Compound – the sector-leading lending protocol – has continued to reach new highs following the launch of their native governance token – COMP.

With over $1B in assets now being supplied to the fasted growing DeFi product on the market, yield farmers are racing to get their hands on the hottest new DeFi token.

Meanwhile, anyone who’s been following Compound knows that this launch was the cumulation of years of hard work and perfect timing. COMP’s launch has triggered a new wave of governance, one in which the community is entirely responsible for dictating how the biggest DeFi protocol will address rapidly growing demand.

In this interview, I took some time to chat with Calvin Liu, the Strategy Lead at Compound responsible for coordinating all partnership and ecosystem interactions that have made Compound so well connected to date. Throughout our discussion, it’s evident that Compound has placed safety and the top of their priorities, perfectly exemplifying how the protocol has stood strong despite seeing more volume in the past two weeks than the last three years combined.

The goal of this conversation was to highlight the true value of COMP governance – a discussion we’re actively involved in as a delegate through DeFi Rate.

This also signals the first of our video-recorded interviews, all of which will be posted on the newly launch DeFi Rate YouTube channel.

 

For those looking a synopsis, here’s a recap of all the top talking points!

What has the reaction to COMP’s success looked like on your end?

It’s been a lot of fun – a bit of a rollercoaster. Kind of stressful, more than stressful actually.

We’re three years into building Compound and this is only inning two. We have visions that are 100x bigger for the protocol and its adoption.

What were the early days of Compound like?

I joined as the second employee in January 2018 while the company was founded in October or November of 2017 . When I joined, we were working out of an attic of an advertising agency.

This COMP launch has been a long time coming. We fundraised a strong seed round in April 2018. V1 of Compound was released in September of 2018. Compound V2 was shipped in May of 2019. COMP and governance shipped early this year.

The pace has always been very high and we always look to ship big, game-changing products quite slowly. It’s truly a marathon, not a sprint.

What was it that stood out to you about Compound in 2018?

DeFi didn’t exist at that time. I think Dharma had existed as a concept. Now it’s easy to see that was one of the first DeFi concepts with their peer to peer lending protocol.

The original idea for Compound was to build a bank on top of Ethereum. As we drilled further and further into the idea, it was narrowed down to the core primitives of simple interest rate markets.

We decided to build a primitive to do that but even at the beginning, we were figuring out how to define what we were doing. There was an idea that was shaped through fundraising and V1 of the protocol by seeing how people were using it.

The reason I was excited was less about the idea being super clear at the time. What was really compelling was that Rob and Geoff (CEO & CTO) this was their third company together. They knew how to start a startup. It was pretty easy to see that they were pretty good at decision making in a general startup way.

It was easy to see that they knew how to sequence the decision making to spend time on the right things.

What lead to making the choice that now is the time to decentralize decision making?

We very authentically believe the protocol can have the most impact if it’s governed in a decentralized way. I think there’s a lot of decentralized theatre and that people are underestimating how authentically we actually want to reach that goal. If Compound is going to be around in 100 years, the only way is if it’s community governed. This only works if users are stakeholders in the system.

With that in mind, there are no best practices. It’s a day by day transition. Governance is no longer a product and engineering problem – it’s a human problem.

Rob is almost like a steward of the community along with being the CEO of Compound Labs.

What was the rollout process for COMP and what can other teams takeaway from that? 

The biggest difference between Compound and other teams today is that V1 of Compound was launched in May of 2018. The token launched in June 2020 – 2 years later.

Meanwhile, Balancer (a project which I love) launched in April and now has a token in June. Compound has a 2-year track record of safety. For the past year, there were anywhere from $100-200M of assets in Compound with no incidents.

Safety is the most important thing for any project. It’s been our priority since day one.

In terms of the rollout itself, we always look through the lens of safety. Given that, what can we do that would work and would be effective that if wrong would not be the end of the world.

The COMP distribution is being changed daily – Proposal 11 is a big change. The great thing is that we built it in a way that (COMP) could be upgraded. We’re fortunate to have a community of people who care.

These proposals will need to change again and we need to prepare for that. We put a lot of time into this rollout both from a product and a team perspective. We’ve never rushed anything.

Even before COMP, the growth of assets was starting to plateau. Despite this, we decided not to make a short term decision of adding new assets and instead looked at the bigger inflection point.

Who is the ideal governance participant? 

The direction it goes organically is where we want it to go.

We’re not trying to guide anyone to do anything. When we first envisioned the distribution, we assumed the applications on top of Compound would either accumulate COMP or be in a position for their users to delegate to them.

What we envisioned was something like the Federal Reserve model. We imagined companies that use (or will use) Compound like Dharma, Argent, Binance, and Coinbase to all have their own users and be representing their own political parties.

Did you imagine the pace of proposals to be this fast?

It has been very fast.

However, it’s important to note that from a safety perspective, all the proposals are tweaks of existing parameters. There’s been no new code, new features, no markets. They don’t add risk or surface area of attack so they’re all ok.

The scope has been pretty tight. I expect this to slow down and I’m personally curious in the first major change such as adding a new asset market that affects the economics and risk parameters of the protocol. This should happen much slower with a lot more discussion.

We want to see Compound grow for 100 years so there’s no rush.

Was it intentional to wait to add new assets until distributed governance went live?

Adding assets was always attractive as a low hanging fruit to grow the usefulness of the protocol.

Instead, we focused on things we could do to increase the AUM by 10-100x, similar to the inflection point we just had with COMP.

This always took priority and we knew assets could come later through governance.

What’s your take on the rippling effects with tokens like BAT and DAI?

We didn’t see it coming. Honestly, we didn’t expect this type of uptick by the ecosystem. We thought it would be slower and more gradual.

It’s a good thing that governance is able to move fast to react. What’s happening with BAT was in-organic and Proposal 11 fixes that. Seeing as that trade was discovered about a week ago, the fact we’re already addressing it is great.

What’s happening to Maker is really interesting as a fan of DeFi. Compound and Maker have always had a strong relationship but Compound was never big enough until now to affect Maker big enough.

Selfishly I care that Compound users are safe so I hope to see this carried through the governance system.

What’s your take on the centralized players getting involved?

Since the very beginning, it’s been largely my job to talk to large hedge funds.

For two years, they thought it was cool – but they never wanted to use it. With the introduction of COMP they all piled in.

We’re seeing massive players put huge amounts of capital in, specifically because Compound has a track record of safety. Even when FTX put tokens into Balancer, they maintained centralized control so they couldn’t be used against them if for some reason they were hacked or stolen – their capital was not at risk.

But, I think we’ll see Compound capturing this new liquidity because people can trust it.

Many people messaged me saying they’ve never had DeFi positions on before but now everyone does. Hopefully Compound can play a small part in bringing CeFi to DeFi.

How does it feel to be largely responsible for the Yield Farming meme and the new DeFi interest?

People have said it feels like Compound has kicked off a new bull run.

I’m very active in other projects as an investor so it’s certainly fun but I don’t think we can claim the credit. There was a fuse waiting to be lit.

Hopefully, this yield farming wave draws in new participants. This will really blow up when people who aren’t even in crypto hear about these things.

As someone new to DeFi, what’s a good starting point?

It’s really hard to understand all the risks that there are – or to even quantify them.

I’m biased to say Compound is the most proven option out there. But, even so, there are risks. I saw a tweet about a stablecoin yield farmer who got liquidated because they did not think of interest accruing back to their position.

Quite frankly it depends on your risk tolerance.

If you wanted to pick one thing, I think one of the safest assets is USDC and one of the safest protocols of Compound. You’re still beating your bank savings by 100x and just trusting Coinbase to be safe with their bank accounts.

How does this new model of giving users control of the protocols they use set crypto products apart? 

It’s extremely exciting and I’m pretty impatient to see it play out.

COMP distribution is pretty slow. Being able to delegate makes a difference but it’s amazing watching our leaderboard.

We have a dashboard on delegation and at this point, a16z has almost 100 different addresses delegating to them.

I participate in governance in other projects as well. It’s so crypto native. Even the idea that a project doesn’t have a Telegram or Discord to talk to their team, it’s weird.

There’s a lot of room for more infrastructure. The Compound forum doesn’t have a lot of features I wish were there.

What are you thinking of building next for Compound Labs?

We’re done with handling the core protocol. We’re going to assist and educate but that’s done and handed off.

Our rate of shipping is every 6 or 8 months. It’s gonna be a while in crypto terms before anything goes public.

This framework we have towards interest rate protocols and uncollateralized borrowing. You’re starting to see projects represent off-chain assets (like Bitcoin on Ethereum). Now we’re wondering if there’s a way to generalize it to be any asset so that one day you can represent off-chain assets on Ethereum and use them as collateral.

Someday you could even represent intangible assets like reputation and identity.

It’s going to take a while but it will probably be in that general direction.

How should people join the conversation?

Our website has a ton of information. Our Discord is a great place to talk with the team.

Resources like DeFi Rate are fantastic. One of if not the best places to aggregate information about all things Compound.

Compound’s governance system is one of the first where, as a user, no matter how little COMP you have you can have a voice.

I would encourage people to check it – it’s not up to us anymore!


As you can tell, Compound is backed by an all-star team with a perfect viewpoint on user safety.

Now, as the protocol decentralizes it’s power, it’s fascinating to consider how things will change in the coming months.

If one thing is for sure, we’ll be keeping a close eye on governance, and doing our best to vote on behalf of the community as a Compound delegate.

To stay up with Calvin, follow him on Twitter.

To stay up with Compound, follow them on Twitter!

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Easter egg: The first person to read this and shoot me a DM on Twitter saying “COMP Easter Egg” will receive 10 DAI 😉