The price of the Compound’s native token, COMP, has dropped over 8%, from $51.02 to $47.21.
Compound Finance faces a governance attack with a malicious actor manipulating the DAO’s decision-making process.
A whale known as Humpy and a group called the Golden Boys set up the attack.
In a dramatic turn of events for the Compound protocol, the price of its native token, COMP, has plummeted over 6%. This decline follows allegations of a governance attack that has thrown the Decentralized Autonomous Organization (DAO) that runs Compound into a mess.
A governance attack is a malicious attempt to manipulate a DAO’s decision-making processes. This typically involves accumulating enough voting power to sway outcomes in favor of the attacker. The attacker takes advantage of the easy trade and open access to governance tokens.
The recent governance attack on Compound was meticulously set up by a whale known as Humpy, who, along with a group called the Golden Boys, managed to pass a controversial proposal. This group aimed to allocate $24 million worth of COMP tokens to a yield-bearing protocol they controlled, named goldCOMP.
How the Compound Finance Attack Unfolded
The saga began in early May with Proposal 118, which suggested transferring 5% of COMP’s treasury to a multi-signature wallet managed by the Golden Boys. This proposal quickly dismissed due to community members flagging suspicious activities around it. Steadfast, the group attempted a similar strategy with Proposal 247. That supports investing 5% of COMP tokens into a goldCOMP vault to provide passive income for COMP holders. This proposal also failed to achieve a quorum and was subsequently canceled.
However, their persistence paid off with Proposal 289, which narrowly passed with a vote of 682,191 to 633,636. This proposal allocates 499,000 COMP tokens, valued at approximately $24 million, from the Compound’s treasury to the goldCOMP protocol for a year. The approval has led to accusations of governance manipulation. Critics allege that the Golden Boys acquired large amounts of COMP tokens to influence the vote.
Michael Lewellen, a security advisor for Compound, highlighted connections between the token acquisitions and the Golden Boys’ proposals. Recent events have put Compound Finance under intense scrutiny.
Currently, COMP is trading at $48.08 with a market cap of $401 million. Despite the price drop, the token’s daily trading volume surged by over 75% to $46 million. That reflects heightened market activity amid the controversy.
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