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Proposal to End Compound’s Reward System Almost Succeeds

The Compound Governance community has rejected a move to completely scrap the COMP rewards program. The community cited concerns that the move could possibly threaten the protocol’s decentralization. Despite these concerns, it is interesting that Compound only narrowly escaped abandoning its rewards program. 

Compound Debate Rewards Adjustments

Compound Finance is a DeFi lending protocol that enables traders to borrow and lend crypto assets on the market. As a DeFi app, its users also possess COMP tokens for utility. COMP tokens allow holders to participate in the governance of the DApp, meaning most users can vote on vital decisions like this. The more tokens a user holds, the greater their participation power. 

Compound’s protocol runs an intricate rewards program that allots a number of COMP tokens to new users. The original plan of the system was to ensure that each user has some ability to be part of the system’s decision-making process.

However, many users of the lending protocol believe the system has since become redundant.

Compound Finance developer, TylerEther, created a curious proposal last week, dubbing it the ‘COMP Rewards Adjustments’. According to TylerEther, COMP’s token reward system, while it began as a means of incentivizing new users, has become troublesome. 

TylerEther posited that the rewards program had served its purpose, and was no longer beneficial to the protocol or its users. The developer stated that most new users instantly sold off the COMP tokens for profit, which was damaging for the token. Additionally, the system was becoming problematic for existing users. 

Summarily, TylerEther moved for the program’s dysfunction. The developer also suggested the protocol instates a new reward program while slashing existing rewards. 

The Proposition Fails

Despite being heavily backed by major Venture Capitalist Andreessen Horowitz, TylerEther’s proposal did not take off. 

The motion recorded a grand total of 992, 527 votes. Final polls revealed 492, 678 votes were for the move and 499,849 votes against it. 

One of the major voices in the tussle is Jeff Amico, a partner at a16z Crypto. Jeff like a 16z voted for the motion. Another is Geoffrey Hayes, co-founder of Compound, who voted against it. a16z had the highest number of votes in favor of the motion, with a whopping 256 million tokens. 

In a tweet, Amico claimed that the COMP tokens given to new users were not being put into valuable use, hence its heavy support of the proposal.

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Hayes also broke silence on the matter. He stated that the rewards program was important for maintaining the liquidity of the COMP tokens. He maintained that the distribution of the tokens would help the protocol stay decentralized, as always planned.

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