The decentralized finance (DeFi) lending protocol Compound has officially launched its highly anticipated third version, known as Compound III. This major upgrade introduces a fundamental shift in its risk model, moving away from a system where users could borrow any asset to one that designates a single borrowable asset per deployment. The initial deployment on Ethereum now allows users to抵押 ETH, WBTC, LINK, UNI, and COMP to borrow USDC.
This redesign prioritizes enhanced capital efficiency, improved user safety, and a more streamlined experience. Notably, the protocol has already garnered significant user interest, with over $1 million in total value locked (TVL) within its first 24 hours of operation.
What Is New in Compound III?
The launch of Compound III represents a significant evolution for the Compound protocol. Its core innovation is the departure from the previous "mixed risk model."
A New Risk Management Approach
In earlier versions, the protocol's collateral was pooled, meaning any supplied asset could be borrowed by other users. This model introduced systemic risk; a failure of one asset or a faulty oracle price feed could potentially impact all assets within the protocol.
Compound III eliminates this by designating a single borrowable asset for each of its deployments. In the current Ethereum market, that asset is USDC. When you supply collateral, it remains exclusively yours and cannot be borrowed by others, drastically reducing shared risk. Your collateral is only ever at risk during a liquidation event.
Enhanced Capital Efficiency and Safety
According to founder Robert Leshner, while suppliers no longer earn interest on their deposited collateral, they gain the ability to borrow more against it. This leads to higher capital utilization. Additionally, users benefit from:
- Reduced Liquidation Risk: The new model is designed to be more forgiving and borrower-friendly.
- Lower Gas Fees: A completely redesigned smart contract architecture optimizes transaction costs.
- Isolated Asset Risk: The protocol can limit the size of individual collateral assets within a market to cap potential risk.
Cross-Chain Capabilities and Oracle Integration
A key feature of V3 is its built-in support for all Ethereum Virtual Machine (EVM) compatible blockchains. This paves the way for future deployments on networks like Arbitrum, Polygon, and Optimism.
For reliable price data, Compound III exclusively uses Chainlink oracles. This ensures accurate and tamper-resistant price feeds, which are critical for determining loan health and triggering liquidations. This oracle choice enhances the protocol's security and portability across different chains.
Early Adoption Metrics
The market's response to the launch has been promptly positive. Official analytics indicate strong initial growth.
- Total Value Locked (TVL): Surpassed $1.03 million in deposited collateral within the first day.
- Borrowing Activity: Users borrowed over 56,000 USDC against their supplied assets.
- Collateral Distribution: The COMP token constituted the vast majority (over 99%) of the initial deposits, with smaller amounts of ETH and UNI.
This rapid accumulation of assets demonstrates strong confidence in the new protocol's mechanics. The team has indicated that support for more collateral assets will be added over time. To explore the current market statistics and how the protocol functions, you can view the official analytics dashboard here.
Market Reaction and COMP Price Movement
The announcement of the launch had a direct but short-lived impact on the protocol's native governance token, COMP.
Following the official announcement, the price of COMP experienced a quick surge, increasing by over 7% to reach a high of $54.56. However, this upward momentum was met with selling pressure, and the price quickly retraced to levels seen prior to the news. At the time of writing, COMP has stabilized around the $51 mark.
This price action is typical for major protocol updates, where the initial excitement is often followed by profit-taking from short-term traders.
Frequently Asked Questions
Q: What is the biggest change in Compound III compared to previous versions?
A: The most significant change is the new risk model. Instead of a shared pool of collateral where any asset can be borrowed, Compound III designates a single borrowable asset (like USDC). Your supplied collateral is isolated and cannot be borrowed by others, making the protocol much safer.
Q: Can I still earn interest on the collateral I supply in Compound III?
A: No. A trade-off of the new model is that supplied collateral no longer earns interest. The benefit is that you can borrow a greater amount against that collateral, leading to higher capital efficiency for active borrowers.
Q: Which assets can I currently use as collateral?
A: The initial deployment on Ethereum supports five collateral assets: ETH (Wrapped Ethereum), WBTC (Wrapped Bitcoin), LINK (Chainlink), UNI (Uniswap), and COMP (Compound's governance token).
Q: Is Compound III available on other blockchains?
A: The protocol is designed to be deployed on any EVM-compatible chain. While the first market is on Ethereum, future deployments on layer-2s and other chains like Polygon or Arbitrum are expected. For the latest on which chains are supported, check the official protocol information.
Q: How does Compound III improve safety?
A: Safety is improved through isolated collateral, a more borrower-friendly liquidation engine, the ability to cap exposure to specific assets, and the exclusive use of robust Chainlink oracles for price data.
Q: Who controls the economic policy of Compound III?
A: Like its predecessors, Compound III is governed by COMP token holders. They have complete control over key economic policies, including which assets are added, borrow rates, and collateral factors.