Friday, September 22, 2023

COMP Rewards Program Removal Rejected

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A community member’s suggestion to remove the COMP rewards program, which received backing from venture capital company Andreessen Horowitz (a16z), failed.

Failed Proposal

On April 15, 2022, Tyler Loewen, a Compound member, proposed a governance proposal. Proposal 100 was the second phase in the process of phasing out the COMP rewards program.

However, on April 21, the idea narrowly defeated. While 499,849 people voted against Loewen’s proposal, 492,678 people voted in favor.

The program’s original goal, according to Loewen’s plan, was to give COMP tokens to users. However, according to Loewen, the habit of profiteering from COMP farming has become an issue. He went on to say that the majority of the tokens distributed under the incentives program usually sells.

Additionally, the proposal went on to say that such behavior was harmful to the protocol, users, and COMP holders. The greatest choice for Loewen is to scrap the current incentives program. He proposed launching a new one solely for the purpose of launching new markets: jumpstart rewards.

Full Support

a16z, a venture finance firm, backed Loewen’s proposal wholeheartedly. Jeff Amico, the chief of a16z’s crypto network operations, issued a tweet thread. According to him, recursive positions receive the most of the benefits. While this strategy increases volume and total value locked (TVL), it does little to aid organic growth.

However, according to Amico, winding down the original scheme does not imply permanently removing incentives. They believe that the existing subsidies should replace with more targeted initiatives aimed at new markets. As a quick follow-up to Prop 100, it would support / promote advancement on those efforts.

Too Early

Avantgarde Finance and Penn Blockchain, in addition to a16z, were among the institutions that voted to end liquidity mining on Compound. Geoffrey Hayes, the founder and CTO of Compound, voted against the idea. Pantera Capital, MonetSupply, and Blck were among the companies involved.

Before the vote, Hayes reacted to Compound Proposal 100 by saying it was too early to propose ending the rewards scheme. It believes that a previous suggestion (Proposal 092) has recently implemented.

The administration also stated that there was insufficient time allotted to adequately examine Proposal 092 and its potential consequences. This was before I thought of a new one. Hayes went on to say that the community hasn’t had enough time to talk about the new plan.

On the other hand, Loewen submitted a suggestion on March 18 to halve existing COMP incentives. This was the first step in removing liquidity incentives from the equation. The proposal received overwhelming support and put into effect on March 27, 2022.

In the summer of 2020, the Ethereum-based decentralized finance (DeFi) system Compound was pivotal in the emergence of the yield farming mania. This comes after the launch of COMP, the company’s governance token, in May. Users who participated in liquidity mining rewarded with these tokens.

Two years ago, the COMP launch arguably kicked off DeFi summer. A problem in one of the Compound’s smart contracts discovers in September 2021. As a result, the protocol paid out $27 million in COMP tokens in error.

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Ivan Cruz
Ivan Cruzhttps://www.cryptoconstellation.com/
Ivan Cruz is a writer for Cryptoconstellation. He has his Masters in Applied Research in Economics & Business. Ivan has been trading crypto for the past 7 years himself and feels it is his duty to bring you all the latest news.
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