Compound Labs released a white paper Thursday detailing its plans to create Compound Chain, an application-specific blockchain that can provide money market services across multiple networks.
“We want to announce the designs for a blockchain that can scale Compound over the next century,” Compound founder Robert Leshner told CoinDesk on a phone call. The decentralized finance (DeFi) firm isn’t committing to a timeline yet but it is at work on a testnet now.
The new white paper, a draft of which was shared with CoinDesk in advance, authored by Leshner and Compound Labs staffers Geoffrey Hayes, Jared Flatow and Max Wolff, cites three limitations of the current version of Compound on Ethereum: gas costs, inability to serve assets on other chains and the fact that all supported assets aggregate the risk of each supported asset.
Those new supported assets aren’t envisioned to be limited to blockchains of the trustless, permissionless variety either. The new project is meant to support the forthcoming and rumored digital assets from central banks and investment banks.
The white paper states:
“Compound Chain is a reimagination of the Compound Protocol as a stand-alone distributed ledger, capable of solving these limitations and proactively preparing for the rapid adoption & growth of digital assets on a variety of new blockchains, including Eth2 and central bank digital currency ledgers.”
Compound Chain joins the chorus of blockchain interoperability efforts, but it’s somewhat unique in that it’s attempting to do so in an application-specific way. Not many similar attempts have preceded it, though Leshner did credit the stablecoin and payments chain, Terra (which just added synthetic equities), as one of them.
While this is an entirely new and standalone blockchain, it will be governed by the same Ethereum-based system that runs Compound v1 – the COMP token. Once the Compound Chain goes live, this will be a considerable new set of powers accruing to COMP owners.
Within an hour of the product’s announcement, COMP surged by as much as 10% in price, according to Messari data.
While the Compound Chain will be governed by COMP – the token that spurred the yield farming craze over the summer – it also introduces a new cryptocurrency called CASH.
Compound Chain’s native CASH token will be used to pay for transactions on the network. CASH will be minted in much the same way as DAI, as a debt against locked collateral held on the Compound Chain.
Like DAI, CASH will start arbitrarily pegged to the U.S. dollar, but its peg can be changed by governance decisions. Unlike DAI, all CASH will earn some kind of yield from a portion of interest paid against loans originated on the blockchain. The precise amount will be one of many parameters determined by COMP holders who participate in governance votes.
The whole purpose of the chain is to function like Compound but in a cross-blockchain fashion.
A new interoperability play
As soon as an asset is…
Read more:Compound’s New Blockchain Readies DeFi for Central Bank Digital Currencies – CoinDesk