This article delves into the recent governance attack on Compound DAO by the Golden Boys, analyzing the events, outcomes, and broader implications for decentralized autonomous organizations （DAOs）.
Points
- Overview of the Golden Boys’ governance attack on Compound DAO.
- Analysis of the attack’s execution and subsequent settlement.
- Broader implications for DAO governance and security.
- Strategies for preventing future governance attacks.
Golden Boys’ Attack on Compound DAO: Key Takeaways
Allegations were made that the Golden Boys committed a governance attack and attempted to steal from the DAO’s treasury. While the Golden Boys denied those allegations, the group — to everyone’s surprise — agreed to settle with Compound on the condition that a similar yield-bearing instrument be created and controlled by the DAO. Prior to that truce, the Golden Boys also addressed the community’s security concerns on Compound’s message boards and took steps to mitigate the risk of vault theft by implementing a Trust Setup function.
Execution and Settlement
Governance attacks are typically characterized as self-serving exploits that enrich the attacker to the detriment of other parties, but the Golden Boys’ behavior doesn’t quite fit the bill. To the contrary, this months-long governance struggle had all the hallmarks of an activist investor, not a scammer.
While the Golden Boys’ efforts turned out to be an unexpected, welcomed bonus for Compound DAO’s token holders — who now have the option to earn extra passive income — the incident raises doubts about how much organizational trust, transparency, and democracy DAOs actually have. Furthermore, even though this DAO drama ended on an amicable note, what happens when the next round of proverbial golden boys aren’t so nice?
“Some random team called ‘the golden boys’ just got a vote passed for $25m（!） out of Compound DAO for some weird yield farming proposal.”
https://twitter.com/DrNickA/status/1817656164638937237
Implications for DAO Governance and Security
Activist investors can be white knights who maximize shareholder value, but they can also be bullies that drive companies into the ground. Bryan Burrough’s “Barbarians at the Gate” illustrated such a demise. Therefore, DAOs need to have protections in place — like legal agreements and voting participation mechanisms — to ward off activist investors and prevent governance attacks that go awry.
DAOs with funds as token holders should be on high alert, transform into a protected corporate entity, and prepare for governance attacks by actors who might seek to exploit the voting imbalance created by this regulatory hand tie. On the other hand, newly created DAOs could seek to limit or cap fund participation to prevent whales who do not actively participate in serious governance issues from soaking up market share.
Preventive Strategies
The second critical step that DAOs should implement to prevent governance dysfunction is to evolve governance participation. One purported reason the Golden Boys’ proposal won is because the voting period occurred over the weekend — when participation was expected to be abysmal. Common sense dictates that if voters will be asleep at the wheel, weekends should be vote-free. Such a change would likely not require significant technological input, but rather a simple change in governance process. Exceptions to weekend-free voting could be overturned by a supermajority vote of token holders.
Another way to increase governance participation is to experiment with AI proxy voting, where AI models are trained to vote for any given issue in a token holder’s absence. DAO governance processes that allow for proxy voting by AI would need to be authorized in a DAO’s bylaws and be legally compliant with state law where token holders reside. Although this novel method comes with plenty of unanswered questions, proxy voting by AI could be a game-changer for DAO governance participation and deserves more attention, legal wrangling, and experimentation.
Without changes to governance participation and design, the attack on Compound DAO’s governance may be the first of many more. The absence of an engaged voting base leaves DAOs vulnerable to activist investors acting in bad faith — or worse, a death spiral of inertia.
解説
- Governance Challenges: The attack on Compound DAO highlights the vulnerabilities within DAO governance structures. Ensuring robust participation and preventing exploitation by activist investors is crucial for maintaining trust and security.
- Legal and Structural Reforms: Implementing legal frameworks and evolving governance mechanisms, such as AI proxy voting, can help DAOs safeguard against future attacks and improve decision-making processes.
- Community Engagement: Increased voter participation and community engagement are essential for the resilience of DAOs. Strategies to boost involvement can prevent governance dysfunction and enhance overall security.
- Future Preparedness: DAOs must be proactive in identifying potential threats and implementing measures to mitigate risks. Ongoing education, transparency, and the development of protective mechanisms are key to sustaining the integrity of decentralized organizations.