DeFi startup Compound commissions stress test to simulate default risks of its lending protocol

Quick Take

  • A stress test commissioned by DeFi lending protocol startup Compound indicated that it can scale its total borrowed value by 10x with less than 1% chance of going default, even when ETH is at its maximum historical volatility
  • This conclusion was reached by subjecting Compound’s protocol to various simulation-based stress tests 
  • The study, done by Gauntlet Networks, could help guide users as they assess the financial security of different DeFi lending protocols

A stress test commissioned by DeFi lending protocol startup Compound suggests that it can scale its total borrowed value by as much as 10x with a less-than-1% chance of going default – even when ETH is at its maximum historical volatility.

The stress test, conducted by blockchain simulation platform Gauntlet Networks, subjects Compound’s protocol to various simulation-based stress tests that replicate how users interact with the lending platform in the live environment. The tests sought to establish whether Compound’s lending mechanism will fall into default risk, defined here as loans being under-collateralized, unde