Compound Shines a Light on DeFi Governance and DAOs

For truly decentralized DeFi protocols, community members and holders of the platform's native token can vote on proposals.

DeFi protocol Compound Finance (COMP) was nearly hijacked by a group of whales after they banded together to pass a proposal that would have allocated $24 million in COMP from the Treasury to a yield-bearing protocol controlled by the whales, known as the “Golden Boys.”

The proposal passed after several whales, led by one known as “Humpy,” voted in favor of the suggestion at the last minute. However, the Golden Boys’ victory was short-lived.

After the voting ended over the weekend, ordinary COMP holders realized what had happened and were outraged. They took to social media and forums to voice their anger, calling the vote a “scam” and accusing the Golden Boys of manipulating the vote by artificially inflating their voting power after accumulating COMP.

In response to the backlash, Compound intervened and had a new proposal drafted to scrap the controversial allocation.

According to the new proposal, instead of the Golden Boys taking charge of the funds, there would be a staking product that would benefit all COMP holders, not just Humpy.

“This proposal would allocate 100k ETH from the Compound Treasury to a new staking product, to be deployed and operated by theἓ Golden Boys,’ a group of community members who have volunteered their time and effort to create this product,” the original proposal stated.

“The product will be fully auditable, permissionless, and decentralized. It will be available to all COMP holders, and will allow them to stake their COMP in exchange for a yield, to be determined by the market.”

However, the proposal was met with strong opposition from the community, and ultimately failed to pass.

“The community decided that they wanted to go in a different direction, and that’s fine,” said one observer.

“The fact that Compound was able to intervene and adjust the course of events shows that DeFi protocols are still ultimately governed by the community.”

As a result of the intervention, COMP prices recovered and began to rise again on Monday.