Conversation

2) Earlier this week, we proposed taking the collateral factor to 65%. We thought--and still think--that it would help diversify the platform. But a number of people raised valid points.

3) The largest concerns were about: a) the centralization of WBTC b) the market liquidity of WBTC

4) For (a) the main worry is around illicit minting of WBTC. This could create a lot of fake loans on Compound. Many proposed putting limits on the amount of WBTC on the platform, and we agree that would help. But it's a medium term goal, and unlikely to be a short term one.

5) For (b) the primary concern was that, even if BTC was liquid, it could take a day to mint WBTC--limiting the market's ability to absorb WBTC liquidations on a short timescale. While we don't think this is the riskiest thing--unlike DAI it can be redeemed--it is a valid point.

6) On the other hand we think it's important to the growth of Compound to be able to support a large swath of the crypto ecosystem--and that means adding synthetic BTC support. A slow death is still a death, and its important to improve the product while you have the limelite.

7) Given all of these factors, we have decided to propose a compromise: adding WBTC collateral, but only with 40% weight. We hope that this will help broaden the utility of Compound while managing the risk associated with doing so.