Compound Agrees To Distribute 30% Of Reserves To COMP Stakers To End Alleged Governance Attack

Compound is floating a new staking program for COMP holders as a compromise with Humpy, a notorious DeFi whale accused of launching a governance attack against the veteran DeFi protocol.

On July 29, Bryan Colligan, the head of business development at Compound, published a governance proposal outlining plans for a new Stake Compound Product that would stream 30% of the project’s current and future reserves to COMP stakers.

Colligan noted that the program was requested by Humpy in exchange for agreeing to Proposal 289 — which sought to invest 499,000 COMP worth roughly $24 million into a DeFi vault controlled by Humpy, and appeared to be rammed through by Humpy and their associates over the weekend.

“We propose the following staking product that addresses the stated interests of Humpy as a new, recent delegate and COMP holder in return for canceling Proposal 289 due to the governance risks it poses to the protocol,” Colligan said. “The Compound Growth Program… will execute on the above commitments, given the immediate cancellation of Proposal 289.”

Colligan added that the proposal would expire at 11:59 pm EST on July 29. Should Humpy have failed to cancel Proposal 289, Compound would move forward with Proposal 290 — blocking Humpy by using the Compound team’s multi-sig to deploy a new governor contract removing governance power from the delegate behind Proposal 289.

Humpy tweeted that Proposal 289 had been canceled a few hours ago. “Glad to have brought Compound Finance to the limelight again,” they added. “StakedComp… finally becoming a yield-bearing asset!

The markets have responded favorably to the resolution, with the price of COMP up 6.2% over the past 24 hours, according to CoinGecko.

Governance attack

Proposal 289 proposed investing 499,000 COMP from Compound’s treasury into goldCOMP, a yield-generating vault from the Humpy-linked Golden Boys team.

The proposal passed with nearly 52% of votes in favor on July 28, despite two previous iterations of the proposal getting shot down by heavy opposition in May and July. The proposals had notably asked for just 92,000 COMP, with security researchers warning that any tokens deposits into the goldCOMP vault would cede their governance power.

In May, Michael Lewellen of the web3 security firm, OpenZeppelin, noted the first proposal was put forward by a new governance delegate who was suddenly allocated 228,000 COMP by five wallets that obtained their tokens from the Bybit exchange. Combined with their own tokens, the delegate commanded 325,333 COMP — more than 81% of the 400,000 tokens required for a governance proposal to meet quorum.

“We alerted the community of the risk that these delegates could be in support of a potential governance attack,” Lewellen said. “The timing of the new proposal and these recent delegations is suspicious.”

Read More: Compound Community Accuses Notorious Whale Of Engineering Governance Attack