Compound's lending protocol pushes for the third version of Comet: focusing on the USDC market and expanding towards EVM-compatible chains.

The Ethereum veteran lending protocol Compound started discussing a multi-chain strategy compatible with the EVM Ethereum Virtual Machine in January of this year. On the 16th of this month, it finally announced the deployment of the third version protocol Comet, which is currently under review by the Compound governance community and will only be launched upon confirmation.

What is Compound III Comet?

Compound III is an EVM-compatible protocol that allows supported crypto assets to be used as collateral to borrow the underlying base asset. The initial version of Compound III on Ethereum uses USDC as the base asset. Users can also supply the base assets to earn interest in this protocol. Compound states that its interface is open-source, stored using IPFS, and operated by the community.

Multi-chain lending services will be interconnected through Compound's Gateway.

What are the features of Compound III?

Developers state that Compound III is designed with consideration for borrowers, capital efficiency, gas efficiency, security, and ease of management. The main improvements include:

• Compound III aims to provide a single borrowable base asset. Other assets are collateral assets, reducing risks and promoting capital efficiency.
• The collateral asset size cap can set the supply limit according to different collateral assets.
• There are different borrowing collateral factors and liquidation collateral factors to help borrowers avoid premature liquidation and improve risk management.
• The risk management and liquidation engine have been redesigned to enhance protocol security while maintaining incentives for liquidators.
• Price quotes are not based on dedicated price oracles but directly use Chainlink, making it more convenient for EVM-compatible chains. This decision can also be changed through governance.
• The supply and borrow interest models can be separated; governance has full control over economic policies.
• Advanced management tools provide a new user experience and applications.
• The core contract contains an abstract incentive indicator to reward users who use the protocol from the beginning. This incentive mechanism is similar to v2 but can be more flexible through governance proposals.
• Based on years of experience and feedback from previous versions of the protocol, a codebase has been established containing complex tools for management and deployment testing.

Parameters under discussion

Currently, the discussion in the proposal focuses on Compound III parameters, with collateral including WETH, WBTC, LINK, UNI, COMP:

Ethereum OGs Transition

According to DeFi Llama data, Compound's locked assets in Ethereum for lending are $30.3 billion, while Aave v2 has $54.1 billion. When considering Aave's asset size on other EVM-compatible chains, the total is $74.9 billion, showing that a multi-chain strategy still significantly aids business expansion.

In terms of token performance, AAVE has shown an increase compared to November 2020, while COMP has experienced a significant decline.

Capitalists Holding Governance Power

Nearly half of Compound's governance voting power is currently held by the top five capital institutions. The successful passage of this proposal relies on their support.