Compound's new blockchain prepares DeFi for central bank digital currency

Compound's new blockchain prepares DeFi for central bank digital currency - Compound blockchain cashCompound Labs released a white paper on Thursday detailing its plans to create Compound Chain, an application-specific blockchain capable of providing money market services across multiple networks.

The fintech firm has not yet posted a date, but is already working on a testnet. The new white paper written by Compound founder Robert Leshner and Compound Labs staff Geoffrey Hayes, Jared Flatow and Max Wolff, cites three limitations of the current version of Compound on Ethereum: commission costs, the inability to serve assets on other chains and the fact that all supported assets suffer the risk carried by each supported asset. The new project aims to support future digital assets of central and investment banks.


While the Compound Chain will be governed by COMP - the token that generated the yield farming mania during the summer - a new cryptocurrency called CASH will also be introduced (here the quotation in real time). Compound Chain's native CASH token will be used to pay for transactions on the network.

CASH will be minted in much the same way as DAI, as a debt against the blocked collateral held on the Compound Chain. Like DAI, CASH will initially be pegged to the US dollar, but its peg may be modified by governance decisions.

Unlike DAI, all CASHs will earn some sort of return from a portion of the interest paid on loans originating on the blockchain. The whole purpose of the chain is to function as a Compound but in a cross-blockchain fashion.

A new interoperability technology

As soon as an asset is uploaded to Compound Chain, it becomes available for lending to others. As on Compound, they will be able to borrow any supported asset. The Compound Chain should be ready to support Ethereum.

As for the next chains to integrate, "This really depends on the community," said Leshner. "I suspect the first additional chains would be things like Solana, Polkadot and Tezos."

The only real prerequisite is that the blockchain is able to support smart contracts. As the white paper explains, "The Compound Governance system on Ethereum has established a distributed decision-making process and is capable of transmitting governance actions to the Ethereum starport, from which Compound Chain validators receive instructions."

Details pending

Compound Labs has not indicated what technology the chain will be built on, only that it will use a proof-of-authority architecture. This consensus mechanism is similar to proof-of-stake in some ways, but it is important to emphasize that all validators are selected from COMP holders.

“Governance could also lift itself and move to a fully open proof-of-stake system,” Leshner said, though he doesn't expect it to do so for some time. The main intent appears to be to expand DeFi into all parts of the crypto ecosystem. “At launch, the goal is to replicate the Compound user experience, but with a very clear path to support every blockchain and every asset,” said Leshner.