Compound Announces Compound Chain to Bring CBDCs to DeFi

Compound Labs has revealed a research paper last Thursday that explains how the firm has developed a blockchain-tagged Compound Chain that will lead to money market services being available over several networks.

The Compound Chain

According to the paper, Compound currently faces some challenges on Ethereum, which include high gas fees, the inability to offer its services to assets on other chains, and the fact that any supported asset aggregates the risk of each supported asset.

The paper went on to state that the coming project would be able to support digital currencies from central banks and investment banks. This negates the earlier functionality of its platform that was limited to blockchains that are trustless and permissionless.

Compound Chain joins the wagon of chains working on blockchain interoperability. However, it distinguishes itself from the rest by working on interoperability in an application-specific way. Furthermore, the founder of Compound, Robert Leshner cites Terra, a stablecoin and payment chain network, as an inspiration.

Introducing the new CASH Cryptocurrency

Compound Chain would be governed by COMP, a DeFi governance token used mainly for Compound, which helped lead the surge in yield farming in recent times. However, the chain also introduces a new crypto asset called CASH.

The crypto asset would serve as the native token of the Chain. It would be used to pay for transactions on the network and would be minted the same way as DAI.

CASH would be pegged to the US Dollar. However, the peg can is modifiable based on governance decisions. The token will also allow users to earn yield against loans that originated from the chain. All of these would be determined by the holders of COMP who would use the token for governance purposes.

How the Compound Chain Would Operate

When the crypto asset is uploaded on the Compound Chain, it becomes available to be lent to others. Users would be at liberty to borrow against their assets.

The Chain, like on Compound, would allow users to borrow supported assets, as well as other assets that would be unique to the Compound Chain.

Leshner stated that those who are long on ETH would see an advantage of incorporating other chains since it would allow them to be able to port values developed on other chains to be integrated into the DeFi app as a form of CASH. He states:

“At launch, the goal is to replicate the user experience of Compound but with a really clear path to be able to support every blockchain and every asset.”

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