Bessie Liu

<div id="highlights-block_6308dd97b6629" class="highlights">
 <ul>
 <li>In Compound III, collateral will remain the property of the supplier</li>
 <li>Users can borrow USDC using ETH, WBTC, LINK, UNI, and COMP as collateral</li>
 </ul>
 
</div>



DeFi developer Compound Labs has officially launched Compound III, a streamlined version of the protocol emphasizing security, efficiency and user experience.



The governance <a href="https://compound.finance/governance/proposals/116" target="_blank" rel="noreferrer noopener">proposal</a> to initialize Compound III was first submitted on August 18, 2022, and received overwhelmingly positive support from governance, receiving 100% approval.



“The most profound change was to move away from a pooled-risk model, where users can borrow any asset,” Robert Leshner founder of Compound Finance <a href="https://medium.com/compound-finance/compound-iii-is-live-a7983dee7e60" target="_blank" rel="noreferrer noopener">wrote</a> in a blog post.



&#8220;Safer risk management in crypto has been a thesis that is emerging as a result of opaque financial practices in CeFi,&#8221; Paul Veradittakit, General Partner at Pantera Capital, told Blockworks. 



<blockquote class="wp-block-quote">&#8220;Continued enhancement of DeFi risk practices will continue to demonstrate DeFi&#8217;s resilience in this bear market and in the next bull market,&#8221; Veradittakit said.</blockquote>



<h3>Building on past Compound versions</h3>



Compound was first launched in September 2018 and is an interest rate protocol which pioneered the on-chain borrowing and lending concept. Users can earn interest on deposited funds without a third party intervening. Borrowers can take out loans against their cryptoassets deposited with the protocol. 



The second version of Compound launched in May 2019, introducing liquid tokenized collateral in the form of cTokens to the protocol. It was also the turning point for the protocol to become community-governed via COMP, with a governance system that has been widely adopted by other protocols and DAOs.&nbsp;



In the first two versions of the protocol, with a pooled-risk model, one single bad asset could theoretically drain all assets from the protocol because collateral could be re-used. That’s why Compound has always limited the number of asset types it supports.



In the latest version, cTokens are no more, and collateral remains the property of the supplier, Leshner said.



“Compound III features a single borrowable asset. When you supply collateral, it remains your property. It can never be withdrawn by other users except during liquidation,” he said.



The latest version of Compound will allow its users to borrow USDC using ETH, WBTC, LINK, UNI, and COMP as collateral.



“While you won’t earn interest on collateral anymore, you’ll be able to borrow more; with less risk of liquidation and lower liquidation penalties; while spending less on gas,” Leshner said.



The new version launched with a Business Source License (BSL), which is meant to limit the ability of other teams to fork the protocol’s open-source code without governance approval. This scheme has been effective for Uniswap Labs which launched its V3 under the same license. Both Uniswap and Compound saw dozens of forks using their second iteration with more permissive licensing.



Jeremy Allaire, CEO of Circle, <a href="https://twitter.com/jerallaire/status/1563185488131149829" target="_blank" rel="noreferrer noopener">praised</a> Compound III on Twitter as “simpler, safer, more efficient, and provides one of the best possible platforms for USDC borrowing.”



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With Compound III Launch, DeFi Pioneer Emphasizes Security

Casey Wagner

<div id="highlights-block_6284fef873148" class="highlights">
 <ul>
 <li>Permissionless speakers today are focused on building, not market conditions</li>
 <li>Regulators are on high alert and bad actors should be put on notice, industry executives said</li>
 </ul>
 
</div>



As the aftermath from this month’s <a href="https://cms.blockworks.co/terra-halted-again-exchanges-delist-spot-trading/" target="_blank" rel="noreferrer noopener">TerraUSD meltdown</a> continues to unfold and cryptocurrency markets extend their sell-off, industry executives are urging their communities to stay strong.



“One of the benefits of a bear market is other sources of validation go away,” Mary-Catherine Lader, chief operating officer of Uniswap Labs, said during a panel discussion at the Permissionless conference in Palm Beach. “All you really have is whether what you&#8217;re building is going to work and whether people are going to use it.”



Other conference speakers agreed, choosing the opportunity to focus on what developers are building and excited about right now as opposed to negative narratives surrounding the industry.&nbsp;



Stani Kulechov, founder and CEO of Aave, said he was shocked at how quickly the industry has grown. Having billions of dollars of value locked into smart contracts is no small feat, and it’s happened in only a few years.&nbsp;



Decentralized finance (DeFi) industry leaders are looking beyond today’s market conditions, and rightfully so, the speakers said. Uniswap Labs’ key focus right now is simplifying the user experience, Lader added.&nbsp;



“To get out of a bear market, we need excited people, and we need capital,” Robert Leshner, CEO and founder of Compound Labs, said.&nbsp;



The source of capital he’s betting on? Institutional investors.&nbsp;



“Historically, DeFi has been individual-led…but our focus right now is how do we get an entire class of users in the system,” Leshner said.&nbsp;



<blockquote class="wp-block-quote">“We’re focused on enabling institutions with billions of dollars to safely deploy capital into DeFi”</blockquote>



Even amid the panelists’ optimism, the question of how the <a href="https://cms.blockworks.co/what-comes-next-for-terra-ecosystem/" target="_blank" rel="noreferrer noopener">collapse of Terra’s stablecoin</a> might impact the rest of the industry remains. Regulators are on high alert, they agreed.&nbsp;



“Terra and Luna and UST are their own ecosystem, but it has a big impact on everything,” Leshner said. “I worry the nuance is going to get lost, the positives are going to be overshadowed by the risks, and the next few years are going to be about trying to differentiate the good actors from the bad.”



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Compound labs