Compound Finance, a distinguished DeFi protocol, has confronted important backlash following the approval of a contentious proposal that directs 5% of its treasury—equal to 499,000 COMP tokens valued at roughly $24 million—to a lesser-known yield-bearing protocol known as goldCOMP Vault.
In accordance with CryptoSlate’s knowledge, this allocation has adversely affected the COMP token, which dropped by roughly 5% previously 24 hours, falling under $50.
Data from DeFillama additional signifies that the incident prompted traders to withdraw their belongings from the protocol. Its complete worth locked has declined by over 2%, now standing at $3.15 billion. This drop is the most important among the many prime 20 DeFi protocols within the 24 hours.
What occurred?
On July 28, Compound Finance DAO, the decentralized group managing the crypto lending protocol, narrowly permitted Proposal 289. This proposal allotted 5% of the treasury, or 499,000 COMP tokens valued at roughly $24 million, to a yield-bearing protocol.
The hassle to cross this proposal started nearly three months in the past in Could, when Humpy main the “Golden Boys” group, launched Proposal 247. This proposal sought a 92,000 COMP funding in goldCOMP’s DeFi vault for five% annual returns however was rejected because of issues concerning the multi-sig’s future actions and the dearth of correct safeguards.
The Golden Boys then submitted Proposal 279, which had related requests to Proposal 247 however launched a Belief Setup as a substitute of a multi-sig. This was supposed to deal with issues about oversight and clawback mechanisms. Nevertheless, this try additionally failed.
Undeterred, the group submitted Proposal 289, which was finally permitted. This proposal elevated the COMP allocation to 499,000 tokens, used the TrustSetup, and up to date the PHASE to permit the Golden Boys’ multi-sig name to put money into the TrustSetup contract.
Neighborhood reacts
Whereas the transfer seems authorized below the DAO’s guidelines, it has confronted robust criticism from group members and consultants who argued that it undermines decentralized governance, which was meant to replicate the collective curiosity quite than the agenda of some influential entities.
Eskender Abebe, the pinnacle of product and technique at Ethereum Title Service, identified that Humpy may pose an enormous danger to Compound Finance with its substantial COMP portfolio. He wrote:
“Assuming they can direct the 600k tokens that voted FOR the proposal, and the additional 500k they received from the proposal, Humpy and the Golden Boys are now the number one Compound delegate, 4x larger than the [number] 2 delegate a16z and larger than the next 9 delegates combined!”
In the meantime, group members additionally rapidly pointed out that Humpy has a historical past of manipulating DAO governance processes to his benefit, utilizing related techniques on the Balancer protocol.
In March, Jared Gray, Head of SushiSwap, accused Humpy of attacking the SushiSwap protocol by accumulating SUSHI and leveraging governance to assist his struggling GOLD token.
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