Compound community halves farming rewards

The Compound lending protocol community voted to halve the COMP rewards paid to users for activity on the platform.

The corresponding proposal was approved by COMP holders on March 27. “For” received around 883,476 votes, “Against” — 87,585.

As described in the initiative’s description, most of the reward tokens are sold immediately. In this way, damage is done to users of the protocol and COMP holders:

“The initial aim of the token rewards programme was to distribute issuance among users of [Compound]. While it helped to boost the project and reward early users, the practice of farming COMP for profit has proven problematic.”

The author of the proposal, Tyler Lowen, published a detailed plan to reform the reward system on the Compound forum. On April 15 he plans to bring a new proposal to a vote, if accepted, which would remove additional COMP token rewards from the protocol.

According to him, market behaviour on Compound is currently dictated by “farmers” who exploit pools based on reward profitability. The mechanism for distributing interest for providing or borrowing liquidity, which was conceived as the main way to regulate the protocol’s markets, is being neglected.

Lowen proposed focusing on interest rates and exploring various economic models to determine the direction for their development.

In his view, the existing incentive system could be replaced with rewards for launching new markets, i.e., boosting liquidity in pools of crypto assets added to the platform.

Balancer addressed a similar issue somewhat differently. On March 28, developers introduced a new solution, whereby BAL token holders will no longer be able to participate in governance or receive a share of the project’s profits.

For voting, a new token—ve-BAL—will be used, which can be issued against staking the BAL/WETH pool LP tokens. The exact proportions depend on the lock-up period, which lasts up to one year. ve-BAL holders receive 75% of Balancer’s profits, as well as 10% of the weekly BAL emissions.

Earlier in February, the founder of TRON Justin Sun was accused of attempting to manipulate voting to integrate the stablecoin TUSD into Compound as collateral.

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