TLDR
- Compound Finance greenlights a contentious move, allocating $24 million in COMP tokens to a new vault.
- Despite significant pushback from the community, the proposal narrowly secured approval.
- Some critics are labeling this decision as a potential 'governance attack' orchestrated by the 'Golden Boys.'
- A key figure behind the proposal, known as 'Humpy,' has been linked to similar controversies within other DAOs.
- This situation highlights potential weaknesses in the governance models of decentralized organizations.
The well-regarded lending platform, Compound Finance, is under criticism over a new proposal directing 499,000 COMP tokens valued at $24 million to a fresh yield-earning vault.
The proposal, known as Proposal 289, On July 28, 2024, amid heated debate, the proposal narrowly passed, raising questions about the robustness of DAO governance.
The proposal, passing with 51% support, saw 682,191 votes in favor contrasted with 633,636 against, led by the 'Golden Boys' and 'Humpy,' a known token holder.
The newly approved initiative aims to channel the tokens into a vault under the group’s control, intended to yield benefits for COMP holders.
According to the proposal:
'Depositing COMP into the goldCOMP vault will reward users with goldCOMP, a partially liquid wrapped asset symbolizing their initial stake,' according to the proposal, suggesting a long-term income source for COMP investors.
Nonetheless, this development hasn’t been without its critics and concerned community members.
Security solution expert Michael Lewellen from OpenZeppelin, who advises Compound Finance, warned as early as May of looming 'governance attack' risks. Lewellen emphasized that the proposal wasn't openly discussed, and the proposer didn't disclose their identity before its introduction.
Voices of dissent suggest the Golden Boys have amassed voting strength through market purchases, potentially challenging decentralized governance's core values. This centralizes power, overshadowing the broader community's input.
Chaos Labs' CEO, Omer Goldberg, with expertise in DeFi security, criticized the proposal for its inadequate communication and possibly being an overt manipulation attempt. Goldberg stressed, 'The critical takeaway remains: where exploitation costs are lower than potential profits, risks prevail.'
This isn’t an isolated case for Humpy in DAO governance disputes. Humpy previously engaged with Balancer protocol in 2022, as reported by Messari, which paralleled this incident to a strategy game involving profits. Humpy also faced allegations of a governance breach in SushiSwap come March 2024.
Due to Proposal 289 passing, COMP token value experienced a downturn, dropping nearly 7% within a day, underscoring negative market sentiment.
Responding to criticism, Humpy defended his stance, arguing, \"'Steal funds' is an incorrect & misleading narrative, particularly coming from the compound's risk expert. The investment structure is guarded by Trust Setup with specific limits that avert fund misappropriation.\"
Mysteries endure regarding the Golden Boys’ actual limitations over the vault. Wintermute's governance portal underscored that \"withdrawal or divestment actions are exclusively under GoldenBoyzMultisig's control, rendering DAOs unable to recall funds autonomously.\"
