Compound V3 Comet: Collateral Tracking, Absorb Design

Frequently Asked Questions

01.What is Compound V3 Comet?

Compound V3, code-named Comet, is a money market that supports exactly one borrowable base asset per deployment, launched on Ethereum mainnet on August 26, 2022. All other supported tokens act purely as collateral: they can be deposited to back a loan but cannot themselves be supplied for yield or borrowed. This single-asset design replaces the pooled multi-asset model used in Compound V2.

02.How does the absorb function work in Compound V3?

Absorb is called by a liquidator against an account whose debt has crossed its liquidation collateral factor threshold. The function transfers the account's debt to the protocol, seizes its collateral into the protocol's own balance, and pays the account the collateral value minus a liquidation penalty in the base asset. The caller who triggers absorb earns liquidator points that track the gas spent, redeemable through a separate incentive contract.

03.Why does Compound V3 use two different collateral factors?

Compound V3 separates the borrow collateral factor, which caps how much a user can initially borrow against posted collateral, from a higher liquidation collateral factor, which determines the point at which absorb becomes callable. The gap between the two factors is a governance-adjustable price buffer that protects new positions from being liquidated immediately after a small price move, while still letting governance tighten borrowing limits without triggering a wave of forced liquidations.

04.What are targetReserves and buyCollateral used for?

targetReserves is a governance-set base asset reserve threshold. When protocol reserves fall below that threshold, the buyCollateral function opens, letting any address purchase seized collateral from absorbed accounts at a discount in exchange for base asset, which replenishes reserves. Once reserves meet or exceed the target, buyCollateral becomes unavailable again, so the discount window is reserve-driven rather than continuously open.