In this special AMA episode, Taariq Lewis @LewisTaariq, CEO of VolumeFi (volume.finance), hosts Compound Protocol Head of Growth and AlphaGrowth founder Bryan Colligan @bryancolligan who shares a postmortem on recent events that landed Compound Finance in the spotlight following allegations of a governance attack led by cyrpto whale Humpy. The controversial Proposal 289 narrowly passed the vote allocating $24 million in tokens from Compound’s treasury to a yield-bearing protocol. This sparked accusations of voting process manipulation by a small group amassing large amounts of COMP tokens on the open market. Compound Finance brokered a truce to resolve the governance conflict that ultimately led to the cancellation of the contentious Proposal 289. A new staking product is being offered that aligns the interests of all parties which will enhance the utility of COMP tokens, distribute fresh token reserves generated annually to staked COMP holders, reduce costs, and institute changes in governance.
Taariq welcomes everyone to Volume’s Twitter spaces and thanks Bryan for guesting in today’s special AMA episode. Bryan of AlphaGrowth currently runs the growth program on Compound Finance. He asks the guest to share context on the controversial Proposal 289, how it was resolved, and future implications for DAO governance and the wider DAO community.
Bryan explains that 400,000 votes are needed to hit a quorum. Proposal 289 narrowly passed the vote to move about 500,000 or 5% of the total supply of Compound equivalent to one-third of the treasury estimated at around $25 million into a structured product called goldComp. The proposal’s approval was viewed by some as a governance attack alleging that a small group manipulated the voting process by acquiring large amounts of COMP tokens on the open market.
Compound rallied the delegation to get 500,000 ‘NO’ votes up to 24 hours before the proposal was to pass or get declined. There were 280,000 votes up about an hour before 289 came up, but another 400,000 votes came in and voted ‘YES” on the proposal. They had under an hour to get another 100,000 votes to say “NO”, but they only managed to get 50,000.
There were growing serious concerns in the war room about the proposals going through.
Most of the war room concentrated on the consequences of the nuclear option, derail governance, the potential loss of the COMP token, and how to restructure governance. Bryan was on a mission to find out what Humpy really wants.
Bryan explains that Humpy came out to say that has been buying tokens for the last couple of months influencing the increase of the COMP token price.
Humpy could be a terrorist if this was indeed a governance attack, or he could be an activist investor that has a better plan. It became abundantly clear within the first hour of negotiations that Humpy wants yield and for the token price to go up.
Negotiations started with the goal of finding common ground that could end up with a win-win and bring value back to the COMP token holders.
Taariq chimes in that Humpy could have reached out in good faith and express his concerns without putting Compound in the crosshairs of destruction.
Bryan states that the goals of AlphaGrowth running the Compound growth program align with the goals of Humpy.
The first demand was to do whatever it took to keep governance going. The next demand was to get yield back to the product and yield back to the token. The third demand revolves around reducing the overhead costs of the DAO.
Taariq sums up the demands of Humpy. He wants to ‘cut the fat’ and distribute revenue to Compound token holders. He also asks an important question.
Bryan responds that on the governance fund front, things are being built and some things are being discussed. They are looking at setting a maximum streaming of funds on deployment and amending the voting process making it difficult for large stakeholders to pull a last-minute stunt as what recently happened where 400,000 votes came in at the last hour.
The host reflects on the plans moving forward but is still apprehensive about the possibility of another hostile attack.
There will be a governance change in Compound in around a week Bryan assures.
While Humpy or anybody can pull another vote while the staking product is being developed, Bryan chooses to act in good faith and push plans forward. He shares that talks with three different potential vendors and partners are underway. Moreover, the team was most focused on the $1M from OP and $3M from Arbitrum which are among the growth initiatives to drive and use that capital. They also started creating pooling options to sell volatility on the COMP token and some structured products.
Taariq recaps what has been discussed.
He asks how Compound will build trust and make sure that Compound continues to be great as it was an innovator and a pioneer. How can we help Compound grow and get new blood?
Bryan states that Compound had so much inbound at the beginning that they didn’t have a process on how it goes to another chain. However, there are revenue-generating and grant opportunities. AlphaGrowth for example, has deployed over 200 grants and $20 million worth of capital to DeFi protocols in particular. The process was concentrated on getting grants first, growth, and using the grants to spur adoption.
He compares Compound to Aave. The latter generated $80 million in revenue this year and has more money, while Compound is capital efficient for certain products such as looping and RWAs.
Taariq congratulates Bryan and his team for surviving their first trial by fire.
Compound is expected to cut down on costs and provide enough value and TVL growth as part of the commitment to Humpy.
Bryan explains that there will be more discussions and negotiations which is how decentralized DAO really works.
Taariq thanks Bryan for coming to today’s special AMA. He congratulates Bryan on the new staked COMP token product and upcoming governance changes.
Bryan thanks Taariq for their friendship and for being extremely helpful throughout this crisis. The host ends the episode expressing his full support for Bryan and his team.
Stay tuned for the next AMA!
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