Compound (COMP) price slips 6% after controversial governance proposal’s approval

Compound (COMP) price slipped about 6%, trading as low as $47.27 on Monday.

The decline came as the community reacted to the latest news about the governance of the decentralized autonomous organization (DAO) behind the lending protocol.

What happened?

Details on a Compound Finance forum page note that a potential “governance attack” on the protocol has passed.

Proposal 289 which seeks to put 5% of COMP tokens worth about $24 million into a yield-bearing protocol called goldCOMP sailed through despite concerns from across the community.

Notably, this is the third proposal from the group “Golden Boys” and followed rejections of similar governance proposals.

The first attempt to have the proposal adopted was in May. However, when the community rejected proposal 118, the Golden Boys followed it up with proposal 247, claiming allocating COMP tokens to the vault will see the Compound Finance token holders earn passive income.

When this too hit the rocks, the group turned to the latest governance attack attempt via proposal 289. This time the controversial proposal to allocate 499,000 COMP worth $24 million has passed, raising further community concerns

Is it a governance attack?

In DAOs, a governance attack happens when an entity controls enough voting power to influence governance votes in their favour and often for personal gain.

According to some community members, Golden Boys and a whale named Humpy are likely out to siphon the COMP out of the DAO. However, Humpy has dismissed such claims, noting the use of a “Trust Setup.”

“‘Steal funds’ is a wrongful & misleading phrase, especially coming from the compound’s risk specialist. Requested investment goes through a Trust Setup with a constraint set of actions that don’t permit stealing/diverting of funds,” Humpy posted.

Despite this, the Compound community will now consider proposal 290 which outlines a governance constraint with the Timelock Admin. If adopted, there will be a two-day delay for actions related to goldCOMP, which could give the community room to counter potential bad-faith moves.

Altcoins rise as Bitcoin eyes $70k

While the COMP token’s price is currently above $48, it’s still more than 4% in the red on the 24-hour time frame.

COMP price chart on CoinMarketCap

Compound’s struggle comes as several top altcoins mirrored Bitcoin’s sharp surge early Monday.

As the Asian trading session saw BTC climb to above $69,800, Ethereum surged above $3,300 and Solana rose to above $193.

Meanwhile, Bitcoin Cash continued its spike as bulls broke beyond $400, rallying more than 14% to reach intraday highs of $452 at the time of writing.

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