Compound crypto governance attack: ‘Cunning’ scheme or legitimate play?

• Compound crypto DAO experienced a governance attack by the Golden Boys, led by Humpy.
• Proposal 290 aims to introduce delays in governance actions to prevent future attacks.

In a surprising development, the Compound Decentralized Autonomous Organization (DAO), which governs the decentralized lending protocol, experienced a potential “governance attack.”

What happened?

Compounds’ Forum posts revealed that the Golden Boys, led by a prominent whale known as Humpy, attempted to sway the platform’s decision-making by channeling a substantial amount of COMP tokens into their control. 

Highlighting Humpy’s actions as a cause of significant disruption and uncertainty within the Golden Boys group, Jared Grey, CEO of SushiSwap, said, 

“I wouldn’t be surprised if Humpy has infiltrated their team and made them take on new members. They may be scrambling to figure out how to deal with it. He’s very resourceful and cunning.” 

As per reports, the group made several attempts to pass proposals that would benefit their own protocol, goldCOMP.

Their first two proposals failed due to community objections and procedural issues. However, their third attempt, Proposal 289, passed successfully.

This proposal involved moving COMP tokens to their goldCOMP vault. Some believed this is a scheme to divert funds, but Humpy claimed that their setup prevents fund theft. 

Execs weigh in

Alex Netto, CEO at Blockful, explained it well when he said, 

“At first glance, it doesn’t look like an attack, since this whale invested a lot of money to have significant voting power in Compound’s DAO. However, when you understand this user’s behavior pattern, you start thinking again that this is an attack.” 

In response, the community proposed Proposal 290 to introduce a delay in governance actions to prevent similar attacks in the future. 

Besides the attack, Compound users were alarmed by the team’s lack of effort to address user security concerns. 

Source: Maxime Desalle/X

In fact, when Compound users inquired about their safety during the governance attack, by asking, 

 “yo are we safe?”

The Compound team members responded by saying, 

 “do not at me again. It is against the rules.” 

Source: Danger/X

Impact on COMP token

The governance attack on Compound had an immediate negative impact on COMP, the protocol’s native token, which fell by over 6%.

However, the decline was short-lived, as COMP rebounded and was up approximately 6% in the past 24 hours, showing positive gains according to CoinMarketCap.

That being said, it remains to be determined whether it will prevent the Golden Boys.

Martin Schmidt, co-initiator at Q.org, in an email sent to AMBCrypto, put it best when he said, 

“This cannot be solved programmatically. They require at least a basic set of spending rules and a sufficiently decentralized mechanism for enforcement.”