Compound (COMP): the lender that started liquidity mining, now split over its treasury

Compound (COMP) is a DeFi lending protocol: people deposit crypto to earn interest, and others borrow against collateral locked in its smart contracts. Compound Finance launched in 2018, handed control to COMP holders in June 2020 and, by paying that token to its own users, started the liquidity mining wave the rest of decentralized finance copied. On 21 October 2026 it held about $1.53 billion, according to DefiLlama, an eighth of its 2021 peak.

Six years after COMP’s debut, Compound is rebuilding itself around a fourth version and a permissioned market for institutions, while its largest voters fight in public over who controls the treasury. On 20 October COMP rose 27% in a day. Nobody has found out why.

What Compound Finance is and who runs it today

The protocol is a set of contracts, mostly on Ethereum, that pool deposits and lend them out. Suppliers earn the interest borrowers pay. Borrowers must post more collateral than they take, and the contracts sell that collateral if a loan turns unsafe. There is no account to open and no loan officer.

Compound Labs, the San Francisco company that wrote the original code, was incorporated on 28 August 2017, according to the Blockworks token transparency filing. Changes to the main markets go through on-chain votes of COMP holders and their delegates. Since July 2025 a Compound Foundation paid by the DAO has run development and business deals. Paid contractors work around it. Gauntlet recommends risk parameters and Woof maintains the market contracts; ChainSecurity and Certora review code, while zeroShadow watches the chain for attacks around the clock.

In September 2026 the old compound.finance address began redirecting to compound.xyz, where the app and documentation now live. Readers new to lending protocols can start with our guide to DeFi lending, exchanges and yields.

How Compound Finance works: one borrowable asset per market

The current version, Compound III, is also called Comet. In Compound V2 every deposited asset could be borrowed and also used as collateral, so trouble with one token could spread through the whole pool. In Compound III each market has a single borrowable asset, the base asset, and a list of collateral assets that can only secure loans. The first market, put to a governance vote in August 2022, lent USDC on Ethereum against WETH, WBTC, UNI, LINK and COMP.

Supplying, borrowing and collateral

Supplying the base asset, for example USDC, earns interest. Supplying a collateral asset such as wstETH earns nothing: it only raises how much you can borrow. Each collateral carries a borrow collateral factor, shown as loan-to-value on the app, that caps the loan against it. On the new Institutional Market, according to its page on compound.xyz checked on 21 October 2026, ETH can back a loan worth up to 87% of its value, wstETH 85%, and wBTC and cbBTC 81%.

Each market is its own deployment of the same contracts, with a Configurator holding its parameters and a Bulker that bundles several actions into one transaction. The Compound documentation states that every Compound III instance is controlled by the Timelock, the contract that executes votes. Parameters are compiled into each market’s code, so raising a supply cap or cutting a collateral factor means redeploying the market, the Foundation wrote on 8 October. That is one reason changes are slow.

Liquidation

A second threshold, the liquidation factor, sits above the borrow factor. When a loan grows past it, because the collateral price fell or interest piled up, the account can be liquidated: the protocol takes the collateral and sells it at a discount to cover the debt. On the Institutional Market the ETH liquidation factor is 93% with a 5% penalty, wstETH 92% with 7%, and the two bitcoin tokens 86% with 10%. Our glossary entry on liquidation explains the mechanism in general.

Partial liquidations, which close only part of a position, were functionally complete at the end of September, but their mainnet rollout was still pending, according to the Foundation’s monthly update.

Interest rates and reserves

No one sets rates by hand. The market contracts compute them from how much of the supplied base asset is lent out. On 8 October the Institutional Market had $20.6 million supplied and $16.3 million borrowed, a 79% utilisation; on 29 September its USDC suppliers earned a 6.35% base rate, according to Foundation posts.

Borrowers pay more than suppliers receive. The gap stays in each market as reserves, which DefiLlama counts as protocol revenue and which reach the DAO treasury only through a vote. Proposal 616, which withdraws reserves from the Scroll USDC market, was waiting for execution on 21 October.

Compound in numbers, October 2026

The figures below come from DefiLlama, read on 21 October 2026 between 06:09 and 06:25 UTC. Our explainer on total value locked says what the headline number measures and what it leaves out, such as money already lent.

Ethereum carries almost everything: $1.31 billion of the Compound III total, plus the V2 deposits. Arbitrum follows with $67.3 million, Base with $25.7 million and Optimism with $9.2 million. The six other chains hold about $7 million between them, and their markets are being wound down. Gauntlet recommended in July 2026 that the Polygon and Unichain markets be deprecated, and on 25 September proposed shutting off new borrowing on Linea, Ronin, Mantle, Scroll and Unichain, where each market had less than $500,000 lent out.

Revenue is small next to the spending. Over the past year the protocol kept about $2.85 million. In May 2026 the DAO approved a $52 million V4 programme. The security providers’ renewal, approved on Snapshot, costs $1.695 million a year, and Gauntlet’s proposed Year 6 fee is $450,000, down from $2.3 million when it included an insolvency fund. The Foundation’s own V4 proposal said Compound had spent more than $400 million on incentives since 2021 without gaining a lasting edge over its rivals.

Why COMP went up 27% on 20 October: no catalyst found

COMP rose 27.3% in the 24 hours to 17:00 UTC (1 p.m. in New York) on 20 October, according to Cryptopolitan, which cited CoinGecko prices of $27.38 against $21.51 a day earlier. It counted $114.5 million of trading over 24 hours, about 39% of it on decentralized exchanges. Crypto Briefing and The Defiant reported the same jump and said COMP had also outrun bitcoin and ether over seven and 28 days.

Deposits did not follow the token. Cryptopolitan put TVL at $1.52 billion at about 17:11 UTC, 8.7% below its level of 21 September. None of the three outlets found an announcement, vote or partnership behind the move. Coindaro went through the Compound forum, Tally and the news flow for 19 to 21 October looking for a buyback, a fee switch, a listing, a new exploit or Gauntlet news, and found none.

The treasury dispute was in the news that week, and Proposal 618 was due to open for voting on Tally around 22 October. No source ties the rally to either. Who bought is not known.

COMP token and tokenomics: votes, no cash flow

COMP has a fixed supply of 10 million tokens, all created at launch, with no inflation and no token sale, according to the Blockworks filing. About 9.67 million were circulating in August 2026, by the same filing. At launch 42.30% was set aside for protocol users, 23.96% for Compound Labs shareholders and 22.26% for founders and team, whose four-year vesting has run out.

Holding COMP pays nothing. DefiLlama states that there is no revenue share for holders. Delegate Uğur Mersinlioğlu put it plainly on the forum on 9 September 2026: “COMP does not have many functions today. Its primary purpose is governance.”

How a vote works

A holder needs 25,000 COMP delegated to submit a proposal, or can lock 100 COMP to start one that goes live once it gathers that support. A proposal passes with at least 400,000 votes in favour and a majority. After a two-day delay the vote lasts three days, then the Timelock waits two more, which the Foundation puts at about seven days from submission to execution. Votes can be delegated without moving tokens. That lets a handful of addresses gather large voting power.

The Proposal Guardian

Proposal 304, passed in August 2024 by 1.4 million COMP to none after a governance attack, gave a Community Multisig the power to cancel proposals; Proposal 538 extended it to February 2030. It can act where user funds are at risk, in a security emergency, or where “a vote has been controlled by a single entity”, in the words of its October 2026 forum post. Its nine signers include ChainSecurity, Certora, Gauntlet and zeroShadow.

History: from liquidity mining to a lender rebuilding itself

2018 to 2020: venture money and the COMP launch

Compound Labs raised an $8.2 million seed round in May 2018, led by Bain Capital Ventures, Andreessen Horowitz and Polychain Capital, according to the Blockworks filing. A $25 million Series A followed in November 2019, led by Andreessen Horowitz at a valuation of about $90 million, DeFi Rate reported.

COMP distribution began on 15 June 2020. About 2,880 COMP a day went to the users of eight markets in proportion to the interest each market generated, and the token traded near $62 on Uniswap a few hours in, The Block reported. Other protocols copied the model within weeks, and the months that followed became known as DeFi summer. Compound’s TVL peaked at $12.31 billion on 9 November 2021.

2021: the Proposal 62 bug

On 29 September 2021 Proposal 62 upgraded the Comptroller, the V2 contract that pays out COMP rewards, with a bug that let some users claim far more COMP than they were owed. The Block reported about 168,000 COMP, near $50 million, claimed in the first hours, with up to 280,000 COMP at risk by co-founder Robert Leshner’s estimate. Leshner said no admin control could switch the distribution off, so any fix had to go through the seven-day governance process. Nobody broke into the contracts: an approved upgrade carried the error.

2022 to 2023: Compound III and new leadership

In mid-August 2022 Compound Labs presented Compound III as audited by OpenZeppelin and ChainSecurity. Kevin Cheng, a senior software engineer there, wrote on the forum that “Compound III is now just a governance proposal away from being live”, The Block reported on 16 August. DefiLlama’s data for it starts on 27 August 2022. In 2023 Leshner left to found Superstate; Jayson Hobby, previously head of design and then VP of product, has led Compound Labs since June 2023, according to the Blockworks filing.

2024: a hijacked website and the goldCOMP vote

On 11 July 2024 the compound.finance website was hijacked and sent visitors to a page that drains connected wallets, Decrypt reported, citing the security firm Harpie. Compound told users to stay away. DefiLlama’s founder named the registrar, Squarespace, as the leading suspect; the cause was never confirmed in those reports. OpenZeppelin’s Michael Lewellen said he believed funds in the contracts were safe.

On 28 July a group called the Golden Boys, led by a whale known as Humpy, passed Proposal 289, the goldCOMP proposal, which would have moved 499,000 COMP, about 5% of the treasury and worth $24 million to $25 million, into a vault the group controlled. It passed 682,191 votes to 633,636, according to the Foundation. Within about 48 hours a truce was struck: Compound’s head of growth, Bryan Colligan, proposed sharing fees with COMP holders, and Humpy answered “I fully approve this message”, DL News reported. Proposal 289 was cancelled on 30 July and the transfer never executed. The promised staked COMP product, paying 30% of reserves, never became a fee share: DefiLlama still lists none.

2025: a Foundation and new security providers

Five proposals in 2025, among them the renewal of the Community Multisig and the deprecation of Compound V2, were defeated by a group of wallets the Foundation links to Humpy. The DAO approved the Compound Foundation in June 2025 through Proposal 448, by 1.33 million COMP to none, with a mandate from 1 July 2025 to 31 December 2026 and a budget of $9 million paid in COMP. Aaron Schnarch, formerly of Anchorage Digital and Coinbase Custody, became Executive Director.

On 8 September 2025 ChainSecurity, Certora and zeroShadow took over security work from OpenZeppelin. The tender behind that change cut the DAO’s security bill from about $4 million a year to $2 million, according to the Foundation.

2026: Kelp, V4 money and the institutional push

The Foundation published a V4 roadmap on 5 January. In February, Proposal 535 created an Ecosystem Protection and Continuity Fund (EPCF) and Proposal 536 put 8.42 million DAI of V2 reserves under Foundation stewardship, each passing 1.57 million votes to 138,000.

On 18 April an attacker drained about 116,500 rsETH, roughly $292 million, from Kelp DAO’s LayerZero bridge, The Block reported, then posted unbacked rsETH as collateral on several lenders, Compound among them, according to the Foundation. Compound’s Pause Guardian could only pause whole markets. USDC withdrawals stayed shut for about seven days, WETH and wstETH withdrawals for 16 to 20 days, while a replacement oracle was built and audited and each fix waited for a vote. Proposal 575 passed 737,776 to 0 and still could not execute until 29 April. Gauntlet’s verdict, quoted in a Foundation post of 8 October, was that the protocol had “no response mechanism faster than a 7-day governance cycle”. Any loss for Compound has not been published.

In May the DAO approved a Treasury Management Committee (TMC) and the $52 million V4 programme, each by 1.88 million votes to none. The Institutional Market went live on 8 September.

The October 2026 dispute over the Compound treasury

The fight pits the Foundation and its contractors against delegates backed by votes the Foundation links to Humpy. Both sides are interested parties, and their forum posts are advocacy.

On 14 September Mersinlioğlu reached the proposal threshold with COMP delegated from an address that Blockful, an analytics firm cited by the Foundation, links to Humpy. On 27 September he accused the Foundation of misusing the 8.42 million DAI: in his account it went to an exchange and came back as 344,780 COMP delegated to the Foundation’s voting address, 58 minutes before the vote closed on Proposals 580 and 582. The Foundation rebutted the claim on 28 September. Nothing has been proven either way.

Much of the bloc’s voting power sits in dCOMP, a wrapped COMP posted as collateral on Morpho. Blockful counted about $33 million of dCOMP deposited there on 28 August and about $12.6 million of USDC borrowed against it, the Foundation wrote: one holder borrowing on a rival lender against Compound’s own governance token. On 24 September that position carried Proposal 608, which asked for a plan to put the Institutional Market under governance, by about 1.8 million votes to 984,000.

On 2 October the Foundation published what it calls the record since 2024, from goldCOMP to September proposals carried by a single address casting 1.77 million votes. The same day a forum user, cmrn, argued that the Foundation had taken the V4 idea from a community temperature check of February 2025 that stalled; another reply disputed that reading.

Then came the votes. Proposal 612 would have raised the treasury withdrawal delay from two to ten days and given the Governor the power to cancel treasury transactions; it passed 1.89 million to 1.04 million, Cryptopolitan reported. Proposal 613 would have closed the EPCF and redirected the protocol’s share of liquidation value. On 7 October, less than nine hours after Proposal 612 was queued, the Proposal Guardian cancelled both. The Community Multisig said the 1.75 million COMP cast by the dCOMP delegate had decided both votes, against more than one million COMP from 19 voters.

Mersinlioğlu answered on 8 October that the cancellation was unjust. The Governor already owns the treasury contracts, he argued, but a committee withdrawal clears in two days while a vote takes about seven, so Proposal 612 only closed that gap and moved no funds. A softer alternative to Proposal 613, putting the EPCF in community multisig custody, became Proposal 618, pending on Tally on 21 October.

V4 and the Institutional Market

The Institutional Market is a permissioned USDC market on Ethereum that the Foundation describes as a V4 test deployment, with a $100,000 minimum deposit and a $10 million borrow cap per collateral. By 25 September it held more than $60 million of deposits and collateral and over $18 million of loans, according to the Foundation. On 12 October Mersinlioğlu asked the Foundation whether it pays Gnosis-linked entities, saying one Gnosis position accounts for over half of the market’s supply and nearly 70% of its borrowing. No reply had been posted by 21 October.

Two multisigs and the 5-of-9 Pause Guardian run the market today. Answering Proposal 608, the Foundation, Woof and the Compound Governance Working Group proposed on 8 October an optimistic governance council: council members propose changes, and COMP holders can veto them. The full specification is due before the end of October. SEEDGov, a delegate, asked for per-collateral pausing so that one bad asset no longer freezes a whole market, as Kelp did.

The V4 money is released in steps. The Foundation received $14 million upfront; a second $14 million comes only if the Year 1 deliverables are met, and the $24 million growth budget is paid in stages from a reserve the TMC controls. The funding proposal also counted on about $12 million of expected recovery from Elixir, whose deUSD stablecoin failed, and the Foundation says it is still pursuing that with outside counsel.

The product page claims “four years of uninterrupted, exploit-free production performance”. That is the project’s own description: the 2021 bug and the 2024 website hijack were not contract exploits, but both cost users. V4 has no launch date, and no audit of V4 code has been published.

Team, funding and audits

Leshner and Geoffrey Hayes, listed as CTO, co-founded Compound Labs, according to the Blockworks filing; Leshner is now co-founder and CEO of Superstate. The Foundation added a COO, Christopher Donovan, a chief product officer, Steven Liu, and a CTO, Leo Eikelman, on 17 August 2026, the same filing says. Equity funding totals $33.2 million over the two rounds. The Foundation is paid from the DAO treasury, not by investors.

Trail of Bits reviewed the protocol in 2019 and the governance system in February 2020. OpenZeppelin delivered a full audit of V2 and governance in March 2022, then audited Compound III in May and June 2022 and found 30 issues, none critical and one of high severity, about assets that could get stuck in the Bulker. ChainSecurity audited Compound III in January 2023, and Certora’s formal verification runs in the code’s test pipeline. In their first six months ChainSecurity and Certora reviewed 92 governance proposals. A bug bounty on Immunefi pays up to $1 million.

Is Compound Finance safe? The risks on record

The contract record is long but not clean. The code has run since 2018 under many audits, yet Proposal 62 showed that an approved upgrade can ship a costly bug, and V4 will be new code.

Collateral is the second weak point. Prices come from oracle feeds, and one broken token can freeze the markets that accept it, as rsETH did in April 2026, when withdrawals stayed shut for up to 20 days.

Governance has been captured once and contested since. Large delegated blocks passed a treasury grant in 2024 and decided two votes in October 2026; both times the brake was a cancellation by a small group of signers, which critics call a veto over token holders.

Liquidation is the user’s own risk: a fast drop in ETH or bitcoin can push a loan past its threshold and cost a 5% to 10% penalty on the Institutional Market. In the markets being wound down, collateral supply caps are at zero, and on Polygon and Unichain suppliers earn no interest under Gauntlet’s July plan.

Compound Finance vs Aave and Morpho

Compound and Aave do the same job: pooled, over-collateralised lending governed by token holders. Aave is more than ten times larger, with about $18.2 billion of TVL on DefiLlama at 06:23 UTC on 21 October, against Compound’s $1.53 billion; our page on the Aave lending protocol has its figures. Compound’s design choice is isolation: a failing collateral token hurts only the markets that accept it, but liquidity is split across many small markets.

Morpho, the lending network behind Coinbase’s bitcoin loans, relies on outside curators who set risk limits for each vault and can cut caps at once. Compound keeps parameters in governance, advised by Gauntlet, whose renewal was proposed on 15 October; Yearn Curation applied for a similar 12-month role on 20 October.

Who Compound suits and what to check first

Compound suits users who want a lender with eight years of history on Ethereum and plain USDC or ETH markets, and institutions that accept a permissioned pool. It offers COMP holders votes, not income.

Before supplying or borrowing:

• Type compound.xyz by hand or open it from the documentation, never from a message or an ad.
• Check that the market is not deprecated and that borrowing against your collateral is switched on.
• Read the borrow factor, liquidation factor and penalty of your collateral, and keep a wide margin.
• Look at pending proposals on Tally, since a vote can change parameters within about a week.
• Plan for frozen withdrawals: they lasted one to three weeks after the Kelp exploit.

Dates to watch: the Proposal 618 vote, the council specification due by the end of October 2026, and 31 December 2026, when the Foundation’s first mandate ends.