Compound, one of the first protocols to enable bankless crypto lending, has approved a record $52 million development budget and restructured its leadership, focusing on traditional finance veterans.
The company is also betting on institutional investors for its next phase of growth, seen as a shift away from chasing yields from retail investors who once fueled DeFi. Its native token, $COMP, appears to have received a boost from this announcement, rising over 10% in 24 hours.
Projects initially focused on retail are now seeking to attract banks, asset managers, and compliance departments to regain footing, and Compound seems to be moving in that direction.
The Compound Foundation wrote on X that the protocol is "entering a new era."
From $12 Billion to $1.2 Billion
The total value locked (TVL) on Compound has fallen to about $1.2 billion, down roughly 90% from the $12 billion the protocol held at its peak in September 2021, according to DeFi platform data.
The vast majority of TVL is on Ethereum, with Arbitrum a distant second.
Compound's metrics differ significantly from Aave, the leading DeFi lending protocol with over $14.6 billion in total lending volume.
Ironically, Compound helped invent this category when it launched in 2018, and by its own account, has processed around $480 billion in deposits and loans since then.
However, after incentive programs that boosted its metrics ended, the protocol's growth stalled.
Despite the rally, $COMP tokens still trade significantly below their best days. Their current price is around $18, yet still down about 98% from its 2021 peak.
How Does Compound Plan to Spend Its $52 Million?
The budget was approved via the Compound DAO, with $14 million authorized for immediate use. The remaining funds unlock in tranches tied to milestones, allowing oversight of the development team's performance funded by the treasury.
The money is roughly split into two parts: about $28 million goes towards operations and developing the new Compound V4 protocol, and $24 million towards growth. Of this growth allocation, $8 to $10 million is earmarked for institutional partnerships, not the old liquidity provider incentive scheme to boost metrics.
A key component of V4 is a hub-and-spoke model where capital flows through a central hub rather than being isolated on individual markets. This approach is intended to give professional counterparties tighter risk controls. Compound said over 10 partners have already committed, with more than 20 others in talks.
A Bench Built on Traditional Finance
The leadership changes look like a statement of intent. The new team includes COO Christopher Donovan, former COO at Near Foundation, and Chief Product Officer Stephen Liu, who grew Maple Finance's assets from $500 million to $5 billion.
Aaron Schnarch, former CEO of Coinbase Custody, joins the team as an Executive Director, with other hires coming from Anchorage Digital, HSBC, Broadridge Financial, and Maple.
In his statement, Schnarch said: "DeFi is a wonderful innovation; however, it has seen limited adoption among institutional investors." He added that existing products "fall short of traditional financial institution requirements"
However, not everyone is convinced by metrics alone, one being Himanshu Sahai of Arch Lending, who said the budget and bench represent a "significant step," but warned that institutions "are not underwriting teams but underwriting structures"
Why Is Everyone Now Chasing Institutions?
Compound is late to a race it once could have led. This year in crypto, the institutional approach has become a default survival strategy. In July, former Ethereum Foundation members launched Ethereum Institutional, a non-profit providing an "entry point" for banks and asset managers, backed by Bitmine, SharpLink, and Joseph Lubin, as reported by Cryptopolitan.
The tokenized real-world assets market has grown to roughly $65 billion, and over 2,000 institutions disclosed Bitcoin exposure via spot ETFs in Q1.
Ran Hammer of Orbs stated: "Retail participation has shrunk to a fraction of what it once was," as the network has "quietly turned into a settlement, execution, and interaction layer between financial institutions." Standard Chartered predicts the DeFi sector could reach $2.7 trillion by 2030.
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