- Compound risk manager Gauntlet proposed cutting WETH and wstETH borrow collateral factors to 0% and liquidation collateral factors to 0.5% on its Scroll market
- The change would make roughly 1,959 remaining accounts, holding about $13,901 in USDC debt against roughly $66,452 in collateral, eligible for absorption
- The proposal is a direct response to the Scroll Layer 2 network itself winding down operations entirely
A proposal posted to Compound’s governance forum on November 4, 2026 lays out a plan to effectively unwind the protocol’s lending market on Scroll, a Layer 2 network built on Ethereum, after Scroll itself announced it is shutting down. Rather than an emergency response to an exploit or security incident, this wind-down is a planned, orderly exit triggered by the underlying blockchain network’s own closure.
Gauntlet’s proposal recommends cutting the borrow collateral factors for WETH and wstETH, the two main assets backing positions on the Scroll market, down to 0%, meaning no new borrowing against those assets would be possible going forward. Separately, it proposes reducing the liquidation collateral factor to 0.5%, a change that makes the remaining open positions on the market eligible for liquidation at a far lower threshold than normal.
The practical effect of these changes would make roughly 1,959 remaining accounts on the Scroll market eligible for absorption, Compound’s term for a position being liquidated and closed out by the protocol. Those accounts collectively hold approximately $13,901 in outstanding USDC debt against roughly $66,452 in posted collateral, a relatively small total exposure that reflects how far activity on the Scroll market had already declined before the network’s shutdown announcement.
By pushing through the liquidation of these remaining positions now, Compound aims to recover whatever reserves remain tied up in the Scroll deployment before the underlying network becomes fully inaccessible, at which point recovering those funds could become far more difficult or impossible. The proposal frames the move as a prudent, proactive step rather than something forced by an emergency, giving affected users advance notice rather than leaving them to discover after the fact that the underlying network had simply disappeared.
The episode offers a rare, concrete look at what happens to a DeFi lending market when the blockchain it operates on simply ceases to exist, a scenario distinct from the security-driven freezes and pauses that have dominated DeFi risk management discussions elsewhere this year. The full proposal is posted on Compound’s own governance forum.
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