Compound outlines plan for distributing its governance token to DeFi protocol users

Compound, the startup behind the DeFi money market protocol, has revealed new details about the ongoing evolution of the protocol's token-based governance system.

That governance token, which went live in mid-April, will ultimately be held by a mix of stakeholders, team members and community participants. In a Thursday blog post, Compound outlined the process by which tokens will be distributed to those who use the protocol – and how its developers will push the governance process toward being fully decentralized.

"The distribution of COMP will become a core mechanic of the Compound protocol. All users and all applications built on top of Compound will continuously, and automatically receive governance rights, for free— in order to shape the future of the protocol," Compound CEO Robert Leshner wrote.

The blog post explains that 4,229,949 COMP tokens will be placed into a "Reservoir" contract, from which 0.5 COMP will be transferred with each Ethereum block into the protocol to be distributed to users. 

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"The distribution is allocated to each market (ETH, USDC, DAI…), proportional to the interest being accrued in the market; as market conditions evolve, the allocation between assets does too," the post explains. "Within each market, 50% of the distribution is earned by suppliers, and 50% by borrowers; in real-time, users earn COMP proportionate to their balance; this is