The Compound Finance (COMP) treasury has been drained of $25 million in a latest governance assault, elevating alarms in regards to the state of decentralized governance within the decentralized finance (DeFi) ecosystem.
Compound DAO Hijacked
According to researcher DeFi Ignas, the assault started with an preliminary proposal to grant 92,000 COMP tokens, submitted with out prior dialogue on the Compound DAO discussion board.
Regardless of “obvious crimson flags” recognized by the challenge’s safety advisor, Michael Lewellen, the warning acquired minimal engagement from the neighborhood, with just a few voices, akin to MonetSupply and Wintermute, elevating concerns.
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However the story took an much more troubling flip when Humpy returned with a 3rd proposal, this time requesting 499,000 COMP tokens – a 5.4x enhance from the preliminary 92,000. Apparently, this proposal sailed by, with solely 57 addresses casting their votes.
Who Is Humpy, And How Did He Amass Such Outsized Affect?
According to DeFi researcher StableScarab, Humpy is a serious participant throughout a number of DeFi protocols, adeptly exploiting incentive designs to build up huge quantities of governance tokens. His techniques allowed him to achieve important management over Balancer, an Ethereum-based automated market maker in 2022, and now he has set his sights on Compound.
The researcher highlights that this incident unveils a essential difficulty in DeFi governance: “the phantasm of decentralization.”
Whereas Compound decentralized autonomous organization (DAO) is touted as a decentralized decision-making physique, the truth, within the phrases of StableScarab, is {that a} mere 20 addresses sometimes take part in governance votes.
The researchers declare that even when contentious proposals are put forth, the broader neighborhood stays largely detached, seemingly unaware or unconcerned with the implications.
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Furthermore, the Compound staff itself seems disengaged, with the official @compoundfinance X account going silent on the time of writing, hours after the incident.
This raises questions in regards to the true nature of the protocol’s governance structure, because it appears Gauntlet, a paid advisor, successfully runs the DAO. StableScrab additional famous:
Humpy’s affect goes past governance. He has his personal token, @Gold_On_Chain, for his ‘Golden Boys’ neighborhood. After in the present day’s Compound occasion, $GOLD’s worth doubled as speculators wager on Humpy’s capacity to proceed discovering “extremely worthwhile” governance/farming methods.
Then again, the Compound’s native token COMP has retraced over 1% within the final 24 hours and over 7% prior to now week alone within the wake of the most recent deemed governance exploit.
Moreover, this has additional exacerbated the token’s ongoing downtrend because the 2021 bull run, which noticed the token hit an all-time excessive of $910 in Might of that 12 months, and is presently down almost 95% from that stage.
It stays to be seen what communications the Compound staff will difficulty to buyers and what different findings will come to gentle within the wake of the exploit.
Featured picture from DALL-E, chart from TradingView.com
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