A white paper was published by Compound Labs on Thursday outlining its aspirations to build Compound Chain, an application-specific blockchain capable of providing money market services across several networks.
In a phone chat with CoinDesk, Compound founder Robert Leshner said that they want to disclose the ideas for a blockchain that could scale Compound over the next century. The decentralized finance (DeFi) startup hasn’t given a timeframe, but it is currently working on a testnet. The new white paper was written by Leshner and Compound Labs employees Geoffrey Hayes, Jared Flatow, and Max Wolff. It cites three limitations of the current Compound on Ethereum version. Specifically, these are gas costs, the inability to serve assets on other chains, and the fact that all supported assets aggregate the risk of each supported asset.
Those new supported assets aren’t just for trustless blockchains. The new project aims to promote central banks’ and investment banks’ upcoming and rumored digital assets.
Compound Chain joins the chorus of blockchain interoperability attempts, but it’s a little different in that it’s aiming for application-specific compatibility. There haven’t been many similar attempts before it. But, Leshner named Terra, a stablecoin and payments chain, as being one of them.
Despite the fact that this is a completely separate blockchain, it will be regulated by the same Ethereum-based system that operates Compound v1—the COMP token. When the Compound Chain goes live, COMP owners will have a significant new set of abilities.
According to Messari statistics, COMP’s price jumped by as much as 10% within an hour of the product’s release.
COMP, the token that sparked the summer’s yield farming mania, will manage Compound Chain. CASH also gets introduction as a new cryptocurrency.
The native CASH token of Compound Chain will pay for network transactions. CASH will be similar in creation with DAI. A debt secured by locked collateral on the Compound Chain.
CASH, like DAI, will begin with an arbitrary peg to the US dollar, but this can have alterations based on governance decisions. Unlike DAI, all CASH will earn some sort of return from a portion of the interest paid on blockchain-based loans. COMP holders who vote in governance votes will determine the number of characteristics, including the exact amount.
The chain’s entire objective is to act similarly to Compound but on a cross-blockchain level.
A New Interoperability Play
When you upload an asset to Compound Chain, it becomes available for lending to others right away. Users can choose whether or not to borrow against their assets.
They will be able to borrow any supported asset, just like on Compound. But they will also be able to borrow exclusive assets to the Compound Chain, starting with CASH.
The only true requirement is that the blockchain can enable smart contracts. Starports are smart contracts that allow assets to move across Compound and smart contract chains.
While this may appear to some as a significant departure from Ethereum, the chain that started DeFi will retain control of the new chain, at least for the time being.
Those who are long Ethereum, according to Leshner, will benefit from incorporating other chains because it will allow Ethereum to port value created on other chains into the world’s computers’ DeFi applications in the form of CASH.
Although the chain can create new assets, the ability of early users to upload assets from other blockchains likely considers to be more crucial. Assets’ uploads are by putting them inside a layer-one smart contract, which the Compound Chain validators will see and mint on the associated Compound Chain wallet.
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