Compound Considers Dedicated Foundation

In a move to streamline operations and bolster its long-term development, Compound Labs—the team behind the decentralized lending protocol Compound Finance—has announced plans to explore the creation of a dedicated foundation. This proposal follows a trend among major DeFi ecosystems and has drawn parallels with Uniswap’s own foundation structure.

Why a Compound Foundation?

Compound Finance, one of the most prominent DeFi lending protocols on Ethereum, currently holds $2.5 billion in total value locked (TVL), according to DeFiLlama. Despite its success, Compound Labs believes a foundation could provide a more sustainable framework for governance and development.

In an April 1 social media post, the team noted that “establishing a foundation has become standard practice across major DeFi ecosystems.” The new entity would help the protocol deal with day-to-day complexities, such as risk management and security practices, which are currently outsourced. Compound Labs envisions the foundation serving as a “reliable layer of coordination” that would be separate from both Compound Labs and any existing entities.

Lessons from Other Projects

Compound Labs points to similar structures adopted by major DeFi protocols, particularly Uniswap. The Uniswap Foundation—launched to coordinate governance and development—provides a potential model for Compound to emulate. By instituting a recognized body, Compound aims to bridge the gap between decentralized decision-making and pragmatic leadership roles.

Market Response to the News

Shortly after the announcement, COMP—Compound’s governance token—dropped about 6% to a local low of $42. It later recovered slightly, trading around $45 at press time, based on CryptoSlate data. Market volatility aside, the move underscores how protocol governance decisions can influence token performance in the short term.

DeFi analysts note that structural changes like a new foundation can create uncertainty among investors, as they may worry about administrative or legal shifts. However, many also see the foundation strategy as a promising step toward more robust and sustainable operations, which could lead to greater confidence over time.

Addressing Growing Complexity

Compound Labs acknowledges that the protocol’s initial operational model was basic—mirroring the experimental nature of DeFi in its early days. Over time, Compound outsourced tasks such as risk assessment to Gauntlet and security auditing to OpenZeppelin. While these arrangements worked, the lack of a formal organizational structure to coordinate these services sometimes caused friction or inefficiencies.

Compound v4 on the Horizon

The proposed foundation aligns with future plans for Compound v4. As the ecosystem decentralizes further, Compound Labs intends to step back from direct involvement. Still, it sees the need for a steady hand to coordinate governance, oversee key decisions, and ensure the community remains informed and engaged.

“We’ve seen the growing need for more consistent structure,” the team stated, adding that a Compound Foundation would provide a formal entity to unify the protocol’s stakeholders. If established, this foundation aims to balance decentralization with the organizational benefits of a well-defined leadership group.

Next Steps

Before proceeding with the Compound Foundation Initiative, Compound Labs will gather community feedback on its forums. The team plans to address any concerns and clarify operational details—such as the foundation’s proposed governance powers, the scope of responsibilities, and funding mechanisms—through public discussions. If the community embraces the plan, Compound could soon follow a governance model more akin to Uniswap’s, offering stability, legal clarity, and cohesive leadership for one of DeFi’s most influential lending platforms.