LUCKNOW (CoinChapter.com) – Compound Finance, a lending platform, has fallen sufferer to an alleged governance assault. The incident noticed the redirection of roughly $25 million price of COMP tokens.
The Controversial Proposal
On July 28, a proposal orchestrated by a COMP token whale generally known as “Humpy” handed by a razor-thin margin of 51%. The choice redirected 499,000 COMP tokens from Compound’s treasury to a yield-bearing vault managed by Humpy and a gaggle referred to as the “Golden Boys.” The proposal garnered 682,191 votes in favor and 633,636 in opposition to.
The proposal claims to supply COMP holders with extra yield by way of a brand new “Trust Setup.” In response to the proposal’s textual content:
“When a user places COMP into the goldCOMP vault, the depositor receives goldCOMP, a semi-liquid wrapped token representing their initial deposit.”
These tokens can then be positioned in a 99/1 Balancer pool, purportedly making a passive earnings stream for long-term COMP holders.
Nonetheless, the centralized management over the brand new vault has been met with widespread skepticism inside the DeFi neighborhood. Omer Goldberg, founder and CEO of Chaos Labs, a agency specializing in DeFi safety, described the proposal as “poorly communicated” at finest and a blatant assault at worst.
The important thing lesson right here stays clear: if the potential payoff exceeds the price of exploitation, somebody will try it.
Goldberg warned on Twitter.
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Purple Flags Raised in Compound Finance’s Discussion board
This governance assault didn’t materialize in a single day. In response to posts on Compound Finance’s boards, it concerned a sequence of coordinated efforts led by Humpy. The group made a number of makes an attempt to control the platform’s decision-making course of, with their newest try lastly succeeding. Their technique included two failed proposals – Proposal 118 and Proposal 247 – earlier than Proposal 289 handed efficiently.
Critics argue that this accumulation of voting energy by way of open market purchases undermines the elemental ideas of decentralized governance. Michael Lewellen, a safety options architect at OpenZeppelin, had beforehand raised alarms a couple of potential “governance attack” as early as Could, noting suspicious exercise and new delegations that raised considerations.
In response to the handed proposal, the Compound neighborhood has put ahead a movement to restrict the actions of Humpy and the Golden Boys. Proposal 290, set to open for voting quickly, goals to switch the Timelock Admin, doubtlessly giving the neighborhood extra time to react to future governance actions.
The fallout from this incident has been swift and extreme. Following the information of the governance assault, the COMP token’s worth plummeted. On the time of this writing, COMP is buying and selling at $48, down 5.7% within the final 24 hours. The token’s market capitalization has additionally dropped to $373 million.
