TL;DR
- Proposal Cancellation: Compound Finance defused a contentious “governance attack” by reaching a settlement with crypto whale Humpy and his Golden Boys group.
- Yield-Bearing Staking Program: Instead of goldCOMP, a new staking product will distribute 30% of existing and new market reserves annually to staked COMP holders.
- Market Impact and Challenges: News of the settlement boosted COMP’s value by 7% to $51. Compound Finance remains a major DeFi lending protocol with over $3 billion in total value locked.
Compound Finance has defused a contentious “governance attack” by reaching a settlement with crypto whale Humpy and his Golden Boys group. The attack posed a significant risk of allowing the group to seize control of almost $25 million in COMP tokens. Here’s what you need to know:
On July 30, Humpy revealed the cancellation of Proposal 289, which originally aimed to assign 499,000 COMP tokens to a yield-generating protocol managed by the group. The proposal had narrowly passed just days earlier, surprising the Compound community.
Yield-Bearing Staking Program
Instead of the controversial goldCOMP proposal, Humpy and the collective have agreed to a counter-proposal. This new plan involves creating a staking product that will distribute 30% of existing and new market reserves annually to staked COMP holders, proportional to their stake. The staking product will be governed by the Compound DAO and undergo security audits.
Market Impact
News of the settlement boosted COMP’s value by about 7%, reaching $51. This positive movement occurred despite the broader crypto market downturn. Compound Finance continues to be a leading player in the DeFi lending space, boasting more than $3 billion in total value locked.
The incident highlights ongoing challenges in DAO governance. DAOs strive to distribute decision-making power, but they may face risks from organized efforts by major token holders. Strengthening governance security is crucial to prevent parties from “cementing Voting Power by giving extra incentive to stakers.”
High-Stakes Nature of DeFi Governance
With billions of dollars at stake, governance attacks pose significant risks. However, the relatively quick resolution in this case suggests growing maturity in handling such conflicts. Earlier this month, Compound also faced a phishing attack on its front end.
Pivotal Moment for Compound Finance
The settlement marks a pivotal moment for Compound. By introducing fee-sharing for COMP holders, the protocol is enhancing its tokenomics to benefit long-term stakeholders. According to Bryan Colligan, Compound’s Head of Growth, “Staking Compound is the #1 priority for the compound growth program going forward.”
Compound Finance has resolved a governance conflict with crypto whale Humpy, opting for a new staking program instead of the controversial goldCOMP proposal. The settlement highlights the challenges and high stakes of DeFi governance.
