Compound Finance, a outstanding DeFi protocol, has confronted important backlash following the approval of a contentious proposal that directs 5% of its treasury—equal to 499,000 COMP tokens valued at roughly $24 million—to a lesser-known yield-bearing protocol referred to as goldCOMP Vault.
In accordance with CryptoSlate’s knowledge, this allocation has adversely affected the COMP token, which dropped by roughly 5% prior to now 24 hours, falling under $50.
Information from DeFillama additional signifies that the incident brought on traders to withdraw their property from the protocol. Its complete worth locked has declined by over 2%, now standing at $3.15 billion. This drop is the most important among the many high 20 DeFi protocols within the 24 hours.
What occurred?
On July 28, Compound Finance DAO, the decentralized group managing the crypto lending protocol, narrowly accredited Proposal 289. This proposal allotted 5% of the treasury, or 499,000 COMP tokens valued at roughly $24 million, to a yield-bearing protocol.
The trouble to go this proposal started nearly three months in the past in Could, when Humpy main the “Golden Boys” group, launched Proposal 247. This proposal sought a 92,000 COMP funding in goldCOMP’s DeFi vault for five% annual returns however was rejected resulting from considerations concerning the multi-sig’s future actions and the shortage of correct safeguards.
The Golden Boys then submitted Proposal 279, which had comparable requests to Proposal 247 however launched a Belief Setup as an alternative of a multi-sig. This was meant to handle considerations about oversight and clawback mechanisms. Nonetheless, this try additionally failed.
Undeterred, the group submitted Proposal 289, which was in the end accredited. This proposal elevated the COMP allocation to 499,000 tokens, used the TrustSetup, and up to date the PHASE to permit the Golden Boys’ multi-sig name to put money into the TrustSetup contract.
Neighborhood reacts
Whereas the transfer seems authorized below the DAO’s guidelines, it has confronted robust criticism from neighborhood members and consultants who argued that it undermines decentralized governance, which was meant to replicate the collective curiosity somewhat than the agenda of some influential entities.
Eskender Abebe, the pinnacle of product and technique at Ethereum Identify Service, identified that Humpy might pose an enormous danger to Compound Finance with its substantial COMP portfolio. He wrote:
“Assuming they will direct the 600k tokens that voted FOR the proposal, and the extra 500k they acquired from the proposal, Humpy and the Golden Boys are actually the primary Compound delegate, 4x bigger than the [number] 2 delegate a16z and bigger than the subsequent 9 delegates mixed!”
In the meantime, neighborhood members additionally rapidly identified that Humpy has a historical past of manipulating DAO governance processes to his benefit, utilizing comparable techniques on the Balancer protocol.
In March, Jared Gray, Head of SushiSwap, accused Humpy of attacking the SushiSwap protocol by accumulating SUSHI and leveraging governance to assist his struggling GOLD token.