Compound Conundrum: Governance Attack Allegations Shake Compound Finance

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As a seasoned crypto investor and long-time supporter of decentralized finance projects, I have witnessed the rise and fall of numerous protocols and their governance structures over the years. The recent controversy surrounding Proposal 289 in Compound Finance has left me feeling deeply concerned about the state of decentralization within this rapidly evolving space.

1. A contentious plan to distribute $24 million from Compound Finance’s reserves has led to accusations that it represents a governance attack orchestrated by a few token owners, stirring doubts about the credibility of the protocol’s decision-making process.

Proposal 289 Controversy

A current proposition approved by the decentralized lending platform, Compound Finance, has sparked apprehensions regarding a possible governance assault. Some members of the community suspect that a select few manipulated the vote by accumulating vast quantities of tokens through purchases in the public market.

The point of contention centers around Proposal 289, which proposes setting aside 5% of Compound’s treasury, equivalent to around 499,000 COMP tokens worth approximately $24 million, for a yield-generating protocol developed by the “Golden Boys” team. The voting process began on Thursday at 11:40 p.m. and concluded over the weekend. By July 28, the proposal managed to pass with a vote count of 682,191 in favor and 633,636 against, resulting in a very close margin.

Allegations of a Governance Attack

Nevertheless, some community voices express apprehensions, implying that the Golden Boys may have executed a governance assault.

Michael Lewellen, who serves as a security solutions architect at OpenZeppelin and an advisor for Compound Finance, pointed out some questionable actions concerning multiple accounts amassing COMP tokens and suggesting a redirect of COMP assets to the goldCOMP product created by the Golden Boys.

Lewellen expressed his concerns on the Compound governance message board, stating, 

As a crypto investor deeply involved with Compound DAO, I firmly believe that the persistent actions of Humpy and the Golden Boys, aimed at withdrawing funds from the protocol, can be categorized as a governance attack. This is because these actions directly oppose the collective will of all other delegates, as expressed through our shared decision-making process.

Defense and Dispute

As the primary proponent of Proposal 289, I, Humpy, refuted Lewellen’s objections to the plan. I explained our rationale behind the proposal and addressed any concerns he raised.

The term “steal funds” is inaccurate and misleading, particularly when used by Compound’s risk expert. Instead, the requested investment undergoes a Trust Setup, which includes a limited range of permissible actions that do not allow for the misappropriation or diversion of funds.

It seems there’s disagreement among the Golden Boys. One member of the multisig group, Ogle, declared ignorance about the proposal. Despite being a long-standing member of the multisig, Ogle stated that they were unaware of the vote and did not take part in it.

Concerns Over Trust Setup

In Compound’s governance account, Wintermute, earlier highlighted concerns about the effectiveness of the ‘Trust Setup’ in preventing the misappropriation of funds. Specifically, it flagged an issue where all withdrawal actions are managed by GoldenBoyzMultisig, which means that the DAO lacks the ability to reclaim funds independently. Instead, the DAO must propose a PHASE update for voting and rely on the multisig to execute the necessary divestment when approved.

indeed, the approval of Proposal 289 within Compound Finance’s community has ignited intense debates, as allegations of a governance manipulation by the Golden Boys have surfaced.

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2024-07-30 16:20