TLDR: Compound, the DeFi lending protocol, is voting to revive their community grants program. The new program draws lessons and improvements from its past version with the goal of creating a decentralized program that incentivizes building on the Compound protocol.
Grants programs are a common tool used by crypto projects to help incentivize and bootstrap building within their respective ecosystems. Some of these notable programs include Aave Grants DAO, the Uniswap Grants Program, and the Balancer Grants Program. Compound, the blue-chip DeFi protocol has notably been missing such a community-led program. The protocol used to have a similar structure: the Compound Grants Program (CGP1.0) and it ran from March through September of 2021. Within this first version, notable contributors included Larry Sukernik, Getty Hill, Monetsupply, Leighton Cusack, and others. This team successfully rewarded thirty grantees with over $1M USD over the course of six months. Following its conclusion in Sep 2021, the program remained dormant for many months as no willing contributor stepped up to pick it back up. Among the things holding it back was the lack of viable organizers, the legal costs, and the general overhead needed to run such a program.
Enter Questbook, a decentralized grants orchestration tool used by projects such as Celo, Aave, Solana, and Polygon. Sriharsha Karamchati, co-founder of Questbook, worked with key stakeholders behind the scenes and posted a draft proposal in the Compound forums on June 29, 2022. Now, after several months of discussion and development — and more than a year after the first iteration of the grants program ended — a proposal for the second iteration of the Compound Grants Program (CGP2.0) is up for the Compound community to vote on.
The Proposal: CGP 2.0
This new version of the Compound Grants Program continues with a similar mandate as its predecessor while introducing a number of improvements to its structure. The proposal outlines a budget request totaling $1M USD to fund grant rewards and related operational expenses over the course of six months.
The proposal took over six months from when it was first proposed to be formally finalized and pushed to a vote. During this process, Questbook struggled to find applicants to oversee important roles within the program. This lengthy lull did however provide ample time for feedback and discussion, resulting in a number of improvements. From its first version to what is now being voted on the proposal has been continuously updated and changed — much to the satisfaction of the Compound community, which has become increasingly engaged with the idea.
This time around the CGP focuses on growing the program itself, delegating capital allocation, and strengthening the builder community under current market conditions. The program will pilot four “domains” (strategic areas of focus) to reward grants: Multichain Strategy; New Protocol Ideas and DAPPs; Developer Tooling; and Security Analysis Tools & Security Bounties. Each of these domains will be allotted $200K for grant disbursement to relevant projects over a period of two quarters.
The new grants committee will be made up of a program manager and four “domain allocators”: Bobby Bola (StableNode), Michael Lewellen (OpenZeppelin), allthecolors, and Madhavan from Questbook in an interim role. Sriharsha from Questbook will be the first program manager, with all the following managers to be selected by the community. For their work the committee will receive $200k over the length of the program, bringing the total proposal request to $1 million.
At the end of each quarter, this committee and the wider Compound community will evaluate the performance and effectiveness of each domain with the opportunity to make changes as they see fit. Questbook will leverage its grants tooling software to offer real-time tracking and visibility of what is transpiring with these grants. The program will work alongside Blockchain Lawyers Group as their legal advisors to help oversee all contractual drafting, KYC applications, and other legal issues that may arise during the grant disbursement process.
Compound has — up until very recently — relied entirely on the widely used Governor Bravo smart contract to oversee its governance. Holders of the COMP token are granted governance rights and powers to influence and shape the protocol. Any address that has 25K or more COMP delegated to them can create a proposal. Once a proposal has been created a 2-day review period commences. After the end of the review, voting begins; the voting period lasts 3 days. Should the proposal succeed it is queued within a timelock for an additional 2 days. In total, an on-chain proposal at Compound takes 7 days from submission to execution. Quorum is set at 400K COMP with a simple majority rule in place.
With the recent introduction of Compound Improvement Proposals, governance at Compound has become more flexible and accessible. It is not yet clear, however, which governance process future changes to the grants program will employ.
Voting for Proposal 123 is now underway and concludes on December 3rd. The proposal looks poised to pass and revive a much-needed community grants program within Compound.
Big Picture
Grants programs are critical for the stimulation of development and innovation in decentralized protocols: they provide a way for contributors from across the space to propose new ideas and have them vetted and funded by the community. There are a number of challenges to such programs, however, as identified by Questbook in their pitch: committee members have blindspots; managers burn out; the tooling is often inadequate for the task of providing transparency. Additionally, committees can easily become centralized sources of power and resources as preferential treatment (and worse) can take place behind the scenes.
Questbook’s proposal attempts to solve these concerns by making sure that each element of the grant-making process — from areas of focus to committee member selection to funding — is determined by community input. The visibility into the process enabled by Questbook’s tooling will give the community all the information they need to understand whether a particular part of the grants program has been successful or not. This will lead, one hopes, to increased accountability on the parts of both grantors and grantees. It should help this version of the grants program survive and improve upon itself going forward.
We’ll be tracking this proposal activity closely at Boardroom, follow our newsletter to stay up to date.  *If you’re a voter in a protocol, make sure to check out Boardroom Portal.
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