Authorization of Treasury Management Use of Compound v2 Reserves

Summary

This proposal seeks governance approval to establish a limited framework for stewarding a defined portion of protocol reserves associated with Compound v2 following its deprecation and wind-down. With v2 markets now inactive, these reserves are no longer required for liquidation backstopping or other v2 risk management purposes and are currently sitting idle. This proposal authorizes the Compound Foundation, acting via qualified service providers and subject to existing governance oversight, to manage a designated allocation of these v2 reserves in support of the Compound protocol and DAO.

Specifically, this authorization enables the Compound Foundation to:

• Establish and operate a treasury management framework for specific assets accessible due to the Compound v2 deprecation.
• Utilize the assigned v2-related reserves in a controlled and accountable manner to support ongoing protocol operations and make the assigned capital productive.
• Implement these activities in a manner consistent with prudent stewardship, market sensitivity, and the intent of prior governance decisions.

Importantly:

• No specific transactions, execution strategies, or market actions are prescribed by this proposal but will be included in future reporting.
• This proposal’s authorization is narrowly scoped to DAI from v2-related reserves.
• The DAO’s existing treasury strategies remain unchanged.
• These funds are entirely DAO-owned and will not be used to fund Foundation-specific operations.

Background and Governance Context

Compound governance previously approved the deprecation of Compound v2 markets pursuant to the Compound v2 Deprecation Proposal, which was passed by an on-chain vote.

That proposal included, among other measures:

• Pausing new borrows and mints across v2 markets while allowing withdrawals, repayments, and liquidations to continue.
• Increasing reserve factors across v2 markets to 100%.

As a consequence of this deprecation, v2 markets no longer require reserves to perform their original risk-management function. While residual user positions continue to close over time, the associated protocol reserves are no longer actively deployed for market operations and instead remain latent. These balances persist as a byproduct of the deprecation process rather than as part of an ongoing market or treasury strategy.

To date, governance has not established a specific framework for how these v2-related reserves should be stewarded once their original purpose ceased. This proposal provides the necessary governance context and authorization to responsibly manage a defined portion of those reserves, without altering the DAO’s broader treasury mandate or existing strategies.

Purpose of This Proposal

The goal of this proposal is to enable the Foundation to establish a treasury management framework for the responsible stewardship of assets that have become available as a result of the Compound v2 deprecation and wind-down, and to ensure these assets are put to efficient and deliberate use in support of specific protocol operations rather than remaining idle.

For instance, COMP held by the Comptroller continues to be distributed through reward claims and is also required for certain governance actions. Taken together, these dynamics have resulted in a mismatch between available COMP balances in the Comptroller and the operational requirements of the protocol. This represents a potential challenge that the Foundation may address by way of the new treasury management framework.

This proposal, however, does not establish an explicit treasury management program from the outset, nor does it alter existing treasury strategies like Avantgarde-managed covered calls. Instead, it enables the Foundation, via appropriate service providers, to steward latent reserves in a manner prudent for addressing important protocol needs.

Treasury Management Facilitation and Implementation

If approved, the Foundation will be:

• Authorised to facilitate treasury management activities, via qualified service providers, using only the Compound v2 DAI reserves, which currently total approximately 8.42 million DAI.
• Allowed to maintain sufficient COMP availability for protocol components that depend on it, such as reward distribution and other forms of governance execution.

Any such facilitation or implementation will be conducted in accordance with existing governance controls, reporting expectations, and fiduciary standards. The Foundation may engage Gauntlet or other third parties as an implementation partner to support analysis, execution, and operational decision-making related to such treasury management activities.

Scope of Authorisation

• Eligible Assets: This authorization applies solely to the DAI reserves associated with deprecated Compound v2 markets, which currently total approximately 8.42 million DAI. No other DAO treasury assets, reserve balances, or protocol revenues are included within the scope of this authorization.
• Permitted Objectives: assets within scope may be managed or deployed exclusively to support protocol operations and governance continuity, including maintaining sufficient COMP availability for components that rely on it, such as reward distribution and governance execution. The authorization does not extend to discretionary trading/speculative activity or deployment of funds to non-essential operations.
• Facilitation and Oversight: The Foundation may engage Gauntlet or other qualified third parties for analysis or implementation support where appropriate. Reporting will be conducted retrospectively on a quarterly basis.
• Isolated Mandate: This authorization does not modify existing treasury strategies. This authorization does not permit the use of v2 deprecation reserves to fund Foundation overhead, personnel costs, or expenses related to any existing vendor or service-provider relationships. Such obligations remain governed by separate, explicitly approved arrangements.

Proposed Action

Upon approval, all 8.42 million DAI from v2 reserves will be transferred to a newly designated, Foundation-administered multisig wallet established solely for the purposes of this authorization. The multisig will be configured with an elevated security threshold (4-of-6) to ensure appropriate checks and balances while preserving operational flexibility. Signers will be drawn from the Compound Foundation, the Governance Working Group (CGWG) and the Security Service Provider (SSP) team, with two representatives from each group.

https://tally.xyz/gov/compound/proposal/536