On July 28, 2024, the Compound neighborhood passed Proposal 289, empowering a group of 5 token holders to take about $24 million from the CompoundDAO treasury. Obviously the neighborhood didn’t mean to license a huge break-in. And the “Golden Boys,” the group of token holders who advanced Proposal 289, most likely weren’t preparing one. Proposition 289 looked for to assign 5% of the DAO’s treasury holdings for full-control by the Golden Boys in their yield-bearing vault. Lots of railed versus the Golden Boys’ proposition as a prime example of a “governance attack,” control of a DAO’s governance systems with the objective of draining its treasury or combining control.
Whatever the Golden Boys’ objectives, how did this threat develop in Compound? Substance is among the leaders of decentralized token-voting, and has a Nakamoto coefficient of 17, making it more decentralized than lots of evidence of stake networks. The Golden Boys’ make use of exposes CompoundDAO’s persistent citizen passiveness. The Golden Boys had the ability to squeeze through Proposal 289 with less than 7% of the overall COMP supply. That’s because lots of token holders merely picked not to vote– typically, just 51 out of Compound’s nearly 5000 members vote on on-chain propositions. This isn’t recorded in existing metrics and ideas of decentralization. That’s a huge issue.
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Today’s decentralization metrics
Popular metrics of decentralization today, such as the Nakamoto Coefficient or the Gini Coefficient, are token-centricThey concentrate on token circulation over addresses
Think about 2 theoretical DAOs, WhaleDAO and MinnowDAO. WhaleDAO has its tokens divided uniformly amongst 5 wallets. MinnowDAO, which has tokens equally divided amongst 100 wallets.
This isn’t recorded in existing metrics and ideas of decentralization. That’s a huge issue
Initially glimpse, we would presume that MinnowDAO is more decentralized than WhaleDAO. This conclusion does not consider who controls these wallets in the very first location. Expect, for instance, that in MinnowDAO, 70 of those wallets are owned by one whale, i.e., the exact same individual or group. MinnowDAO would in fact be more central than WhaleDAO, with a single individual managing 70% of the ballot power.
This is precisely what occurred when it comes to the Golden Boys. The group’s “yes” vote of around 700k COMP was divided among lots of wallets, with a lot of the specific wallets holding less than 25k COMP.
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