A recent governance attack on the Compound Finance (COMP) treasury has led to the draining of $25 million, sparking concerns about the state of decentralized governance in the decentralized finance (DeFi) ecosystem. The attack began with a proposal to grant 92,000 COMP tokens, which was submitted without prior discussion on the Compound DAO forum. Despite warnings raised by the project’s security advisor, the community showed minimal engagement, with only a few voices expressing concerns.
The situation worsened when a third proposal by an individual named Humpy requested 499,000 COMP tokens, a significant increase from the initial 92,000 tokens. Surprisingly, this proposal passed with minimal participation, raising questions about the individual’s influence within the community. Humpy is known to be a major player across multiple DeFi protocols, utilizing incentive designs to amass large amounts of governance tokens. This incident sheds light on the issue of decentralization in DeFi governance, as a small number of addresses typically participate in important governance decisions.
The Compound team’s lack of engagement during the attack has raised doubts about the true nature of the protocol’s governance structure. It appears that a paid advisor effectively runs the DAO, leading to concerns about the level of decentralization within the system. Humpy’s influence extends beyond governance, as he has his own token and a community known as the ‘Golden Boys’. Following the Compound incident, the value of his token doubled as speculators bet on his ability to find profitable governance and farming strategies.
In response to the governance exploit, the Compound token COMP has retraced over 1% in the last 24 hours and over 7% in the past week. This has further worsened the token’s ongoing downtrend since the 2021 bull run, where it reached an all-time high of $910. The token is currently down nearly 95% from that level, indicating the impact of the governance attack on its value. It will be crucial to see how the Compound team communicates with investors and what actions they take in response to the exploit.
Overall, the recent governance attack on Compound Finance’s treasury highlights the challenges and vulnerabilities present in decentralized governance within the DeFi ecosystem. The incident raises questions about the level of decentralization in governance decisions, as well as the influence of individual actors like Humpy. It also underscores the importance of community engagement and vigilance in safeguarding DeFi protocols against such attacks in the future. Investors and stakeholders will be closely monitoring the developments in the aftermath of the exploit to assess the long-term impact on the Compound ecosystem.
