Compound Reels as Whale Voter Dominates DAO

The DAO of crypto lending protocol Compound passed a controversial proposal this weekend, sparking concerns over a potential governance attack.

The proposal, driven by a prominent COMP whale named Humpy, allocates a substantial portion of Compound's treasury to a yield-bearing protocol controlled by his group, the "Golden Boys."

What's the scoop?

• Proposal 289 Passed: On July 28th, a Compound governance proposal unexpectedly passed that will allocate 1/4th of the Compound Treasury—499k COMP worth ~$25 million—into the Golden Boys goldCOMP strategy vault for one year, which will then deposit assets into the existing 99/1 Balancer COMP pool.
• Prior Attempts: Two alternative versions of the proposal were previously submitted by Humpy, which sought 92k COMP and were both rejected. Humpy was involved in a protracted struggle with the Balancer community in 2022 and has been accused of attacking Sushi before.
• Unprecedented Control: The Compound protocol will transfer the COMP tokens from the approved proposal tomorrow, July 30th. The moment the Golden Boys receive them, the group will gain unprecedented control over Compound’s governance process and can wield near unilateral discretion in approving whatever proposals they please.
• Mitigating Risk: Compound risk advisors are taking precautionary measures to mitigate potential centralization risks of the vote by decreasing the COMP collateral factor to 0% and transferring governance Timelock Admin privileges to the Compound Community multisig.

Bankless take:

The Compound debacle showcases the risks of onchain token-weighted governance, especially when combined with an inattentive and uninformed delegate base. While it now appears to be too late for Compound to prevent lasting damage from this vote, other DAOs would be wise to learn from this event and remain attentive to their core governance processes.