Compound approves a $52 million budget to push DeFi towards institutionalization

Compound Decentralized Autonomous Organization approves $52 million development plan

On August 17, Compound's Decentralized Autonomous Organization (DAO) approved a $52 million development plan, the largest budget in the nine-year history of the loan agreement, to build infrastructure needed to serve banks, asset management companies and other institutional lenders.

1/ Compound is about to enter the next era. Today, we announced a new leadership team and a $52 million DAO-approved development plan-the largest in the history of the agreement-to bring institutional credit business onto the chain.

The DAO's own non-native treasury holds US$5.95 million, while agreed annual revenue is US$2.4 million. The promised funds are almost 9 times the amount of the treasury and about 22 times the annual income.

Where will the money be used?

The Compound Foundation divided the money into two components in its governance proposal submitted to the Agreement Forum in April: $28 million for engineering, integration and risk systems, and $24 million for institutional cooperation and liquidity. Funding will be released in phases, with US$14 million allocated in the first year, linked to deliverables such as a new clearing engine and an audit of the next major version of the agreement. The goal is clearly stated in the proposal: "Build a trustworthy and easy-to-integrate credit infrastructure layer for partners, institutions and distribution platforms."

Responsible for this work is Aaron Schnarch, executive director of the Compound Foundation. Prior to this week's announcement, Schnarch had already held the position: Earlier this year, according to Compound's official account, he participated in a panel discussion on institutional adoption of blockchain as executive director at the Yale Innovation Summit.

Compound drives the team behind institutional business

Aaron Schnarch-Executive Director of the Compound Foundation. Former CEO of Coinbase Custody.

Christopher Donovan-Chief Operating Officer. He was chief operating officer of the Near Foundation.

Steven Liu-Chief Product Officer. Compound said he previously helped grow Maple Finance's balance sheet from about $500 million to $5 billion.

Leo Eikelman-Chief Technology Officer.

Several people were also recruited from Anchorage Digital, HSBC and Broadridge Financial.

The move comes at a time when Compound has fallen far behind its biggest competitor. The agreement currently holds US$1.24 billion in deposits, well below its peak of approximately US$12 billion in 2021, a drop of approximately 90%. By comparison, Aave holds $14.3 billion.

The meager surplus behind the reserve figures

The treasury figure of $5.95 million is not a one-time shortage. Compound's own dashboard shows that the agreement charges US$32.87 million per year, but only US$2.4 million of that is retained as revenue, accounting for about 7%, with the rest going to lenders and suppliers on the platform. COMP liquidity on the Compound chain is US$6.21 million, which is also thin compared to the US$33 million COMP that changes hands every day, which means that most of the trading in the token takes place outside Compound's own market.

Similar bets have failed

Goldfinch Finance, backed by Andreessen Horowitz and Coinbase Ventures, has built a similar model starting in 2021 to channel crypto deposits into loans to off-chain borrowers. The agreement issued about $100 million in loans before a massive default and was forced to close in June this year. One depositor reported that eight borrowers had more than $50 million in outstanding loans, two of whom were in default, six were restructuring, and had realized losses of nearly 70%, compared with the agreement's estimate of only 20%.

The people who built the protocol came to a different conclusion

Compound's founders made the opposite view three years ago. Robert Leshner said at the Permissionless conference in Austin in September 2023 that "institutions will not come," saying that banks and asset management companies want to have access to traditional assets such as stocks and bonds. He then left Compound Labs and founded Superstate, a company focused on bringing traditional assets to blockchain, rather than transforming DeFi lending for institutional use. Schnarch's diagnosis today sounds similar. He said DeFi's "limited institutional adoption" was because current products failed to meet "traditional financial standards." The two men reached the same initial observation, but chose completely different paths.

September 2023: Compound founder Robert Leshner declared that "institutions will not come" and then left and founded Superstate, focusing on tokenizing traditional assets.

April 6, 2026: The Compound Foundation released a funding proposal for the V4 program at its Governance Forum.

April 18, 2026: An attack stole approximately 16,776 ETH from rsETH positions associated with Compound and approximately 13,000 ETH from positions associated with Aave.

April 28, 2026: Compound proposes to contribute up to 3,000 ETH to the "DeFi United" recovery alliance formed after the attack.

Spring 2026: V4 funding proposals are approved through the Compound governance process.

June 2026: Goldfinch Finance closes due to massive borrower defaults.

August 17-18, 2026: The Compound Foundation publicly announced its $52 million plan and expanded leadership team.

Neither Compound's proposal nor its public statement explained how the $28 million operating portion would be funded with a vault of this size. The DAO approved the plan through its standard governance process. The proposal's milestone structure links subsequent payments to product delivery rather than one-time payments. These milestones are the clearest tests of the future: a clearing engine, Compound's current version of the integrated toolkit, and a completion audit for the next version. Compound said the new institutional product will be launched within weeks.