Compound paid users in a governance token it had just created

Inherited archive entry · retained from the earlier edition. Its factual, legal and policy claims have not all been reverified for 19 September 2026. Research scope.

A protocol pays its own users to use it

On 27 May 2020, Compound founder Robert Leshner announced in an official Compound Labs post that the protocol would begin distributing COMP, its governance token, directly to the people who supplied and borrowed assets on it. The mechanism: 4,229,949 COMP placed in a Reservoir contract, releasing 0.50 COMP per Ethereum block, roughly 2,880 a day, allocated across markets in proportion to the interest each market was accruing and split evenly within each market between suppliers and borrowers. An update to the same post fixed the start date at 15 June 2020, a date Compound's own newsletter confirms, adding that within days 1,642 addresses held COMP and roughly 22,400 had earned it.

Not the same thing as paying interest

Compound already paid and charged interest in the asset actually supplied or borrowed: ETH, DAI, USDC, and others. COMP was a second, separate payment layered on top, denominated in a token whose total supply the protocol itself created and whose price is set entirely by an open market rather than by the lending mechanism generating it. The rapid uptake the newsletter records is evidence that a token-denominated incentive can attract activity quickly. It is not, on its own, evidence that the underlying lending markets had become more useful or safer than before the incentive existed.

Why the yield's value depends on the token's value

A user earning COMP for supplying or borrowing is being paid in an asset that can move in price independently of, and far faster than, the lending market that produces it. Compound's current documentation describes a still-active Rewards contract that holds tokens for claiming "according to the core protocol tracking indices," the same architecture generalised beyond COMP alone, as retrieved on 16 September 2026. A yield figure quoted in COMP, or converted to a dollar value at one moment, says nothing about what that COMP is worth once received and sold, and nothing guarantees the distribution continues at its original rate: the founder's own post notes an April 2021 update that fixed the daily allocation rather than tying it to interest rates as originally designed.

Questions to carry forward

• Does a quoted "APY" for a lending market include the token incentive, the underlying interest, or both, and at what token price was the conversion made?
• What happens to activity in a market once its token incentive is reduced or removed?
• Who is actually diluted when a protocol distributes millions of newly created governance tokens to attract users: existing token holders, or someone else?

Paying users in a token the protocol itself can create was, in 2020, a genuinely new growth mechanism for the sector. It also introduced a dependency that a fixed-rate savings account does not have: the yield is only as real as the market for the token it is paid in.