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The market takes ETH, wstETH, WBTC and cbBTC as collateral against USDC at loan-to-value ratios of up to 87%. Compound says borrowing is open to anyone, with approval required only for the 200,000 USDC in supplier rewards.

Compound Foundation has opened a USDC lending market that takes ETH, wstETH, WBTC and cbBTC at loan-to-value ratios of up to 87%, three weeks after relaunching the protocol around institutional credit.

The Institutional Market is the first product out of the $52 million program COMP holders approved in May, and it went live under a control structure the DAO never voted on. The Treasury Management Committee administers the market and a separate Safe holds authority over its collateral and parameters, an arrangement a Compound delegate is now asking COMP holders to reverse.

The market lends USDC against ETH, wstETH, WBTC and cbBTC, and runs on Compound v3. Compound holds $1.53 billion in total value locked with $638 million borrowed against it, sixth among lending protocols on DefiLlama and up 23% over 30 days. Ethereum carries $1.42 billion of that, or 93%. COMP trades at $20.88, up 9% over seven days, for a market cap of $212 million.

"With today's Institutional Market launch, we are taking the first step toward building infrastructure to meet institutional client demands, including better capital efficiency, clearly defined risk, and a much higher standard of service," said Aaron Schnarch, executive director of Compound Foundation. "We are encouraged by the market demand, and look forward to launching additional capabilities over the coming months."

Oversubscribed At LaunchCompound says the market was oversubscribed on day one, with DeFi Saver, K3, KPK and Yearn taking part. The company gave no figure for how much was subscribed.

"Compound is combining the capital efficiency of onchain markets with the level of service institutional participants expect. The ability to access more efficient borrowing while working directly with a team that understands institutional requirements makes this a compelling new market for us," said Marcelo Ruiz de Olano, co-founder and CEO of KPK.

Four Assets, One BorrowThe collateral list is short and liquid: two forms of ether and two forms of wrapped bitcoin.

Compound's argument is that a market holding only those four assets can run higher loan-to-value ratios than one that has to price the tail, and that lenders capture better economics as a result. Borrowing is open to anyone. The approval process and a 100,000 USDC minimum deposit apply to the boosted supplier rewards, which run to 200,000 USDC paid pro rata over three months against a $20 million supply cap.

Compound's market page puts ETH at an 87% loan-to-value ratio, wstETH at 85%, and WBTC and cbBTC at 81%, with a $10 million borrow cap on each. Liquidation factors run from 93% on ETH to 86% on the two bitcoin assets, and liquidation penalties from 5% on ETH to 10% on WBTC and cbBTC.

The Foundation has described the market to delegates as an Institutional Comet built under v3.5, outside the V4 roadmap the DAO funded, to test an institutional use case. Compound also says v3 has run four years without an exploit, a claim worth stating as the company's own.

Who Holds The KeysCompound delegate ugurmersin asked COMP holders on Sept. 9 to move ultimate control of the market to Compound governance, writing that the DAO "does not currently appear to have ultimate control over Institutional Comet" and that he could find no governance authorization for the current structure or any way for COMP holders to revoke it. The proposal would leave day-to-day operation with the Foundation and the committee while requiring the administrators to publish a full permissions map within 10 business days and transfer ultimate authority within 30. It also notes that the committee's mandate from the DAO covers treasury management, not administering a lending market. The Foundation had not responded on the forum as of Wednesday.

Mostly Still In ReserveCOMP holders approved the budget on May 8, with 1.88 million COMP in favor and none against, and it executed two days later. The Foundation made it public on Aug. 17 alongside four hires from Coinbase, Anchorage, NEAR and Maple. Schnarch, the executive director, was chief operating officer of Anchorage Digital and chief executive of Coinbase Custody. The two-year budget runs $28 million for operations and $24 million for growth, but only $14 million went to the Foundation's multisig; the other $38 million sits in reserve against milestones that include a staffed engineering team and a production v3 integration kit.

Shipping an institutional product three weeks in is the first of those milestones met in public. Whether the remaining $38 million follows is a DAO decision, not a Foundation one.

The $480 Billion LineCompound's boilerplate puts the protocol at "approximately $480B in deposits and borrowing volume" since 2018. Compound sits behind Aave's $17.5 billion and Morpho Blue's $9.6 billion in a lending category holding $50.2 billion across 639 protocols, with 3.1% of the total.

Compound wrote the template for onchain lending in 2018 and now holds less than a tenth of Aave's deposits, and the institutional market is its attempt to win back size on terms and service rather than rates. Compound calls it the first in a planned series built around different collateral types and borrower profiles.

CORRECTION, Borrowing is open to anyone and approval applies only to the supplier rewards; COMP holders approved the program in May and the Foundation made it public in August; the participant is K3. The story has also been updated with the market's liquidation parameters and with a governance proposal filed Sept. 9.

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Compound Finance has placed a $52 million bet and leadership renewal on its pivot to institutional DeFi. (Miguel Parera/Unsplash)Summary

Compound Finance overhauled its leadership and approved a record $52 million budget as it seeks to revive growth after its total value locked fell to $1.2 billion from a $12 billion peak in 2021.The protocol is pivoting toward institutional clients by developing real-world asset offerings, partner integrations and credit infrastructure designed to meet traditional finance compliance and technical standards.Industry executives say the new leadership team and sizable budget align with a broader shift in DeFi toward serving financial institutions, after the sector’s overall assets declined amid market weakness and security exploits.Compound Finance, one of the oldest decentralized finance (DeFi) lending protocols, replaced its leadership team and approved a $52 million budget on Monday to attract new capital after the value of assets locked on the platform tumbled to $1.2 billion from a peak of $12 billion in September 2021.

The company said it will now focus on attracting institutional users and will offer real-world assets, partner integration and credit infrastructure for traditional financial markets.

Compound pioneered decentralized lending when it started up in 2018, popularizing the concept of earning yield on crypto deposits without intermediaries. It said it has processed roughly $480 billion in deposits and borrowing volume since its inception. Over the past few years, it has lost ground to competitors such as Aave, which holds more than 11 times its TVL with $14.8 billion, DeFiLlama data shows.

As an industry, DeFi is operating from a weakened base. TVL across the sector has fallen by more than a third since the start of the year to roughly $70 billion, driven by a broad correction in the crypto market, compressed yields and a run of protocol exploits, including the $292 million KelpDAO hack in April. Still, the sector is forecast to reach $2.7 trillion by 2030, with tokenized real-world assets (RWAs) among the fastest-growing segments, according to a Standard Chartered projection.

"Now is a great time for initiatives like these, where real capital goes toward both the structural work and the bringing in of bright minds from the institutional sphere who can explain it to a risk committee in their own language,” said Gal Stern, chief business development officer at deBridge, over Telegram. “That combination is what brings institutional confidence back."

The new team includes Chief Operating Officer Christopher Donovan, who previously held the same role at the Near Foundation. Steven Liu, who scaled Maple Finance from $500 million to $5 billion in assets, joins as chief product officer and the former CEO of Coinbase Custody, Aaron Schnarch, becomes an executive director. Other appointees join from Anchorage Digital, HSBC, Broadridge Financial and Maple Finance, the company said.

"DeFi is a remarkable innovation; however, it has achieved limited institutional adoption," Schnarch said in a statement. "Current product offerings fall short of meeting the traditional finance bar, especially as it pertains to compliance and technical requirements."

The move is a logical response to the shift in DeFi's user base, according to Ran Hammer, chief business officer at Orbs.

"Retail participation is a fraction of what it was, and the chain has quietly become a venue for settlement, execution and interaction between financial institutions," Hammer said. “Since DeFi summer, the space has turned into something completely different, essentially a new financial layer for institutions. So bringing in leadership that speaks that language is exactly the right direction."

The size of the allocated budget, the largest approved by Compound's decentralized autonomous organization (DAO), may help underline its commitment.

"The $52 million and a bench with that much institutional experience is a serious move, and it should improve its execution," said Himanshu Sahay, co-founder and chief technology officer of crypto lending firm Arch Lending, but institutions will want more than credentials. They "aren't underwriting teams, they’re underwriting structures."

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Two prominent crypto projects have been exploited and many more could be at risk after two-factor authentication (2FA) was disabled, at the front-end, for projects using Google Domains amid a migration to Squarespace.

Posted July 11, 2024 at 2:27 pm EST.

The recent hacks of Compound Finance and Celer Network’s front-end domains on Wednesday revealed at least an additional 124 domains are at risk of exploitation by virtue of their registration with website-building company Squarespace, according to security experts. 

Compound Finance, one of the largest decentralized protocols with a total locked value of nearly $2.2 billion, is hosting a phishing site, said Michael Lewellen, head of solutions architecture at blockchain security firm OpenZepplin, on X. He warned users not to interact with the website until further notice.

Another attacker, perhaps the same one or group, also attempted to take over the front-end domains of Celer Network. The team said on X that the takeover was intercepted and that their “investigation indicates that the attack vector likely involved third parties beyond our control.” 

In a conversation with Unchained, the founder of blockchain network Glue and prominent white-hat hacker who goes by Ogle indicated that Compound Finance and Celer Network’s use of Squarespace to host their front-end websites is what allowed these exploits to occur. 

“Right now, [Compound Finance is] exploited to the point that links are changed and so people can be phished,” he added. Phishing is a type of scam where exploiters use deception to make people reveal sensitive information or install malicious software. 

Please avoid interacting with the compound[.]finance website until further notice.

It is part of the widespread domain compromise occurring right now. By visiting the site, or clicking any associated links, you will be putting yourself at risk. We and others are diligently…

— Compound Labs (@compoundfinance) July 11, 2024

The at-risk websites initially used Google Domains, but Squarespace acquired the Google Domains business, completing its acquisition of assets in September 2023. 

The recent exploits were “almost certainly” from the migration of Google Domains to Squarespace, said Ogle. “What I’ve learned is that during that migration 2FA [short for two-factor authentication] was disabled.” 

Compound Finance and Celer Network “probably did have 2FA enabled on Google, but then once it got switched over, not the case anymore,” he added.

“Google sold their domain business to Squarespace a few months ago and the forced migration of domains to Squarespace removed 2FA causing all these domains to be vulnerable and several have been hijacked,” said Bobby Ong, the co-founder of CoinGecko, on X.

Read More: $1 Million Bounty On Offer for Finding Bugs On Solana Validator Client Firedancer

Domains of Top Protocols At-Risk The number of crypto protocols joining the likes of Compound Finance and Celer Network may grow, as the pseudonymous founder of DefiLlama, who goes by the screen name @0xngmi on X, noted that 124 additional front-end domains of prominent crypto protocols are using Squarespace including Pendle Finance, Hyperliquid, dYdX, Nostra Finance, Axelar Network, Polymarket, Thorchain, Aptos Labs, NEAR, and Safe. 

A spokesperson for Safe, a wallet infrastructure provider, confirmed with Unchained that Squarespace is involved with its front-end website, but emphasized they haven’t identified any abnormal activity and have systems in place to detect irregular changes. 

“We currently remain unaffected,” Safe’s spokesperson said. “Our teams will continue to monitor the situation and keep our community and users informed.”

“As always, stay vigilant,” the spokesperson at Safe added. In a similar vein, the dYdX trading team said to Unchained over Telegram, “dYdX.exchange is secure with no detected vulnerabilities” and that they will also continue to “monitor the situation.” Axelar Network also has not identified any issues with its domain and will continue to track for any further developments, per a post on X. 

Read More: 50% of Illicit Funds End Up At Centralized Crypto Exchanges, Chainalysis

The domains of these protocols —  barring Compound Finance and Celer Network  — remain unaffected. Yet Ogle says protocol team members should be worried as the situation is “not good” and that people should not go to any of these websites “under any circumstances until the official Twitter says it’s safe.”

At presstime, Compound(dot)Finance gets redirected to Compound-Finance(dot)app, in which the latter is flagged by Google as a dangerous site. “Attackers on the site you’re trying to visit might trick you into installing software or revealing things like your password, phone, or credit card number,” according to Google’s warning.

The message Google raises when people try to visit compound(dot)finance, which gets redirected to compound-finance(dot)app. If a user proceeds despite the flagrant, red warning, they’ll see a website that looks like a standard crypto protocol.

The interface of the phishing site is hosted by Compound Finance’s front end. Difference Between a Domain and Protocol While the domain websites of crypto projects may go down in the event of a hijacking, the actual protocols remain unaffected. People or bots can still interact with a project’s smart contract without going through a front-end website, Ogle said. 

“You could transfer funds on the blockchain, you could go through their bridge, all that kind of stuff can happen without ever even using the website.” Even if a protocol’s front-end domain is attacked and “taken down by these hackers right now or whatever, you still don’t lose your money. You still have access to it.”

Representatives of Squarespace did not immediately respond to Unchained’s requests for comments.

UPDATE (July 12, 2024 10:03 a.m. ET) Includes status update of Axelar Network