Compound III Now Expanded To Layer-2 Arbitrum

Key Points:

• The lending protocol Compound III has been deployed on Arbitrum, allowing users to use ARB, GMX, WETH, and WBTC as collateral to borrow USDC on Arbitrum.
• This is the 4th version of the platform on blockchains.
• The improved security mechanism of Compound III comes at a cost as compared to the previous version.

Compound Labs announced that Compound III had been deployed to Arbitrum, allowing the use of ARB, GMX, WETH, and WBTC as collateral to lend USDC. This is the third blockchain deployed by Compound III after Ethereum and Polygon.

Compound, the veteran lending protocol of Ethereum, announced in August last year the launch of the third version of the EVM-compatible chain, Compound III “Comet” can be used for lending, while other assets are mortgage assets, which will greatly reduce risk and promote capital efficiency.

Comet is another name for Compound III. Kevin Cheng, Senior Software Engineer at Compound Labs, explains that Comet will significantly save gas for users by not changing the parameters of the protocol.

Each type of collateral on the platform comes with custom loan and liquidation rates, with WETH and WBTC having slightly lower liquidation fees. The USDC market will target a reserve fund of 5 million USDC and have a minimum loan size of 100 USDC.

There are currently four versions of Compound III, including lending USDC on Ethereum, Polygon, and Arbitrum and lending ETH on Ethereum.

Compound II uses a risk pool model where users can borrow any asset. In this model, the protocol is as secure as the single weakest asset, and this can also lead to bad assets draining all assets in the protocol. Currently, lending protocols such as Aave also work in this way.

However, compared with the previous version, the improvement of Compound III’s security model comes at a price, and the collateral provided in the future will no longer be able to earn interest.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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