According to Leshner, “The architecture of [Compound v2] was too risky in that one bad asset can theoretically drain the entire protocol, [In Compound v3], even if one asset plummets to zero, there's no risk to users in the protocol of other assets.”
Compound Finance recently launched its newest streamlined protocol upgrade, Compound III. This update reduces the number of supported tokens that could be borrowed and collateralized on the platform. Essentially, they are finally drifting away from the pooled-risk model, which enables its users to borrow any asset.
Its former versions supported nine cryptocurrencies, including Ether (ETH), Tether (USDT), and DAI. Users leveraged these models to deposit assets into lending pools where they would earn interest. In return for the deposits, the lender receives a cToken with which he could borrow a certain percentage of the value of their asset using a cryptocurrency of their choice.
The DeFi lending platform’s founder, Robert Leshner, explains that Compound III will enable users to borrow more tokens at decreased liquidation rates and penalties.
He stated;
“The architecture of [Compound v2] was too risky in that one bad asset can theoretically drain the entire protocol, [In Compound v3], even if one asset plummets to zero, there's no risk to users in the protocol of other assets.”
Compound is one of the most forked platforms. With this new upgrade, the number of exploits done on Compound’s platform will be significantly reduced. For a fork to happen, the community’s permission is needed. This approval ensures that the code behind each proposal is less vulnerable to exploitation.
Leshner also stated that upgrading to Compound III would make it easier, cheaper, more capital efficient, and safer. Its launch will allow users to borrow USD Coin (USDC) with Ethereum (ETH), Uniswap (UNI), Chainlink (LINK), Wrapped Bitcoin (WBTC), and COMP as collateral.
Asides from Compound upgrading its protocol, it also made changes to the governance system. With Compound III, governance will run through a single configurator rather than a bunch of individually merged networks.
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