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Compound is the largest decentralized finance protocol in terms of value held. A few weeks after the COMP token was launched, the holders adopted a measure aimed at modifying the distribution method of this governance token.
Change in the distribution of COMP
The Compound community approved through a vote the change of the distribution model of the COMP token. The aim is to allocate capital more efficiently through the markets.
Until now, COMP tokens were distributed to lenders and borrowers in each market, based on the amount of interest received. Thus, this allowed many users to generate large quantities of COMP, by exposing themselves to less liquid markets, like that of BAT, currently leading the markets on Compound.
Thus, following the eleventh Compound governance vote, the holders decided to change this system. Consequently, the interest rate on the loan was removed from the calculation of allocation of COMP to each market. Instead, the calculation will only be based on the dollar value of the assets loaned and borrowed from each of the pools.
“It changes the distribution of COMP between the markets, by eliminating the debit interest rate as a weighting mechanism. Each market is assigned COMP according to the loan request; the distribution is made equally between suppliers and borrowers. »Description of the vote
Not so decentralized governance
Unfortunately, the first decentralized governance votes taking place on Compound already show certain weaknesses in the protocol. Indeed, among the biggest voters (therefore those who have more weight) we find only companies, such as Paradigm, Synthetix, Dharma or ParaFi Capital.
As a result, the governance of the protocol remains relatively centralized for the time being. This is completely normal given the mode of distribution of the COMP token, 5 million of which were distributed to the teams and partners of Compound. A gigantic share, compared to COMP tokens that have been generated by users since the launch of liquidity mining.
It will take several months for new players to join the governance decisions of the protocol. Until this happens, the main players in Compound will keep a monopoly on its governance.
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