$25 Million Drained From Compound (COMP) Treasury In Latest Governance Exploit Incident
30 Juli 2024 - 8:00AM
NEWSBTC
The Compound Finance (COMP) treasury has been drained of $25
million in a recent governance attack, raising alarms about the
state of decentralized governance in the decentralized finance
(DeFi) ecosystem. Compound DAO Hijacked According to researcher
DeFi Ignas, the attack began with an initial proposal to grant
92,000 COMP tokens, submitted without prior discussion on the
Compound DAO forum. Despite “glaring red flags”
identified by the project’s security advisor, Michael Lewellen, the
warning received minimal engagement from the community, with only a
few voices, such as MonetSupply and Wintermute, raising concerns.
Related Reading: Shiba Inu’s NVT Ratio Sees Drastic Increase, Is A
Rise To $0.00003 Still Possible? But the story took an even more
troubling turn when Humpy returned with a third proposal, this time
requesting 499,000 COMP tokens – a 5.4x increase from the initial
92,000. Interestingly, this proposal sailed through, with only 57
addresses casting their votes. Who Is Humpy, And How Did He Amass
Such Outsized Influence? According to DeFi researcher
StableScarab, Humpy is a major player across multiple DeFi
protocols, adeptly exploiting incentive designs to accumulate vast
amounts of governance tokens. His tactics allowed him to gain
significant control 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 critical
issue in DeFi governance: “the illusion of decentralization.”
While Compound decentralized autonomous organization (DAO) is
touted as a decentralized decision-making body, the reality, in the
words of StableScarab, is that a mere 20 addresses typically
participate in governance votes. The researchers claim that
even when contentious proposals are put forth, the broader
community remains largely indifferent, seemingly unaware or
unconcerned with the implications. Related Reading: Bitcoin Bull
Cycle Likely To Go On Till Mid-2025: CryptoQuant CEO Moreover, the
Compound team itself appears disengaged, with the official
@compoundfinance X account going silent at the time of writing,
hours after the incident. This raises questions about the
true nature of the protocol’s governance structure, as it seems
Gauntlet, a paid advisor, effectively runs the DAO. StableScrab
further noted: Humpy’s influence goes beyond governance. He has his
own token, @Gold_On_Chain, for his ‘Golden Boys’ community. After
today’s Compound event, $GOLD’s value doubled as speculators bet on
Humpy’s ability to continue finding “highly profitable”
governance/farming strategies. On the other hand, the Compound’s
native token COMP has retraced over 1% in the last 24 hours and
over 7% in the past week alone in the wake of the latest deemed
governance exploit. Additionally, this has further
exacerbated the token’s ongoing downtrend since the 2021 bull run,
which saw the token hit an all-time high of $910 in May of that
year, and is currently down nearly 95% from that level. It
remains to be seen what communications the Compound team will issue
to investors and what other findings will come to light in the wake
of the exploit. Featured image from DALL-E, chart from
TradingView.com
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