Jake Chervinsky, General Counsel at Compound, an open-source, autonomous interest rate protocol, confirmed that Compound Labs achieved an important milestone “in our pursuit of progressive decentralization.”
Chervinsky, a former Adjunct Professor at the Georgetown University Law Center and also former Associate at Kobre & Kim, explained:
“We launched an on-chain system that freely and continuously distributes COMP tokens to users of the Compound protocol. The user distribution system is a critical element of community governance, ensuring that the protocol’s users are also its owners and managers.”
He noted that the launch marked the last step in the “decentralization” process that Compound protocol developers had announced in February of this year. Chervinsky added that his team’s core work on the Compound protocol has now been completed.
He wrote in a Medium blog post:
“Until yesterday, we played a central role in the development of the protocol. Through traditional equity fundraising (not token sales), we funded and built a key piece of infrastructure for the decentralized finance (DeFi) space.”
He claims that the control has now been turned over to the community, which was done by distributing COMP tokens to the protocol’s “most important” stakeholders.
The Compound Labs team says it won’t have a management role in the protocol’s community-led governance. The Compound developers won’t directly take part in any governance-related matters, meaning they won’t be casting any votes or delegating any COMP tokens to influence how decisions are made to maintain the open-source protocol.
Chervinsky clarified that Compound Labs won’t “privately coordinate votes for or against governance proposals; or conduct or pay for security audits of third-party governance proposals.”
The Compound developers will basically distance themselves from making direct decisions related to the protocol’s ongoing growth, development, and maintenance. They’ve decided to do this so that they can help “promote decentralization and empower community governance” of the Compound protocol.
Chervinsky emphasized:
“COMP holders must learn to manage the protocol without us. We’ll still be available to answer questions about the work we’ve done, and our employees may decide to participate in governance as individual members of the community themselves (or not). Beyond that, we leave the protocol to you.”
Compound’s source code was previously licensed with the BSD-3 open source license, but now it’s fully open-source. The development team has applied for certain patents which they claim will only be used for “defensive purposes” (if granted).
The Compound developers note that most cryptocurrencies sit idle on digital asset exchanges and in users’ wallets, without generating any interest. The Compound team wants to change this.
The Compound protocol is a widely used Ethereum-based system with thousands of users, and many different integrated apps.
Compound’s developers have raised $25 million through their Series A investment round.