Compound V2 vs V3

Compound III is a refined version of the protocol that prioritizes security, capital efficiency, and user experience. Its design focuses on simplification rather than complexity, resulting in the most effective borrowing tool in DeFi.

The most significant improvement was moving away from the pooled-risk model, which allowed users to borrow any asset but constantly rehypothecated collateral. This model was vulnerable to a single bad asset or oracle update draining all assets from the protocol.

In Compound III, each market deployment offers a single borrowable asset, and the supplied collateral remains the property of the borrower, except during liquidation. This new approach increases capital efficiency and reduces risk since the collateral is more "useful" when the borrower knows the specific asset being borrowed in advance.

The first release of Compound III allows borrowing of USDC using ETH, WBTC, LINK, UNI, and COMP as collateral. Although borrowers will not earn interest on their collateral, they will be able to borrow more with lower risks of liquidation and penalties while spending less on gas fees.

wETH market is also live now, with Coinbase Wrapped Staked ETH(cbETH) and Lido Staked ETH(stETH) as collateral.

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