Compound

Background:

COMP distribution to users began on June 15, 2020, and has since distributed ~450K COMP, with approximately 4MM COMP remaining.

Behind the scenes, the distribution works through two main contracts, the Reservoir, and the Comptroller. The Reservoir is an immutable contract that exists outside the control of governance and drips 0.50 COMP per block into the Comptroller contract. The Reservoir continuously adds COMP at the drip rate and is independent of the rate at which the Comptroller distributes such COMP. The Comptroller contract controls the usage and distribution rate of COMP for a number of functions including but not limited to, i) distribution to borrowers and lenders for each market, ii) building a reserve that can be used for community needs, and iii) voting, among other uses.

Currently, the Comptroller distributes 0.352 COMP/block (70%) on liquidity incentives and accrues the remaining 0.148 COMP/block (30%) as treasury reserves. At the current COMP price of $155, Compound’s treasury is growing at a rate of ~$149,000 per day, or $4.5MM per month.

Gauntlet’s prop30 added the ability for the Comptroller contract to send COMP to a particular user, group, address, or contract selected by a governance vote. These changes as described by jmo, enable a plethora of use cases, including the use of treasury assets to compensate those liquidated in the Thanksgiving Event, as suggested by mrhen.

Mechanics:

This proposal uses the _grantComp function introduced by Gauntlet to distribute a set quantity of COMP to a Merkle distributor contract that will automatically distribute the corresponding COMP to each of the wallets affected—user’s don’t need to interact with any contract to claim this COMP; After the proposal’s execution, the relayer will claim COMP for each wallet according to the Merkle distributor and distribute it.

To calculate the amount of COMP needed from the Comptroller for the compensation, this proposal uses the 14-day average closing price of COMP from CoinMarketCap as of the time of writing (12/8/20) to compensate users 8% of the liquidated amount.

As an illustrative example, if a wallet had 100 DAI repaid by a liquidator, then that wallet would receive 8 DAI worth of COMP, which equates to 0.064 COMP of compensation (using a 14-day average COMP price of $123.39).

Distributor Methodology

Referencing the DAI liquidations spreadsheet published by rleshner, a total of 85,220,406.43 DAI was repaid on 11/26/20. Applying the 8% liquidation penalty, this proposal would pay out a total of 6,817,632.51 DAI (in COMP). Taking the 6,817,632.51 DAI and dividing by $123.39 (the 14-day average price of COMP) equals 55,254.95 COMP distributed to users.

• To view the detailed math breakdown, see here.
• To preview the COMP distribution per address, see here.

Overall, this distribution of COMP represents only 0.55% of the fully diluted COMP 10M supply and less than 2% of the 24hr COMP volume traded globally, suggesting minimal market impact. Additionally, assuming the Comptroller earns 962 COMP per day, the 55k COMP distribution will be replenished in less than 60 days.

Next steps: If you support this proposal, you can delegate COMP to this autonomous proposal.

Disclosure: For full transparency, I was one of the 121 Compound users affected in the DAI liquidation event. I recently worked with the community to pass a reserve factor change to the DAI market to de-risk it and prevent repeat events.

Resources: To view the full forum post, see here.