The team behind the DeFi protocol Compound Finance is contemplating the establishment of a dedicated foundation aimed at optimizing operations and fostering the protocol’s long-term growth.
As one of the leading DeFi lending protocols on Ethereum, Compound boasts a total value locked (TVL) of $2.5 billion, according to data from DefiLlama.
After the announcement, COMP, the native token of Compound Finance, experienced a decline of about 6%, reaching a local low of $42, before rebounding slightly to approximately $45 at the time of this report, according to information from CryptoSlate.
Why a Compound Foundation?
In a social media update on April 1, the organization explained that creating a foundation has become a common approach within prominent DeFi ecosystems. A similar organization for Compound could provide greater stability, legal clarity, and alignment within the community concerning the protocol’s activities.
The team recognized that the protocol’s early operational model was quite rudimentary, mirroring the experimental phase of DeFi in its infancy. However, as the platform evolved, the lack of a centralized structure complicated the management of essential processes.
Although aspects like risk assessment have been outsourced to Gauntlet and security audits to OpenZeppelin, the absence of a formal foundation has added unnecessary layers of complexity.
The team expressed:
“With the imminent development of Compound v4 and increasing involvement in community forums—alongside the gradual decentralization of the Compound ecosystem and a reduction in participation from Compound Labs—we’ve recognized the necessity for a more consistent organizational structure. Consequently, we feel it’s time to consider the creation of a Compound Foundation.”
If established, this proposed Compound Foundation would operate independently from Compound Labs and any other existing organizations, providing a solid framework for coordination and leadership among the protocol’s stakeholders.
Compound Labs indicated that the foundation would aim to create a model similar to that of the Uniswap Foundation, promoting governance, development, and communication among participants.
Before moving forward, the team plans to engage with the community on its forums to collect feedback.
