DAO Drama: Compound Governance Controversy

Author: Justin Baba, Messari analyst; Compiler: 0xjs@黄金财经

DAOs (decentralized autonomous organizations) are often seen as a better alternative to centralized control because they promise to empower token holders with voting and decision-making power through decentralized and transparent governance.

However, recent events related to Compound Finance have highlighted the potential problems that DAOs may encounter.

• On July 28, 2024, Proposal 289 proposed by Humpy passed. The proposal plans to allocate 5% of the Compound treasury (499,000 COMP tokens, worth approximately $24 million) to a one-year yield agreement designed by the "Golden Boys" group.

Prior to this proposal, Humpy had tried to pass two proposals similar to Proposal 289, which attracted the attention of Compound security consultant Michael Lewellen. Lewellen discovered that multiple wallets were accumulating COMP to vote for these proposals and urged governance representatives to vote against them. As a result, these proposals failed to pass.

However, due to the lack of participation of COMP token holders in governance, the proposal passed on the third attempt. A total of 57 wallets voted for the proposal.

To address this situation, on July 29, 2024, Bryan Colligan, Head of Growth at Compound, created a new proposal to address the interests raised in Proposal 289, with the following details:

• A new staking product will be created that will direct a portion of the fees earned from providing liquidity and lending to COMP stakers.

• This staking product will be controlled by the Compound DAO and will be able to adjust its risk parameters.

• This proposal can only be executed if Humpy cancels Proposal 289.

This situation emphasizes the importance of active participation of token holders in DAO governance and highlights the negative impact it can have on the protocol.