The DeFi community has concerns about the centralization of the compound chain

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DeFi Loan Protocol Compound published a whitepaper on Thursday introducing Compound Chain, a new blockchain designed to enable value transfer across chains.

Responses to the news have been largely negative as many respondents on social media struggled with the project’s centralization concerns. Compound Labs may be expecting a negative response from “Crypto Twitter” and even has limited responses to its tweet announcing the project.

According to the white paper, compound chain is a blockchain architecture that enables cheaper value and liquidity transfer across various distributed networks. The project will use the PoA (Proof of Authority) consensus of a group of validators to regulate the chain with CASH as the indigenous stable coin currency.

The whitepaper was not very detailed, but qualified CASH as being similar to MakerDAO’s Dai. In contrast to Dai, however, CASH is used to pay the transaction fees for the compound chain.

As part of the documentation released on Thursday, Compound Chain is an answer to three main problems: high gas charges, aggregate risks associated with supported assets, and the inability to handle non-Ethereum-based assets. By using PoA under a limited number of validators, Compound Chain can theoretically offer faster transactions.

As is so often the case, however, higher transaction throughput is achieved at the expense of decentralization. Indeed, critics like Set Protocol’s Anthony Sassano argued:

“Though the reason [ETH gas fees are] is expensive because Ethereum’s throughput is limited due to its extreme decentralization – Compound Chain will have low fees as it will be much, much less decentralized as it is a PoA chain (which the validators from COMP- Governors are selected). “

Rather than building an entire blockchain, Sassano believed that Compound could achieve the same goal with Layer Two solutions on the Ethereum chain. However, Layer 2 deployments also bring additional composability concerns, especially for DeFi users.

Robert Leshner, founder of Compound Finance, defended the project’s decision to create a new blockchain. Leshner has identified assets like central bank digital currencies (CBDCs) as likely use cases for the cross-chain functioning of the proposed network.

As previously reported by Cointelegraph, the founder of Compound Finance is confident that there will be future synergetic relationships between Centralized Finance (CeFi) and DeFi. However, the first whitepaper did not provide an explanation of how the project will resolve compatibility issues with moving non-Ethereum assets to the Ethereum chain.

The news of the planned compound chain blockchain comes less than a week after a planned compensation fund failed to get enough votes for users hit by the massive Dai liquidations on Nov. 26.