Compound approves $52 million institutional DeFi plan

Compound Foundation announces new leadership, DAO approves US$52 million development plan

On August 17, the Compound Foundation announced its new leadership team, while its Decentralized Autonomous Organization (DAO) approved a US$52 million development plan focusing on institutional credit and real-world assets.

Core Points

Compound DAO has approved a two-year, US$52 million plan focusing on institutional credit and infrastructure. Only US$14 million was initially allocated, and the remaining US$38 million will be gradually released based on specific delivery milestones. Aaron Schnarch will lead the Compound Foundation, working with senior management teams responsible for operations, product and core engineering functions. The roadmap covers real-world asset support, integrated tools, and improving the efficiency of lending capital on the chain. Compound said its platform has processed approximately $480 billion in total deposits and borrowings since 2018.

The new leadership team is officially in place

Aaron Schnarch, former CEO of Coinbase's custody business, will serve as executive director. Christopher Donovan serves as chief operating officer, Steven Liu serves as chief product officer, and Leo Eikelman serves as chief technology officer. Compound described the allocation of funds as the largest development plan in the history of the agreement. However, the DAO did not immediately allocate all of the $52 million to operating expenses. The two-year plan releases $14 million at launch. An additional $38 million will be retained in reserves and released only after the foundation meets specific development and institutional adoption milestones.

The US$52 million using the milestone funding allocation mechanism

Compound is planned to be funded using milestone funding. Compound V4 's financing proposal divides the total budget into a $28 million operating plan and a $24 million growth incentive plan. The initial allocation of $14 million will be used to support approximately 12 months of implementation. Compound expects to spend 45% to 55% of its operating budget on engineering and product development. Other funding categories include infrastructure, security, governance, partnerships and administration. The remaining $38 million will be placed in a separate reserve wallet. A planned financial management committee would control the wallet through five keys in a seven-person multi-signature structure. The foundation cannot independently control this reserve.

According to the approved framework, the second US$14 million operating capital allocation requires the completion of all first-year deliverables. These results include a fully equipped engineering team, a production-ready V3 integrated toolkit, and a new clearing engine running on the main network. Compound must also complete the V4 core smart contract to meet auditability standards and launch a restricted private Alpha test. The Financial Management Committee will review relevant evidence and certify or reject the milestone results submitted by the foundation.

Institutions use progress to determine subsequent payments

The $24 million growth plan will be paid out in three installments. The first $10 million will be available after the first operational checkpoint is completed. After the payment is launched, Compound has six months to ensure access to top institutional integration partners. Compound must provide evidence that integration is online or a formal commitment to have a clear deployment plan. An additional $7 million is required to bring in a top curator for the V4 lending market within 180 days of completing the previous milestone. The final $7 million will be available after Compound launches its public V4 beta network. If the Foundation fails to meet the conditions, the Committee may suspend subsequent transfers. Undeployed funds may also be returned or reallocated after DAO review.

Operational Transparency and Money Management

Compound promises to publish monthly reports, hold community conference calls, and provide more detailed quarterly reviews. The plan wallet address will be made public, allowing governance participants to monitor balances and transfers online. While awaiting release, reserves can generate benefits through a separately approved treasury strategy. Any forecast of earnings is only an estimate and not a guaranteed income.

Targeting banks and tokenized assets

Compound plans to increase native support for real-world assets and provide tools to enable financial institutions to embed lending services into their products. It also wants to improve capital efficiency and provide infrastructure for banks, asset managers, exchanges and financial technology companies. Schnarch said current DeFi products "fail to meet traditional financial standards," especially in terms of compliance and technical requirements. His assessment represents the foundation's explanation of this strategic shift. Steven Liu previously worked at Maple Finance, where Compound said he helped expand assets from $500 million to $5 billion. Donovan previously served as chief operating officer of the Near Foundation. Compound said other team members have experience at Anchorage Digital, HSBC and Broadridge Financial.

Competitive landscape and market positioning

This strategy allows Compound to compete directly with lending agreements that are already around tokenized asset development services. In July, Aave expanded its institutional lending infrastructure to the Avalanche network. Institutional collateral is also entering other lending markets. In May of this year, VanEck's tokenized treasury bond fund became eligible collateral in the Euler lending market. These projects demonstrate the growing competition for asset management companies seeking blockchain-based credit services. But this does not guarantee Compound will be able to obtain institutional partners or increase deposits. Compound faces a small market share in DeFi lending. When Compound was launched in 2018, it helped pioneer algorithmic lending. The foundation said the agreement has processed approximately $480 billion in total cumulative deposits and borrowings.

It also claimed the agreement had "zero bad debts since its launch." This statement is a unilateral statement by the company and is different from the total loss or allocation error measured using a different yardstick. Current deposits are still well below Compound's 2021 peak. Data shows that as of August 18, its total locked position value (TVL) was approximately US$1.25 billion, while the peak in September 2021 was close to US$12 billion. Among them, approximately US$1.14 billion is locked on the Ethereum chain, accounting for nearly 92% of the current total. Compound currently has approximately $575 million in active loans. By comparison, the locked value of Aave V3 is approximately $14.4 billion and Morpho Blue is approximately $8.1 billion. These data rank Compound sixth among loan agreements tracked by DeFiLlama. This comparison provides context for Compound's institutional strategy, but does not measure revenue, credit quality or capital efficiency. The total locked value may also fluctuate with token prices, withdrawals and lending activities.

First products coming soon

Compound said the first product on its institutional roadmap will be launched "in the next few weeks." It did not provide a specific release date, product name or confirmed institutional partners. The next verifiable steps include publishing the plan wallet address and publishing the first monthly progress report. Before the committee authorizes subsequent payments, the foundation must provide evidence for each development milestone. The V3 integration toolkit and clearing engine need to be completed before the first anniversary of operations. Compound must also advance its V4 contract to the auditable stage during this period and open up its private Alpha testing.

There are currently no definite market fluctuations that can be entirely attributed to this leadership change. The price of COMP tokens and Compound's deposits are still influenced by broader cryptocurrency market conditions and the activity of competitive lending platforms.