Compound's COMP tokens skyrocket, project announces US$52 million in institutional transformation

Compound, one of the first agreements to enable cryptocurrency lending without banks, has approved a record development budget of US$52 million and rebuilt its leadership team around veterans in the traditional financial sector. At the same time, the agreement will bet the next phase on institutional customers, which is seen as a departure from the retail investors who have driven DeFi's development. Affected by this news, its native token COMP seemed to be boosted, rising more than 10% in 24 hours.

Projects that once started serving retail investors are now courting banks, asset management companies and compliance departments to regain their footing, and Compound seems to be moving in this direction. The Compound Foundation posted on the X platform that the agreement is "entering the next era."

From US$12 billion to US$1.2 billion,

Compound's total locked position (TVL) has dropped to approximately US$1.2 billion, down approximately 90% from the peak of US$12 billion in September 2021. The vast majority of TVLs are located on Ethereum, with Arbitrum ranking second with a wide gap. Compound is a far cry from Aave, the leading agreement in DeFi lending, which has a TVL of more than $14.6 billion. Ironically, Compound helped create this category when it was launched in 2018, and, according to its own statistics, has since processed approximately $480 billion in deposits and loans.

However, the agreement's growth stalled as the incentive program that had driven growth in its target ended. Although the COMP token received a boost, the trading price was still well below its glory days. It currently trades at about $18, still down 98% from its all-time high in 2021.

How did the Compound plan cost US$52 million?

The budget has been approved through Compound DAO, of which $14 million is available immediately. The rest will be unlocked in stages based on milestones, a structure that allows the development team to maintain performance pressure with funding from the funding pool. Funding is roughly divided into two components: approximately $28 million for operations and development of the new protocol version Compound V4, and $24 million for growth. Of the growth funds,$8 million to $10 million is earmarked for institutional partnerships rather than the past practice of paying liquidity providers to enhance superficial data.

The core of V4 is a "hub and spoke" design that allocates funds through a central hub rather than isolating them in different markets. This approach is designed to provide professional counterparties with stricter risk control. Compound said that more than 10 partners have committed to join, and more than 20 are in negotiations.

Management team built from traditional finance

The comprehensive reorganization of leadership shows clear intentions. The new team includes Chief Operating Officer Christopher Donovan (previously COO of the Near Foundation) and Chief Product Officer Steven Liu (who has grown Maple Finance's assets from $500 million to $5 billion). Aaron Schnarch, former CEO of Coinbase Custody, joined as executive director, and other new members came from Anchorage Digital, HSBC, Broadridge Financial and Maple.

In a statement, Schnarch said: "DeFi is a remarkable innovation, but it has made limited progress in institutional adoption." He added that current products "fail to meet the standards of traditional finance." However, not everyone is convinced based on seniority alone. Himanshu Sahay of Arch Lending said the budget and management team was "a serious move" but warned: "Agencies are not evaluating teams, they are evaluating structures."

Why is everyone chasing institutions now?

Compound has fallen behind in the race it could have led. This year, the shift in the cryptocurrency sector to institutions has become a common survival strategy. According to previous reports, in July, former Ethereum Foundation members founded Ethereum Institutional, a nonprofit organization backed by Bitmine, SharpLink and Joseph Lubin to serve as a "front door" for banks and asset management companies. As of May, tokenized real-world assets had climbed to approximately US$65 billion, with more than 2000 institutions disclosed Bitcoin positions through spot ETFs in the first quarter.

Orbs 'Ran Hammer said: "Retail participation is only a fraction of what it used to be" and the chain "has quietly become a venue for settlement, execution and interaction among financial institutions." Standard Chartered Bank predicts that by 2030, the size of the DeFi sector may reach US$2.7 trillion.