Compound, one of the leading lending platforms in the altcoin world, has been seriously shaken by recent developments. The platform’s native token COMP has lost more than 6% of its value following recent developments. The source of the problem is the struggle for control over the Decentralized Autonomous Organization (DAO), the platform’s governance structure.
A group called Golden Boys has accepted a negative proposal for the altcoin
The events were triggered by a group calling itself “Golden Boys”. After three failed attempts, this group successfully made its fourth attempt, and accepted a proposal to direct $24 million worth of COMP tokens to a protocol called goldCOMP, which is claimed to bring passive income to COMP holders.
This development has caused serious concerns among major investors of the platform, such as Wintermute. It is stated that this situation is considered a “governance attack” on the protocol. The term “governance attack,” which is often used in the altcoin world, refers to an attacker manipulating the DAO’s decision-making mechanism for their own benefit by using permissionless and tradable governance tokens.
What happened?
According to posts on the Compound forums, the attack began as a coordinated effort led by a whale nicknamed “Humpy.” Humpy took control of a large amount of COMP tokens with the aim of transferring $24 million worth of COMP tokens to the goldCOMP protocol, which he controls. The group, known as the Golden Boys, prepared three different proposals to implement Humpy’s plan. The first proposal, Proposal 118, called for transferring 5% of the COMP treasury to a multi-signature wallet controlled by the Golden Boys, but was rejected due to suspicious circumstances.
The second proposal, Proposal 247, aimed to deposit 5% of COMP tokens into the goldCOMP vault, but was canceled due to insufficient support. The third and final Proposal 289, however, had the same goal but took a different approach. Humpy and Golden Boys’ moves were alleged to be aimed at “stealing funds,” Humpy denied the accusations. He argued that the GoldCOMP fund that has become valid is built on “a trust structure that includes a set of restrictions to prevent theft or diversion of funds.” However, the community took action in response to Golden Boys’ success.
Will Golden Boys be able to seize COMP tokens?
Proposal 290, which will be put to the vote in about a day, aims to change the powers of the Timelock Admin, the smart contract that queues governance actions. This will allow governance decisions to go into effect with a two-day delay, giving the community more time to react. This move could prevent future governance attacks, but it remains unclear whether it will block the COMP tokens that Golden Boys are after. With the development, COMP price dropped by 6 percent.
These incidents have raised serious questions about the security and effectiveness of governance mechanisms in the cryptocurrency ecosystem. The democratic structure of DAOs can be vulnerable to manipulation by malicious actors. Therefore, more robust security measures need to be developed to prevent such attacks and protect the rights of communities. On the other hand, such internal conflicts in important protocols like Compound can damage investor confidence.
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