According to a report from CoinDesk, the price of the governance token COMP for lending protocol Compound rose nearly 10% on Tuesday (June 30th) as a “governance attack” targeting Compound appears to have been resolved.
A group called “Golden Boys” recently proposed creating a token called goldCOMP on Compound’s governance forum. According to the proposal, goldCOMP is a semi-liquid wrapped token, and the Golden Boys plan 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 create 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, the security advisor for Compound DAO, even referred to the proposal as a “governance attack,” as reported by Zombit.
However, despite two failed proposals, a new proposal (number 289) put forward by the Golden Boys unexpectedly passed on Monday. This proposal requested transferring 499,000 COMP tokens from the DAO treasury to the goldCOMP treasury. The COMP price seemed to have fallen as a result.
The controversy surrounding the proposal has now seemingly been resolved. A whale named “Humpy” and the Golden Boys agreed to cancel their proposal and voted in support of an alternative solution. The 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 many concerns about Humpy and the Golden Boys acquiring 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 the Compound governance event on social media and noted that very few people participated in the discussions and voting for these proposals, and they did not receive much attention from the Compound team.
It is worth noting that such governance issues are 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.
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