Ethereum's pioneering lending protocol, Compound, has announced the deployment of its third-generation protocol, Comet, marking a strategic shift toward multi-chain EVM compatibility. The proposal is currently under review by the Compound governance community, with potential deployment upon approval.
What Is Compound III (Comet)?
Compound III is an EVM-compatible protocol designed to enable users to collateralize supported crypto assets and borrow base assets (initially USDC on Ethereum). Key features include:
- Open-source interface hosted on IPFS and maintained by the community.
- Multi-chain integration via Compound’s Gateway, streamlining cross-chain lending services.
Key Innovations in Compound III
Developers emphasize enhancements for borrowers, capital efficiency, and security:
- Single borrowable asset (USDC) reduces risk and improves capital efficiency.
- Customizable collateral caps per asset (supply limits).
- Dynamic collateral factors for borrowing/clearing, minimizing premature liquidations.
- Redesigned liquidation engine balances security and incentivizes liquidators.
- Chainlink price oracles replace dedicated feeds for EVM compatibility.
- Separate interest models for supply/borrowing, with full governance control.
- Built-in incentive mechanisms reward early adopters, adaptable via governance.
- Advanced management tools and optimized gas efficiency.
👉 Explore EVM-compatible lending opportunities
Proposed Parameters Under Discussion
Governance is evaluating collateral settings for WETH, WBTC, LINK, UNI, and COMP, including:
- Loan-to-value (LTV) ratios.
- Liquidation thresholds and fees.
- Interest rate models for supply/borrowing.
From Ethereum Veteran to Multi-Chain Player
Data from DeFi Llama highlights Compound’s $3.03B TVL on Ethereum, compared to Aave’s $7.49B across EVM chains. While AAVE’s token has retained value since 2020, COMP has significantly declined, underscoring the need for expansion.
Governance Dynamics
Nearly half of Compound’s voting power is held by five institutional entities, whose support will be pivotal for Comet’s approval.
FAQs
Q: Why is Compound III focusing on USDC?
A: USDC’s stability and liquidity make it an ideal base asset, reducing volatility risks for borrowers.
Q: How does Comet improve capital efficiency?
A: By isolating USDC as the sole borrowable asset and optimizing collateral factors, it minimizes overexposure.
Q: Will Comet support other stablecoins later?
A: Governance can vote to expand base assets post-launch, depending on community consensus.
👉 Discover how multi-chain lending works
Risk Disclosure: Cryptocurrency investments carry high volatility; capital loss is possible. Assess risks carefully.
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