What is the Compound Governance Token?
Created by the Compound Finance Team, Compound Governance Token (COMP) or (sometimes verbally Compound Coin) will be the key application to replace the administration of the Compound Lending Protocol through community governance. Eventually, users of the Compound Lending Platform will be given power to suggest, debate, and implement changes to Compound — without relying on, or requiring, our team whatsoever.
COMP is an ERC-20 asset token that will run on the Ethereum Network, much like the Compound Smart Contract itself. In addition to that, COMP allows its owner to delegate voting rights to an address of their choice; be it the owner’s own wallet, another user, an application, or a DeFi expert. The Compound Governance will essentially work on a Delegated Proof of Stake model, much like EOS, Lisk, Steem or Bitshares.
"My personal belief is that nobody would use bitcoin if it was run by the ‘Bitcoin Corporation,’” Robert Leshner, Compound’s founder once said in an interview, alluding to the motivations behind why the team set out to create the Compound Governance Token.
What will COMP be used for?
Eventually, anyone will be able to propose a change to the Compound Lending Protocol. However, only proposals with the backing of at least 1% of COMP total supply in backing will then be brought forward for voting. These proposals may include adding support for a new asset, changing an asset’s collateral factor, changing a market’s interest rate model, or changing any other parameter or variable of the protocol that the current administrator can modify.These proposals will be in the form of executable codes, not suggestions for a team of foundation to implement. This will make it so that Compound may eventually become a Decentralized Autonomous Organization in the future.
Once a proposal has been brought forward for voting, it will be allowed a 3 day period for all COMP owners or delegatees to vote on the proposal. Once a proposal has reached a 4% quorum with majority support, the proposal is queued in a Timelock, and can be implemented after 2 days.
The 2 day period is imposed so that users who do not agree to the proposal may withdraw their positions from Compound itself if they wish so.