DeFi
Compound Finance faces scrutiny over $24 million cash allocation
Compound financinga major DeFi protocol, has faced significant backlash after approving a controversial proposal that directs 5% of its treasury — equivalent to 499,000 COMP tokens valued at around $24 million — to a lesser-known yield protocol called goldCOMP Vault.
According to data from CryptoSlate, this allocation had a negative impact on the COMP token, which fell by around 5% in the last 24 hours, falling below $50.
Data DeFillama further states that the incident prompted investors to withdraw their assets from the protocol. Its total value locked decreased by more than 2%, now standing at $3.15 billion. This is the largest drop among the top 20 DeFi protocols over the past 24 hours.
What happened?
July 28, Compound Finance DAOthe decentralized organization that runs the crypto lending protocol, narrowly approved Proposition 289. The proposal allocated 5% of the treasury, or 499,000 COMP tokens valued at approximately $24 million, to a yield-bearing protocol.
The effort to pass this proposal began nearly three months ago in May, when Humpy, head of the “Golden Boys” group, presented Proposition 247This proposal sought an investment of 92,000 COMP into goldCOMP’s DeFi vault for a 5% annual yield, but was rejected due to concerns about the multi-sig’s future actions and lack of proper collateral.
The Golden Boys then submitted Proposition 279, which contained similar demands to Proposition 247, but introduced a trusted configuration instead of multi-signature. This measure was intended to address concerns about monitoring and recovery mechanisms. However, this attempt also failed.
Undeterred, the group submitted Proposition 289which was eventually approved. This proposal increased the COMP allocation to 499,000 tokens, used the TrustSetup, and updated the PHASE to allow the Golden Boys multi-sig call to invest in the TrustSetup contract.
The community reacts
While this move appears legal under the DAO’s rules, it has been met with fierce criticism from community members and experts who have argued that it undermines decentralized governance, which is supposed to reflect the collective interest rather than the agenda of a few influential entities.
Eskender Abebe, Product and Strategy Manager at Ethereum Name Servicepointed out that Humpy could pose a huge risk to Compound Finance with its large COMP portfolio. wrote:
“Assuming they can manage the 600,000 tokens that voted FOR the proposal, and the additional 500,000 they received from the proposal, Humpy and the Golden Boys are now Compound’s number one delegate, 4 times larger than the [number] 2 delegates a16z and greater than the next 9 delegates combined! »
Meanwhile, community members have also quickly underlines that Humpy has a history of manipulating the DAO’s governance processes to his advantage, using similar tactics on the Balancer protocol.
In March, Jared Grey, director of SushiSwap, accused Humpy attacks the SushiSwap protocol by accumulating SUSHI and leveraging governance to prop up its struggling GOLD token.
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Published in: Challenge, Featured