According to a report by CoinDesk, the price of the governance token COMP of the lending protocol Compound rose nearly 10% on Tuesday (30th) as a “governance attack” targeting Compound seemed to have been resolved.
A group called “Golden Boys” recently proposed the creation of a token called goldCOMP on Compound’s governance forum. According to the proposal, goldCOMP is a semi-liquid wrapped token, and the Golden Boys plan to create a goldCOMP vault that generates income for COMP holders. When users deposit COMP into the goldCOMP vault, they will receive goldCOMP tokens representing their initial deposit. These goldCOMP tokens can be placed in a 99/1 Balancer pool to create passive income for long-term COMP holders.
Wintermute Governance, representing market maker Wintermute, expressed concerns about the Golden Boys’ proposal, believing that it would give the group complete control over the transferred funds. Michael Lewellen, security advisor to the Compound DAO governance organization, even stated that the proposal could be seen as a “governance attack.”
However, despite two failed proposals, a subsequent new proposal (number 289) by the Golden Boys unexpectedly passed on Monday this week. The proposal requested the transfer of 499,000 COMP tokens from the DAO treasury to the goldCOMP treasury. The COMP price seemed to have dropped as a result.
However, the crisis now seems to have been resolved. A whale named “Humpy” and the Golden Boys agreed to cancel their proposal and voted in support of an alternative proposal. This proposed new solution involves creating a collateral product controlled by CompoundDAO, which will distribute 30% of the existing and new market reserves annually to COMP stakers based on their collateral ratio.
The new proposal addresses many concerns about Humpy and the Golden Boys gaining excessive control. Additionally, the new collateral product will be audited by security partners designated by Compound and continuously reviewed by the DAO’s market risk managers.
DeFi researcher Ignas described the “absurd” process of the Compound governance event on social media and pointed out that very few people participated in the discussions and voting on these proposals, and even the Compound team did not pay much attention to it.
It is worth noting that this governance issue is not unique to Compound. Ignas highlighted the difficulties and challenges of decentralized autonomous organization (DAO) governance and suggested that DAOs should find more ways to attract and incentivize community participation, rather than relying solely on token prices to generate interest.