Compound III Launches on Ethereum: What You Need to Know

The new features of Compound III, the implications for the DeFi ecosystem, and its potential impact on borrowing, leverage, and stablecoins.

Compound III, the latest iteration of the popular decentralized finance (DeFi) lending protocol, launched on Ethereum.

The new upgrade is set to change the DeFi ecosystem, particularly when it comes to borrowing.

In this blog post, I’ll explore the changes brought by Compound III and their implications for the DeFi space.

The Focus on Borrowers

The biggest change in Compound III is the focus on borrowers.

Unlike its predecessor, Compound V2, which used a pooled-risk model where users could borrow any asset, Compound III only supports one base asset for borrowing, with other crypto assets supplied as collateral.

Currently, USDC is the base asset, and ETH, COMP, LINK, UNI, and WBTC are supported as collateral. This approach ensures that the protocol is as safe as its weakest asset, reducing the risk of a single bad asset draining all assets from the protocol.

Improved Security, but at a Cost

While this improved security is a significant advantage, it …