In a latest governance assault, $25 million was drained from Compound Finance’s (COMP) coffers, elevating alarm concerning the state of decentralized governance. Decentralized Finance (DeFi) ecosystem.
Composite DAO was hijacked
in keeping with Researcher DeFi Ignas mentioned the assault started with an preliminary proposal to award 92,000 COMP tokens, which was submitted with out prior dialogue on the Compound DAO discussion board.
Regardless of “apparent pink flags” identified by Michael Lewellen, the venture’s safety guide, the warning acquired minimal group engagement, with solely a handful of individuals, together with MonetSupply and Wintermute, issuing calls. fear.
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However the story took an much more disturbing flip when Humpy got here again with a 3rd proposal, this time requesting 499,000 COMP tokens — a 5.4x improve from the unique 92,000. Apparently, the proposal handed with solely 57 addresses voting.
Who’s the hunchback?
in keeping with In line with DeFi researcher StableScarab, Humpy is a significant participant in a number of DeFi protocols and is sweet at utilizing incentive design to build up numerous governance tokens. His technique led him to achieve vital management of Ethereum-based automated market maker Balancer in 2022, and now he has his sights set on Compound.
The researchers emphasised that this incident revealed a key challenge in DeFi governance: the “phantasm of decentralization.”
When getting again collectively decentralized autonomous group (DAO) is touted as a decentralized decision-making physique, however the actuality, in StableScarab’s phrases, is that sometimes solely 20 addresses take part in governance voting.
Researchers declare that even because the controversial proposals are being tabled, the broader group stays detached and doesn’t seem to concentrate on or involved about its implications.
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Moreover, the Compound workforce itself doesn’t look like concerned, with the official @compoundfinance X account falling silent on the time of writing, hours after the incident.
This raises questions concerning the true nature of the settlement governance constructionIt seems that Gauntlet is a paid guide, successfully operating the DAO. StableScrab additional states:
Hampi’s affect extends past governance. He has his personal token @Gold_On_Chain for his “Golden Boys” group. Following in the present day’s compounding occasions, $GOLD doubled in worth as speculators guess on Humpy’s capacity to proceed discovering “extremely worthwhile” governance/farming methods.
However, Compound’s native token COMP has retraced over 1% up to now 24 hours and greater than 7% up to now week alone following the newest governance breach.
Moreover, this additional provides to the coin’s ongoing downward development from the 2021 bull run, which noticed the coin hit an all-time excessive of $910 in Could of that yr and is now down almost 95% from that stage.
It stays to be seen what message the Compound workforce will ship to buyers and what different findings shall be launched within the wake of the breach.
Featured photos from DALL-E, charts from TradingView.com
