Compound Protocol has decided to make a significant change in the way it distributes its revenues following an unfortunate governance incident.
A new product, stCOMP, will be introduced by the protocol to implement a switch in fees that will distribute 30% of protocol reserve funds to holders who have staked their COMP tokens.
This proposal is led by Compound’s head of growth, Bryan Colligan. It aims to increase the utility of and appeal of COMP tokens through yield opportunities.
Compound, like all DeFi protocols, generates revenue by charging fees to borrowers. A percentage of these fees is usually paid to the liquidity providers as an incentive to maintain protocol liquidity. However, COMP token holders currently do not receive a share of these revenues — as is common with many DeFi protocols, such as Uniswap.
Ironically the discussion to return token revenue follows a failed governance attempt.
Compounds were widely perceived to be harmful. “governance attacked” Golden Boys was formed two weeks ago by an unnamed delegate group. Its de facto leader “Humpy” A proposal was approved by a small margin (52%).
The Golden Boys controlled vault would receive 499,000 COMP (24 million dollars) for the DeFi strategy, whereby users can lock their COMP into a balancer pool in order to produce yield.
It was deemed an unjustified attack by Golden Boys as this was their third attempt to get a governance vote passed. OpenZeppelin flagged two previous failed proposals from May 6th and July 19, which were seen as potential threats. “coordinated governance attack.”
This episode of DAO Drama may have an end that is happy after all. DAO stakeholders reach a mutually acceptable solution.
The DAO, based on the most recent forum proposal has made a deal with the Golden Boys in order to return funds that were approved for Proposal 289 as well as negate the prior onchain voting.
As a result, DAO will consider an income-sharing program, in the form a staking tool, called stCOMP. This product was already planned for the protocol roadmap.
“We’re considering a yield-bearing aspect for COMP token holders and also how to increase liquidity around COMP pools for downside protection,” Colligan tells Blockworks. “Right now, we’re speaking to three or four different vendors that we’re potentially running a trial with,” He said.
Wintermute, Consensys, and OpenZeppelin governance delegates were seen to approve the truce.
The DAO had also attempted to introduce, before the truce agreement was made, a proposal which would have imposed a time lock of two days on the approval of future funds. In accordance with the Golden Boys agreement, the DAO also cancelled this proposal.
Markets have welcomed the peaceful resolution to this conflict. COMP token prices have recovered to their previous levels, which were $51.8. This was before the governance crisis.
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