Compound Finance (COMP) Treasury Drained in Governance Attack
The Compound Finance (COMP) treasury recently fell victim to a $25 million governance attack, sparking concerns about the state of decentralized governance within the decentralized finance (DeFi) ecosystem.
Compromised Compound DAO
As reported by researcher DeFi Ignas, the attack unfolded with an initial proposal to allocate 92,000 COMP tokens, submitted without prior deliberation on the Compound DAO forum.
- Despite warnings from the project’s security advisor, Michael Lewellen, only a few community members, like MonetSupply and Wintermute, expressed concerns.
- The situation worsened when Humpy proposed the allocation of 499,000 COMP tokens, a significant increase from the initial 92,000, which bizarrely received minimal objections and garnered votes from just 57 addresses.
Identifying Humpy and His Influence
According to DeFi researcher StableScarab, Humpy is a prominent figure across various DeFi protocols, leveraging incentive mechanisms to amass substantial amounts of governance tokens. Having previously gained control over Balancer, an Ethereum-based AMM, Humpy has now turned his attention to Compound.
- StableScarab pointed out a major flaw in DeFi governance, highlighting the “illusion of decentralization” within the Compound DAO, where only a limited number of addresses participate in governance votes.
- Despite controversial proposals, the broader community exhibits apathy towards participating in governance decisions.
Concerns Over Governance Structure
Noteworthy is the apparent detachment of the Compound team, as the official @compoundfinance X account remained inactive following the incident, prompting questions about the actual governance dynamics of the protocol. In fact, it seems that Gauntlet, a paid advisor, has substantial influence over the DAO.
Humpy’s reach extends beyond governance, with the creation of his own token, @Gold_On_Chain, for his ‘Golden Boys’ community. Speculators have shown increased interest in $GOLD following the Compound incident, expecting lucrative governance and farming strategies.
Conversely, COMP, the native token of Compound, has dipped over 1% in the last 24 hours and 7% in the past week due to the governance exploitation. This decline adds to COMP’s continuous downtrend since 2021, when the token reached an all-time high of $910, now trading nearly 95% lower than that peak.
The response from the Compound team and any further revelations post-exploit remain uncertain.
Hot Take: The Future of DeFi Governance
The recent governance attack on Compound Finance serves as a stark reminder of the vulnerabilities present in decentralized governance models. It raises critical questions about the efficacy and transparency of decision-making processes within DeFi protocols, emphasizing the need for robust security measures and community engagement to safeguard against potential exploits.
Sources:
– DeFi Ignas Twitter
– StableScarab Twitter
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