‘DeFi or DoxFi’ Asks Community After Compound Founder’s Statement
Following questions of legality and ethics surrounding the ongoing issue faced by decentralized finance (DeFi) protocol Compound Finance, whose users claimed millions in COMP coin due to an error – the founder is now backpedaling a controversial statement, while the community is once again questioning how decentralized DeFi really is.
As reported, Compound Finance passed and executed a proposal on Wednesday, but soon reported “unusual activity.” Due to a bug in a smart contract, users were able to claim millions in COMP – with some USD 82m impacted in the process.
But then, in the night between Thursday and Friday (UTC time), Robert Leshner, Founder of Compound Labs, tweeted a request that didn’t sit well with the crypto community.
“If you received a large, incorrect amount of COMP from the Compound protocol error: Please return it to the Compound Timelock. Keep 10% as a white-hat,“ he said, adding: “Otherwise, it’s being reported as income to the [Internal Revenue Service (IRS)], and most of you are doxxed.”
It was already being heavily debated if anybody should be returning this money, or is it fair game, or if the team should be asking for it to be sent back at all – but now, the community argued that the act of doxing is being used against these individuals, an act in itself highly questionable ethics-wise even if not illegal, in addition to the threats of reports to the US IRS.
Hours later, Leshner said that he’s trying to do anything he can to “help the community get some of its COMP back, and this was a bone-headed tweet / approach,” adding:
“That’s on me. Luckily, the community is much bigger, and smarter, than just me. I appreciate your ridicule and support.”
Nonetheless, many again questioned the decentralization of DeFi. “Is it still “DeFi” if the founders dox you to the IRS,” asked ‘Dan Darkpill’, with a commenter simply replying “DoxFi.”
More users argued that it can’t be claimed a project is DeFi if its creators can give orders, dox, threaten the community members. “Leshner is not setting a good example here. In code we trust also means we eat our own shit when shit happened,” said another.
Checking in on how code-is-the-only-law, be-your-own-bank, lets-be-ungovernable world of DeFi is doing.— Patrick McKenzie (@patio11) October 1, 2021
Oh, Compound had a $70 million bug this week? I suppose we'll go down the crypto governance flowchart to: https://t.co/zqFn8UT4g7
Some asked why is such a big deal, or such a big threat, being reported to the IRS, with Cinneamhain Ventures Partner Adam Cochran opining that it’s likely because many people fail to report taxes properly, which may result in fraud charges.
Cochran also complimented Leshner for “owning” and “learning” from his mistakes. The founder also got the support of software developer and engineer Hudson Jameson who said it’s good on Leshner for walking back their IRS tweet. “Be sure to give grace and empathize with the incredible amount of stress he and his team must be under,” he said.
Many other commenters disagreed, however, stating that Leshner’s reaction was to threaten his community into subordination.
At 9:13 UTC, COMP, ranked 68th by market capitalization, was trading at USD 322 and was up by 9% in a day, trimming its weekly losses to less than 14%.
Yikes.— Hsaka (@HsakaTrades) October 1, 2021
Someone should submit a Compound proposal to hire a PR agency that screens all tweets from key people. https://t.co/v5awjZQeqT
Update: This did not go well 🙂 Backlash city.— Mark Jeffrey (@markjeffrey) October 1, 2021
Many are calling Compound 'not decentralized' as a result.
This is great lesson in why we don’t want a single human to control important things. Script kiddies, amirite, iykyk. https://t.co/xxSXjgPIfc— kain.eth (@kaiynne) October 1, 2021
– DeFi Is Not a New Concept and Is Misnamed As Decentralized – SEC Chair
– Why DeFi Isn’t Always As Decentralized As You Might Think
– Decentralization in Crypto Is a Hard to Measure Ideal