Compound Finance Attack Turns Fee Switch? Twist Sees Attacker Labeled Hero

• Compound Finance has reached a resolution with its alleged attacker.
• The deal, seemingly forced by the would-be attacker, looks set to benefit COMP holders significantly.
• The unexpected twist has earned the would-be attacker high praise.

Often dubbed by regulators as a “wild west,” there is hardly any dull moment in the crypto space. At the center of the most recent drama is the DeFi lending protocol Compound Finance.

Over the past 48 hours, the protocol has been embroiled in controversy amid an alleged governance attack that looked set to allocate 5% of the protocol’s treasury worth around $24 million to an obscure yield-bearing project, with the DAO having no oversight on the fund’s management. This wild story has taken an unexpected turn that many likened Compound’s would-be attacker to an activist and hero. 

A Win for Compound Finance Users?

In a surprising turn of events, “Humpy,” the whale at the forefront of the forced proposal to allocate $24 million from the Compound Finance treasury to the little-known goldCOMP product run by the similarly little-known Golden Boys group, appears to have strong-armed the Compound Finance DAO to a deal that promises to avert a governance crisis and yield value to COMP holders.

In a new proposal on Monday, July 29, Compound Finance Head of Growth Bryan Colligan wrote that at the request of Humpy, the Compound DAO would be proposing a COMP staking product to offer a yield to users in exchange for the whale’s decision to cancel his controversial goldCOMP proposal.

Per the new proposal, 30% of Compound Finance’s treasury accrued from fees generated on the platform would now be distributed to staked COMP holders proportional to the amount of COMP they stake. As explained by Colligan, unlike the goldCOMP proposal, this staked COMP product will offer the DAO sufficient oversight with risk assessments from a security partner and a market risk manager and options to adjust the percentage of reserves distributed to ensure Compound’s continued growth.

The resolution has received overwhelming support on the Compound Finance forum even as members of the broader crypto community have now showered praise on Humpy.

“Shareholder Activism?”

Reacting to the unexpected twist, Ducat Protocol core contributor Alex Forshaw described Humpy’s actions as “savage shareholder activism,” a term that describes an event where shareholders use equity stakes in a firm to put pressure on the management to listen to the wishes of investors.

Forshaw was not the only one to heap praise on Humpy as Delphi Digital Head of Consulting Ashwath Balakrishnan asserted that the supposed governance exploiter had done “more for COMP value than anyone else.”

Amid the perceived turn of fortune, COMP trades around the $51 price point at press time, representing an over 10% gain in the past 24 hours, while other major crypto assets are experiencing pullbacks.

On the Flipside 

• While things appear to have worked out well this time, Humpy’s success raises questions about Compound’s governance system.

Why This Matters

Humpy’s goldCOMP proposal had raised fears of potential treasury fund mismanagement. The recent resolution, however, puts these fears to bed while promising benefits to COMP holders.

Read this for more on the Alleged COMP governance attack:
Alleged Compound Finance Attack Puts DAO Governance Models Under Scrutiny

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