Compound releases own blockchain and breaks away from Ethereum

  • Compound will release the Compound Chain, an interoperable, cross-chain platform.
  • The Compound Chain is expected to bring new assets into the protocol.

Many have been criticizing the dependence of DeFi platforms on the Ethereum blockchain for some time. Looking to make a change, Compound, one of the top lending protocols in the decentralized finance (DeFi) space, is now gearing up to release a new blockchain.

Easy cross-chain asset movement

A white paper from Compound Finance provides details of the upcoming Compound Chain, which developers believe will help scale Compound for the next century. Compound’s developers point out three primary disadvantages of the Ethereum blockchain. These include rising gas costs, lack of support for assets on other chains, and the fact that Ethereum aggregates risk for all supported assets.

With the Compound Chain, Compound Finance looks to integrate its lending platform’s benefits to a standalone blockchain. While many see this as another competitor to Ethereum’s DeFi dominance, Compound Finance has asserted that this isn’t the case. Instead, the Compound Chain will merely function as a tool to bring more assets into the lending protocol through other blockchains.

Compound Finance noted that the Compound Chain will also support some new developments in the blockchain space. These include ETH 2.0 and, possibly, Central Bank Digital Currencies (CBDCs).

One of the primary features coming with the Compound Chain is the interoperability with other blockchain platforms. Therefore, the Compound Chain will use “starports” a specialized type of smart contract, to move assets from its to other blockchains.

Speaking on support for other blockchains, Robert Leshner, Compound Finance’s founder, told industry news sources that the Compound Chain will ship with support for Ethereum. He added that the community will have the right to vote on what other blockchains to support. The only prerequisite is that the supported blockchain needs to work with smart contracts.

Thus, the Compound Chain looks to be Compound’s first attempt to break away from the Ethereum blockchain finally. However, the white paper explained that the Ethereum blockchain would maintain control of the new chain in the interim.

The CASH token

The Compound Chain will also mark a break from the traditional Compound protocol as it will use a separate governance token, known as CASH. The native token will be used to pay for transactions on the network, and it will be minted as a debt against all locked assets held on the Compound Chain.

Compound added that CASH will start as a dollar-pegged asset, like DAI. However, the peg could change based on governance decisions. The token will also earn some yield from a portion of interest paid against loans that originate on the blockchain. COMP holders who participate in governance decisions will determine that yield amount.

While the Compound Chain will be able to print new assets, the developers are focusing on early users’ ability to integrate assets from other blockchains. Users will upload assets by moving them into a smart contract on a layer-one chain. From there, Compound Chain validators will witness the contracts and mint the assets on corresponding Compound Chain wallets.

Leshner has noted that there is no timeline for a possible move from Ethereum, although developers have begun work on a testnet for the new chain. A limited-feature testnet is expected to launch in Q1 2021.

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About Author

Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system. When not immersed in the daily events in the crypto scene, he can be found watching legal reruns or trying to beat his Scrabble high score.

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