Compound mulls upping WETH supply to $194 million in ether on v3 protocol

The Compound community is set to vote to increase the supply cap for wrapped ether (WETH) in the Comet market as the current limit is soon to be reached.

Comet, or Compound III, is the third version of the DeFi lending protocol. Launched in August, it is the first iteration of the platform to go multi-chain with support for EVM-compatible networks.

The Compound vote is based on a recent proposal filed by Paul J. Lei, protocol program manager at DeFi risk manager Gauntlet. Lei’s proposal called for a 100% increase in the WETH supply cap on the Comet USDC market.

Compound III launched with a supply limit of 75,000 WETH ($97 million) on the Comet USDC version 3 market. Data from the Comet dashboard shows the supply cap is only 14 WETH ($18,000) away from reaching the limit. If Lei’s proposal passes, the limit will be increased to 150,000 WETH ($194 million).

Compound Finance founder Robert Leshner said that the community has already discussed taking such a step. According to Leshner, there appears to be “widespread support” for increasing the WETH supply cap as a means of increasing the growth of the Comet USDC market.

Supply caps are important for DeFi lending protocols as they determine the amount of a token that users can supply as collateral to obtain loans. DeFi lending platforms use supply caps on collateral assets to guard against price manipulation attacks that can see malicious actors can target tokens with inadequate liquidity profiles to launch sophisticated attacks on DeFi lending pools.

DeFi lenders like Compound and Aave have recently taken steps to limit their exposure to these attack vectors by either suspending the use of some tokens as collateral or significantly reducing their supply caps.

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