Compound DAO asleep at the wheel as $25M governance ‘attack’ passes
In what some have branded a ‘governance attack,’ controversial Proposal 289 passed a Compound Finance DAO vote yesterday, with a margin of 52% to 48%.
The proposal grants 499,000 COMP tokens, worth $25 million at the time, to be sent to a goldCOMP vault created by a group known as the ‘Golden Boys.’
The price of COMP has dropped over 6% in the past 24 hours, according to data from CoinMarketCap.
Read more: Compound Finance and Celer Network websites compromised in ‘front-end’ attacks
Compound is one of the longest-established lending platforms in the decentralized finance (DeFi) sector. Any decision about the running of the protocol must be made via on-chain governance, with votes being cast by owners of COMP tokens proportional to their holdings.
While the proposal purports to be “an exciting new strategy designed to provide COMP holders yields on their COMP tokens,” similar moves by the same group have been shot down over the past three months after raising concerns.
Third time’s a charm
In May, Proposal 247 requested 5% of the treasury, or 92,000 COMP worth $5.4 million at the time. However, the vote was canceled when it became clear that its chances of passing were slim, with over seven times the number of votes against than for. Two weeks ago, a similar situation played out on Proposal 279, albeit with the vote margin slightly reduced.
Concerns were initially raised over the lack of control of the funds once sent, as well as the lack of governance discussion before initiating a vote.
Security advisor to Compound Michael Lewellen, posting under the screen name ‘cylon,’ has branded the latest move a ‘governance attack‘ which goes in “clear opposition to the will of all other Compound DAO delegates.”
He also noted that the most recent proposal “increased the amount of COMP being requested,” speculating that the group timed the latest attempt so that “the majority of the voting period occurs over the weekend and the participation is low enough” for the proposal to pass.
In response to the earlier attempt, Proposal 247, Lewellen published a Governance Security Notice which tracked suspicious accumulations of COMP tokens. He identified five separate addresses that delegated between 39,000 and 59,000 COMP tokens for use in DAO voting. The tokens were all withdrawn from the centralized exchange ByBit, potentially to conceal their accumulation.
Asleep at the wheel?
Yesterday’s result, following repeated attempts at similar proposals, appears to have ground down the appetite for resistance within the Compound DAO.
Read more: Compound Finance upgrade bug freezes $830M in crypto
However, the DeFi ‘whale’ behind the proposal, rejected the characterization of the proposal as aiming to ‘steal funds.’
The user, who goes by ‘Humpy,’ underlines the Trust Setup contract which permits only a limited set of actions to be performed on the COMP tokens, each of which must be pre-authorized by a Compound DAO vote.
Humpy, who in 2022 accumulated BAL tokens in order to manipulate rewards on the Balancer decentralized exchange, signs off with: “On that note, I’d like to thank all holders who voted for our proposal.”
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