Compound, one of the earliest protocols to make crypto lending work without a bank, has approved a record $52 million development budget and rebuilt its leadership around traditional-finance veterans, wagering its next chapter on institutions rather than the retail yield-chasers who once drove DeFi.

The market reaction was immediate: the protocol's native token, COMP, has risen more than 10% in the past 24 hours following the announcement. Compound's foundation wrote on X that the protocol is "entering its next era."

The shift mirrors a broader industry pattern, as projects that grew up serving retail users now court banks, asset managers, and compliance departments to find their footing again.

From $12 billion to $1.2 billion

Compound's total value locked (TVL) has fallen to around $1.2 billion, a decline of roughly 90% from the $12 billion the protocol held at its September 2021 peak, per DeFillama. The vast majority of that TVL sits on Ethereum, with Arbitrum a distant second.

The figures are a far cry from Aave, the leading protocol in DeFi lending, which holds a TVL of over $14.6 billion. The gap is notable given that Compound helped invent the category when it launched in 2018 and, by its own accounting, has processed around $480 billion in deposits and borrowing since. The protocol's growth stalled after the incentive programs that boosted its metrics came to an end, underscoring how hard it has been for DeFi projects to sustain usage once token rewards fade.

Despite the recent bounce, COMP still trades far below its glory days. The token currently trades around $18, down 98% from its 2021 record.

How Compound plans to spend its $52 million

The budget passed through the Compound DAO, with $14 million cleared for immediate use. The remainder unlocks in tranches tied to milestones, a structure that keeps the development team on a performance leash funded by the treasury.

The money splits roughly in two: about $28 million for operations and the engineering behind a new protocol version, Compound V4, and $24 million for growth. Of that growth pool, $8 million to $10 million is earmarked for institutional partnerships rather than the old playbook of paying liquidity providers to boost headline numbers.

V4's centerpiece is a "hub-and-spoke" design, which routes capital through a central hub instead of walling it off in separate markets — an approach meant to give professional counterparties tighter risk controls. Compound stated that more than 10 partners have committed, with over 20 more in talks.

A bench built from traditional finance

The leadership overhaul reads as a statement of intent. The new team includes Chief Operating Officer Christopher Donovan, previously COO at the Near Foundation, and Chief Product Officer Steven Liu, who grew Maple Finance's assets from $500 million to $5 billion.

Aaron Schnarch, former CEO of Coinbase Custody, joins as an executive director, with other hires drawn from Anchorage Digital, HSBC, Broadridge Financial, and Maple.

"DeFi is a remarkable innovation; however, it has achieved limited institutional adoption," Schnarch said in a statement, adding that current products "fall short of meeting the traditional finance bar."

Not everyone is sold on credentials alone. Himanshu Sahay of Arch Lending said the budget and bench amount to "a serious move," but warned that institutions "aren't underwriting teams, they're underwriting structures."

Why is everyone now chasing institutions?

Compound is late to a race it once could have led. Across crypto this year, the institutional turn has become the default survival strategy as protocols and market infrastructure look for users with deeper pockets and more formal requirements than the retail crowd that powered DeFi's first boom.

In July, former Ethereum Foundation staff launched Ethereum Institutional, a non-profit "front door" for banks and asset managers backed by Bitmine, SharpLink, and Joseph Lubin, Cryptopolitan reported. Tokenized real-world assets climbed to about $65 billion by May, and more than 2,000 institutions disclosed Bitcoin holdings through spot ETFs in the first quarter.

"Retail participation is a fraction of what it was," said Ran Hammer of Orbs, noting that the chain has "quietly become a venue for settlement, execution and interaction between financial institutions." Standard Chartered projects the DeFi sector could reach $2.7 trillion by 2030.