According to a report from CoinDesk, the price of the governance token COMP for the lending protocol Compound rose nearly 10% on Tuesday (June 30), following the apparent resolution of a “governance attack” targeting Compound.
A group called “Golden Boys” recently proposed the creation of a token called goldCOMP on the Compound governance forum. According to the proposal, goldCOMP is a semi-liquid wrapped token, and Golden Boys plans to create a goldCOMP treasury that generates income for COMP holders. When users deposit COMP into the goldCOMP treasury, they will receive goldCOMP tokens representing their initial deposit. These goldCOMP tokens can be placed in a 99/1 Balancer pool to provide passive income for long-term COMP holders.
Wintermute Governance, representing market maker Wintermute, expressed concerns about the Golden Boys proposal, stating that it would give the group complete control over transferred funds. Michael Lewellen, a security advisor for the Compound DAO governance organization, even described the proposal as a “governance attack.”
However, despite two failed proposals, a new proposal (number 289) from Golden Boys unexpectedly passed on Monday this week. This proposal requests the transfer of 499,000 COMP tokens from the DAO treasury to the goldCOMP treasury. As a result, the price of COMP tokens seemed to decline.
However, it appears that the crisis has now been resolved. A whale named “Humpy” and Golden Boys have agreed to cancel their proposal and vote in support of an alternative proposal. This proposed alternative involves creating a collateral product controlled by CompoundDAO, which would distribute 30% of existing and new market reserves annually to COMP stakers based on their collateral ratio.
The new proposal addresses concerns about Humpy and 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 this Compound governance event on social media and noted that very few people participated in the discussions and voting for these proposals, without even receiving attention from the Compound team.
It is worth noting that this governance issue is not unique to Compound. Ignas pointed out 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 solely relying on token prices to generate interest.
