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1) We are proposing prop 14, to increase the WBTC collateral on @compoundfinance to 65% (from 0).
https://compound.finance/governance/proposals/14?target_network=mainnet
Why, and what are the best counterarguments?
https://compound.finance/governance/proposals/14?target_network=mainnet
Why, and what are the best counterarguments?
2) As for why--well, WBTC is as liquid as the other assets on the platform, and so should have a similar collateral factor.
In addition, right now most of the platform is DAI. This creates a lot of risk! Things we can do to diversify the assets are helpful.
In addition, right now most of the platform is DAI. This creates a lot of risk! Things we can do to diversify the assets are helpful.
3) On the other hand, there is risk in allowing WBTC as collateral. There are two risks:
a) BTC drops a lot
b) WBTC drops but BTC doesn't
(a) is a risk but less of one than most other assets on Compound. (b) is the real worry.
Many have brought this up as a risk!
a) BTC drops a lot
b) WBTC drops but BTC doesn't
(a) is a risk but less of one than most other assets on Compound. (b) is the real worry.
Many have brought this up as a risk!
4) For instance, BLCK has voted against prop 14 for this reason.
I think this is a totally reasonable worry! Many have suggested putting a cap on WBTC allowed, and I'd be in favor. I'd love something like "WBTC on Compound can't increas by more than max(10%, 200BTC) in a day"
I think this is a totally reasonable worry! Many have suggested putting a cap on WBTC allowed, and I'd be in favor. I'd love something like "WBTC on Compound can't increas by more than max(10%, 200BTC) in a day"
5) But that will likely take a while to roll out. So what's the best thing to do until then--wait, or add WBTC?
I think either way is reasonable. But there are factors that tip me over the edge towards just adding WBTC:
I think either way is reasonable. But there are factors that tip me over the edge towards just adding WBTC:
6) One reason is that I do think it will make Compound immediately healthier and safer. $50m WBTC and $450m DAI seems better to me than $500m DAI.
I think it's also less risky than the less liquid coins on Compound--BAT, ZRX, etc.
I think it's also less risky than the less liquid coins on Compound--BAT, ZRX, etc.
7) Beyond that, though, a lot of people are waiting to see what happens to the protocol. And right now it has one of the most restrictive asset sets in DeFi. Which is fine--there are advantages to this!
8) But in order to be a fully servicing platform, I think it needs to have USD, ETH, and BTC on it, at a minimum. It has USD and ETH--but no BTC yet. And without that it's missing a huge segment of activity.
9) Some projects flame out spectacularly. But many more die a slow death. The industry is littered with DEXes, and stablecoins, and exchanges, and protocols that have basically no usage left.
Right now Compound is in a great state--it has tons of attention and resources.
Right now Compound is in a great state--it has tons of attention and resources.
10) The world is watching to see what it does--but eventually the world will get bored if it doesn't get more adoption. And so I think that it's a high priority to move towards greater adoption while we can.
11) To that end--adding some BTC product, and ideally USDT, are the largest remaining targets.
I'd be excited to see the community test out different BTC wrappers and choose one they like best--whether or not that's WBTC! And I'd be even more excited to see work on supply caps.
I'd be excited to see the community test out different BTC wrappers and choose one they like best--whether or not that's WBTC! And I'd be even more excited to see work on supply caps.
12) But in the end I think that it's the correct decision for Compound to add WBTC as collateral now.
I think it makes the platform more dynamic, more useful, and in the end safer. Because this isn't coming in a vacuum, and it's replacing things at least as risky.
I think it makes the platform more dynamic, more useful, and in the end safer. Because this isn't coming in a vacuum, and it's replacing things at least as risky.
13) (For more color on that--DAI is pretty scary! You can't really redeem it when you need to which makes crash scenarios totally possible. And even creating it is pretty costly capital-wise. And the world is full of altcoins similar to BAT, ZRX, etc. that have crashed.)
14) But I totally respect people wanting to hold off on adding WBTC collateral until a supply cap is in place.
