Compound’s COMP Token Faces Major Governance Attack, Price Plummets Over 6%

• Compound, one of the prominent lending platforms in the altcoin world, has been significantly shaken by recent developments.
• The platform’s native token, COMP, has dropped in value by more than 6% amid the turmoil.
• The core issue stems from a power struggle within its Decentralized Autonomous Organization (DAO).

This article delves into the recent power struggle that has impacted Compound, exploring the implications for its governance and market value.

Golden Boys Ignite Controversy in Compound DAO

An entity known as the “Golden Boys” has succeeded in pushing forth a contentious proposal after three failed attempts. This proposal redirects $24 million worth of COMP tokens into a protocol called goldCOMP, which promises passive income for COMP holders. Notably, this event has sparked concern among major investors like Wintermute, who view this maneuver as a potential “governance attack.” A “governance attack” in the crypto world typically involves the manipulation of a DAO’s decision-making process using unauthorized or voting tokens.

The Unfolding of Events: Governance at Stake

According to posts on Compound forums, the orchestrated attack was led by a whale nicknamed “Humpy,” who gained control of the significant amount of COMP tokens to support the goldCOMP protocol. The Golden Boys prepared three distinct proposals to execute their plan. The first proposal, Proposal 118, aimed to transfer 5% of the COMP treasury to a multi-signature wallet controlled by the Golden Boys but was rejected under suspicious circumstances. The second, Proposal 247, intended to deposit 5% of COMP tokens into the goldCOMP vault but failed to garner sufficient support. The final and successful Proposal 289 pursued the same goal through a different approach. While there were accusations of “fund theft” against Humpy and Golden Boys, Humpy defended that the goldCOMP fund was built with restrictions to prevent fund misappropriation or redirection. Despite this, the community began to mobilize against the success of Golden Boys.

Future of COMP Tokens: Community Response and Strategic Moves

With Proposal 290 set for voting within a day, the focus shifts to altering the powers of the Timelock Admin – a smart contract governing the execution of management actions. This proposed change aims to introduce a two-day delay in the implementation of governance decisions, providing the community with more time to respond to future potential attacks. Though this measure could curb forthcoming governance assaults, it remains uncertain whether it will prevent Golden Boys from securing COMP tokens. The recent developments have resulted in a 6% dip in COMP’s price.

Implications for DAO Governance and Security

The unfolding events raise significant questions regarding the security and efficacy of governance mechanisms within the crypto ecosystem. The democratic structure of DAOs can be susceptible to malicious manipulation. To safeguard community interests, the implementation of robust security measures is essential. Moreover, internal conflicts within major protocols like Compound could potentially undermine investor confidence.

Conclusion

The ongoing power struggle within Compound highlights the complex dynamics of DAO governance and its susceptibility to manipulation. As the community braces for the outcome of Proposal 290, the broader crypto ecosystem must reflect on improving governance security to preserve investor trust and platform integrity.