A recent $24 million proposal passed by Compound Finance has sparked controversy, with allegations of a governance attack by a small group acquiring large numbers of tokens to influence the vote.
Points
- Proposal 289 allocates 5% of Compound’s treasury to a yield-bearing protocol.
- The proposal narrowly passed by a vote of 682,191 to 633,636.
- Allegations of governance attack by a group acquiring large numbers of tokens.
- Controversy highlights the challenges of DAO governance and token-based voting systems.
A recent proposal passed by the lending protocol Compound Finance has ignited controversy within the community. Proposal 289, which allocates 5% of Compound’s treasury, amounting to 499,000 COMP tokens worth approximately $24 million, to a yield-bearing protocol designed by the “Golden Boys,” narrowly passed by a vote of 682,191 to 633,636 on Sunday.
Voting for the proposal began on Thursday at 11:40 pm and lasted through the weekend. However, community members have raised concerns about the legitimacy of the vote totals. Michael Lewellen, a security solutions architect at OpenZeppelin and a security advisor for Compound Finance, drew connections between several accounts amassing COMP tokens on the open market and multiple proposals intended to divert COMP holdings towards the goldCOMP product created by the Golden Boys.
Following Lewellen’s security alert, several community members, including Wintermute Governance, Columbia Blockchain, Penn Blockchain, and StableLab, echoed similar concerns
, particularly as the group had made two previous attempts to pass a similar proposal that initially failed.
“In my personal opinion, the actions of @Humpy and the Golden Boys can be considered a governance attack if they persist in their attempts to take funds from the protocol in clear opposition to the will of all other Compound DAO delegates,” Lewellen posted following the creation of Proposal 289. Attempts to reach Lewellen for further comment on this story were unsuccessful.
However, following the passage of Proposal 289, Humpy, the apparent leader of the Golden Boys, defended the proposal in response to Lewellen’s accusations. “‘Steal funds’ is a wrongful & misleading phrase, especially coming from Compound’s risk specialist. Requested investment goes through a Trust Setup with a constraint set of actions that doesn’t permit stealing/diverting of funds,” Humpy claimed.
Wintermute’s governance account had questioned the efficacy of the ‘Trust Setup’ in preventing fund diversion, writing, “Any form of withdrawal action （divest） is solely controlled by GoldenBoyzMultisig, meaning that the DAO cannot actually recall funds at any time under their own discretion. The DAO would first vote to initiate a PHASE update and then trust that the GoldenBoyzMultisig calls the relevant divest functions.”
Bryan Colligan, founder and CEO of Compound’s official growth team, expressed skepticism about the proposal’s value. “Security concerns aside, from our early analysis there are much better POL opportunities available leveraging partnerships from emerging chains and dexes. Most of these opportunities we are evaluating start at 15.20% APR and some as high as 40% APR,” Colligan wrote on X.
Compounding the controversy, one of the five members of the Golden Boys multisig claimed to be unaware of the proposal. “On multisig from long ago, didn’t know this was a vote happening and didn’t vote in it,” wrote X user Ogle, one of the members named by Humpy as governors of the multisig.
Ogle offered a more tempered view on the allegations of a governance attack. “From my interactions I had last year they were self-serving but good actors, as in I’d be surprised if this was meant to harm anybody. My guess is it’s meant as a way to make everybody money including the group, but I genuinely am just hearing about this…so I don’t know any more than you do,” Ogle wrote.
The price of Compound’s token （COMP） has dropped nearly 7% in the past 24 hours following the passage of Proposal 289, according to The Block’s Compound Price Page.
A History of Hijacking?
Humpy has allegedly been involved in similar governance tactics in other DeFi protocols. In 2022, Humpy was reportedly engaged in a prolonged conflict with the Ethereum-based Balancer DeFi protocol over proposals that he was able to pass by accumulating a large vote share.
“Over [April-December 2022], Balancer has struggled to align Humpy’s activity with DAO objectives through incentives, instead being driven into a cat-and-mouse game to control the whale’s profit-seeking activity through governance,” a Messari report states. Eventually, a peace treaty was agreed upon, but not before Humpy controlled more than 50% of the vote share through multiple wallets, unilaterally passing proposals.
In March of this year, SushiSwap’s ‘Head Chef’ Jared Grey accused Humpy of attempting a governance attack. “As the process has unfolded, it’s become clear that Humpy’s plans for Sushi, should his governance attack prevail, is to extract the value of the Sushi by farming the inflation to support his GOLD token’s lackluster performance & distribution,” Grey wrote on X.
Reacting to Proposal 289’s passage, Grey expressed sympathy for Compound Finance. “Feel bad for Compound and the governance attack perpetuated by Humpy,” he posted.
The incident underscores the vulnerabilities in DAO governance systems, where large token holders can exert disproportionate influence, raising questions about the effectiveness and fairness of token-based voting mechanisms.
解説
- The controversy surrounding Proposal 289 highlights the complexities and potential pitfalls of DAO governance.
- The allegations of a governance attack emphasize the need for robust security and transparency measures in decentralized protocols.
- The incident illustrates the challenges in balancing decentralization with effective governance, especially in large-scale DeFi projects.
- Compound Finance’s experience may serve as a case study for other DAOs to develop more resilient governance frameworks.
- Investors and community members should closely monitor governance activities and proposals to safeguard the integrity of decentralized ecosystems.