Gauntlet’s $2.3M contract renewal with Compound faces backlash
The renewal of Gauntlet’s $2.3 million contract with crypto lending platform Compound Finance is facing pushback for “economic underperformance” and “conflicts of interest,” among other criticisms.
In a post to Compound’s governance forum, made in advance of Gauntlet’s own renewal proposal, Founder and CEO of AlphaGrowth, Bryan Colligan, recommended that Compound should “not rehire Gauntlet under the current model.”
He made four main criticisms, accusing Gauntlet of having “operational gaps” and failing to maintain profitable collaborative programs with other platforms, in addition to the aforementioned “economic underperformance” and “conflicts of interest.”
Read more: Compound DAO asleep at the wheel as $25M governance ‘attack’ passes
Similar accusations were made back in March, following the approval of a proposal to use competitor Morpho (for whom Gauntlet is also a service provider) to launch new markets on the Polygon network.
In the decentralized finance (DeFi) sector, projects are often run as decentralized autonomous organizations, or DAOs, in which token holders vote on key decisions such as protocol upgrades or hiring contractors such as Gauntlet.
Compound is considered one of the most well-established DAOs and has been credited with sparking 2020’s fabled ‘DeFi Summer’ by rewarding liquidity providers with its own governance token, COMP.
Skepticism over DAO judgement
In a blog post published on AlphaGrowth titled “The Death of DAOs,” Colligan alludes to the issues such conflicts of interest bring and claims, “If you’re a service provider trying to keep contracts alive, you can’t call out inefficiency without making enemies.”
Gauntlet previously toed this line a little too closely at DeFi lending giant Aave before eventually throwing in the towel and joining up with Morpho.
Aave governance delegate Marc Zeller is one of Gauntlet’s harshest critics and views its relationship with Compound as parasitic. Zeller says Gauntlet would likely “drain compound treasury to zero,” and that “the only way out for COMP holders is to hit the sell button.”
Read more: Justin Sun defends HTX while it lends 92% of its USDT on Aave
Instead of renewal, Colligan suggests a month-long tendering stage before two service providers are selected to compete against one another on an identical brief over a 90-day period. He also sees performance-based payment as the way forward, rather than fixed fees.
Gauntlet’s proposal to renew its services points to its risk guidance having “avoided any material insolvencies,” while also highlighting the “parameter recommendations” and “risk alerts” it produced as part of its research over the year.
In response, Compound Foundation said it “supports extending our relationship with Gauntlet” based on “continuity,” “avoiding disruption,” “strategic initiatives,” and “contractual enhancements.”
DAO drama
Infighting is common within the DeFi sector. Hacks, lawsuits, forks, and vampire attacks all create a high-pressure environment where grudges fester and tempers flare. Most recently, Uniswap’s Hayden Adams went on the offensive against rival decentralized exchange Bancor.
Read more: Uniswap ‘hook’ Bunni hacked for over $8M after precision bug exploited
Adams’ post was made in response to a lawsuit Bancor brought against Uniswap in May, which Adams called “nonsense.” He argued “using first grade level math to price tokens on a blockchain” doesn’t warrant patent infringement.
Bancor launched its “constant product automated market maker” exchange in 2017, with Uniswap launching the following year. Today, DeFi dashboard DeFiLlama shows Uniswap’s $5.8 billion of total value locked (TVL) dwarfing Bancor’s $69 million.
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