TLDR
- A Compound Finance proposal passed, transferring 499,000 COMP tokens (worth about $25 million) to a new vault controlled by a group called the “Golden Boys”
- The proposal passed narrowly with 51% of votes, raising concerns about a potential “governance attack”
- Critics argue this move undermines decentralized governance principles
- Previous similar proposals by the same group had failed or been criticized
- The situation has sparked debate about the security and fairness of DAO governance systems
Compound Finance, a popular crypto lending platform, is facing controversy after a recent proposal passed that will move a large amount of its treasury funds to a new vault.
The proposal, which narrowly passed on July 28, 2024, will transfer 499,000 COMP tokens (worth about $25 million) to a vault controlled by a group called the “Golden Boys.”
The proposal passed with 51% of votes in favor, but it has raised concerns among some members of the Compound community.
Critics are calling it a potential “governance attack,” saying it goes against the principles of decentralized finance (DeFi).
Compound Finance uses a system called a DAO (Decentralized Autonomous Organization) to make decisions. In this system, people who hold COMP tokens can vote on proposals. The idea is to give users a say in how the platform is run.
The group behind the successful proposal, known as the “Golden Boys,” says their plan will create more value for COMP token holders.
They want to put the COMP tokens into a new vault that will generate extra income. Users who put their COMP into this vault would get a new token called “goldCOMP” in return.
9/ The key lesson here remains clear: if the potential payoff exceeds the cost of exploitation, someone will attempt it. The only variable is the time horizon.
We’ll continue monitoring this to see how it unfolds.
— omer (@omeragoldberg) July 28, 2024
However, not everyone thinks this is a good idea. Some community members and experts are worried that it gives too much control to a small group.
Michael Lewellen, a security expert, warned about this kind of move back in May. He said it could be seen as an attack on the governance system if a small group keeps trying to take funds from the main treasury.
This isn’t the first time the “Golden Boys” have tried to pass a proposal like this. Earlier attempts in May and July failed to get enough votes. The latest proposal asked for much more COMP tokens than previous ones.
The narrow victory of this proposal has sparked a debate about how fair and secure DAO voting systems really are. Some worry that if someone buys up a lot of tokens, they could push through proposals that mainly benefit themselves, not the whole community.
Omer Goldberg, CEO of a company that works on DeFi security, said this situation shows a key problem with these systems. He pointed out that if someone can make more money by exploiting the rules than it costs them to do so, they might try it.
In response to these concerns, another proposal has been made. This new proposal wants to move control of certain admin functions to a different group, which might make it harder for similar proposals to pass in the future.
The Compound Finance situation highlights the challenges of running a decentralized system. While DAOs are meant to give power to all users, this event shows that they can sometimes be influenced by small groups with a lot of voting power.
