- Compound Finance has introduced a new streamlined version of its protocol called Compound III.
- The new protocol focuses on security, capital efficiency, and user experience while reducing complexities.
- Users can borrow USDC using ETH, WBTC, LINK, UNI, and COMP as collateral.
Compound Finance (COMP), a decentralized lending platform, has introduced a new streamlined version of its protocol called Compound III. According to a recent blog post by the founder, Robert Leshner, the new protocol focuses on security, capital efficiency, and user experience while cutting down complexities.
The most profound change was to move away from a pooled-risk model, where users can borrow any asset. In this model (which Compound pioneered), collateral is constantly rehypothecated. A single bad asset (or oracle update) can drain all assets from the protocol.
The founder added that the improvement would increase Compound’s capital efficiency, speed, and affordability. Upon Compound III’s initial deployment, users will be able to borrow USD Coin (USDC) using Ethereum (ETH), Wrapped Bitcoin (WBTC), Chainlink (LINK), Uniswap (UNI), and COMP as collateral.
Compound III’s security was audited by OpenZeppelin and ChainSecurity and formally verified in partnership with Certora. Although, the protocol has imposed modest collateral limits on the first market to protect users. Leshner explained that the action was because “the protocol depends on new technology which might contain undiscovered vulnerabilities.”
The protocol encouraged the crypto community to observe before scaling across assets and blockchains. Other new features attached to COMP III include an entirely redesigned risk management/liquidation engine to increase the safety of funds while simultaneously being more borrower-friendly.
It also includes market-wide limits on the size of individual collateral assets to limit risk, plus decoupled earn-and-borrow interest rate models. Additionally, users won’t earn interest on collateral anymore but will be able to borrow more with less risk of liquidation, lower liquidation penalties, and low gas fees.