- The DAO allocated 300,000 Compound tokens to special delegates last year.
- That allocation was to boost governance participation.
- About 70% of participants rejected a proposal to claw back those tokens.
The community behind $4 billion DeFi lending protocol Compound has rejected a proposal to claw back about $13 million in tokens assigned to a group of DAO delegates.
The proposal was rejected by a group of Compound whales on Tuesday. The proposal claimed the tokens only benefited a select group of insiders to the detriment of the wider DAO.
The tokens came from Compound’s treasury in August 2024 under a programme called Delegate Race, designed to improve governance participation within Compound DAO.
“DAO governance is built on a simple principle: power must be correlated with actual economic risk-taking [via] buying the underlying token,” the proposal’s author wrote on the DAO forum.
“The Delegate Race distorts this principle: it grants political power financed by the treasury, without being earned through capital commitment.”
The author also claimed the allocation was a misuse of treasury funds, which ought to be used to support the protocol’s long-term development.
Humpy, a pseudonymous major DeFi whale, supported the motion with voting power worth more than $3 million of Compound tokens.
Despite these claims and Humpy’s involvement, almost 70% of the tokens deployed during the poll were used to vote against the recall, based on data from Tally, an onchain voting platform.
Data from Tally also shows that delegates who directly benefit from the Delegate Race, like PGov and Arana Digital, also voted against the recall proposal.
DL News reached out to several DAO delegates on both sides of the issue, but they declined to comment publicly on the matter.
DAO capture
One DAO delegate who spoke to DL News on the condition of anonymity said the result of the vote was the best outcome for Compound DAO.
They said the token allocation stands as a “bulwark against DAO capture” from whales like Humpy. It’s not clear whether Humpy was behind the proposal, even though they contributed the most voting power in support of the motion.
DL News couldn’t reach Humpy for comment.
DAO capture is like a 51% attack against a DeFi protocol. It refers to a situation in which a whale or a group of aligned whales amass enough governance power to sway the results of DAO votes.
Tuesday’s vote isn’t the first tiff between Compound and Humpy.
In July 2024, Humpy, as part of a DAO delegate group called Goldenboys, used their considerable governance power to orchestrate a vote that awarded themselves $25 million worth of Compound tokens from the DAO’s treasury.
The DAO managed to strike a truce with Goldenboys to reverse the vote’s execution in exchange for a staking program that would distribute yield to major whales like Humpy.
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him atosato@dlnews.com.
