Compound Finance Proposal Sparks Controversy Amid Allegations of Governance Attack
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Compound Finance, a leading decentralized lending and borrowing protocol, is embroiled in controversy over a possible governance attack.
The recent passage of proposal 289 has sparked allegations of a governance attack, allegedly orchestrated by a voting bloc known as the “Golden Boys.”
The controversy began with discussions on Compound’s governance forums, where insiders had warned of potential governance issues days before the proposal’s approval.
Community Haggles Over COMP Proposal
On May 6, Compound Governance rejected proposal 247 due to insufficient votes.
The proposal, titled “Treasury to Invest 5% of COMP holdings into goldCOMP Vault,” was subsequently canceled.
The proposal aimed to create a wrapped COMP token called “GoldCOMP,” which would be managed by the Golden Boys and funded by COMP.
Golden Boy member Humpy explained that this token would offer a new layer of “passive income” for COMP holders through a Balancer pool, facilitating long-term investments.
However, an updated version of the proposal, number 279, also failed to pass during a July 19 vote.
This iteration sought a one-year investment of 92,000 COMP into the goldCOMP Treasury Fund.
The failure of proposal 279 did not quell concerns, as members of the community, including the Wintermute Governance bloc, voiced fears that the proposal would grant the Golden Boys undue control over the funds.
Wintermute Governance highlighted that any withdrawal actions from the vault would be exclusively controlled by the GoldenBoyzMultisig, effectively delegating governance rights to the Golden Boys.
Michael Lewellen of the OpenZeppelin bloc, under the username “cylon,” warned that the Golden Boys’ actions could be seen as a governance attack if they continued to pursue control over the funds despite opposition from other DAO delegates.
Proposals 289 and 290
The controversy escalated on July 28 when proposal 289, introduced by the Golden Boys, passed narrowly with 682,191 votes in favor and 633,636 against.
The proposal increased the amount of COMP requested for the goldCOMP treasury from 92,000 to 499,000, a significant rise.
The approval of proposal 289 means its implementation is slated for July 30.
Some random team called “the golden boys” just got a vote passed for $25m(!) out of compound DAO for some weird yield farming proposal.
Delegate tokens for the proposal all come out of ByBit. Seems like a governance attack to me. https://t.co/OjT0Ikh4MY
— drnick (@DrNickA) July 28, 2024
This development has led to the introduction of proposal 290, titled “Precautionary Transfer of Timelock Admin,” which suggests transferring the Compound Governance Timelock Admin to “CommunityMultiSig.”
The move aims to prevent future proposals similar to those put forth by the Golden Boys from being passed.
However, critics argue that this precautionary measure may be too little too late.
The 499,000 COMP requested in proposal 289, worth approximately $24.1 million at the time of writing, is expected to be transferred to the goldCOMP treasury fund on or around July 30, as stipulated by the proposal’s terms.
Meanwhile, earlier this month, the Compound Finance website fell victim to a hijacking incident, according to crypto investigator ZachXBT.
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