Compound considers fee redistribution after $24M COMP truce

Compound Protocol is considering a major shift in its revenue distribution following a recent governance fiasco.

The protocol plans to introduce a fee switch that will allocate 30% of protocol reserves to staked COMP token holders through a new product called stCOMP.

The proposal, led by Compound head of growth Bryan Colligan, aims to enhance the financial utility and attractiveness of COMP tokens by providing yield-bearing opportunities.

Like all DeFi lending protocols, Compound’s revenues are generated from fees charged to loan borrowers. A portion of these fee revenues are typically paid to liquidity providers to incentivize 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 discussions to return revenue to token holders follow a botched governance attempt to do the same.

Compound was widely perceived as being “governance attacked” two days ago by an anonymous delegate group by the name of the Golden Boys. Its de facto leader “Humpy” had acquired $4.5 million worth of COMP from ByBit exchange 88 days ago, which was then used to vote in a proposal at a narrow margin of 52%.

Proposal 289 would have approved the payment of 499,000 COMP ($24 million) to a vault controlled by the Golden Boys for use in a DeFi strategy where users could lock up their COMP in a Balancer pool to generate yield.

The governance vote was seen as an illegitimate attack as it was the third attempt by the Golden Boys to pass such a vote. There had been two previously failed proposals on May 6 and July 19 that OpenZeppelin had flagged as a potential “coordinated governance attack.”

Now it appears this episode of DAO drama will have a happy ending after all, as DAO stakeholders find an amicable solution.

Based on the latest forum proposal, the DAO has struck a truce with the Golden Boys to return the approved funds from Proposal 289 and negate the previous onchain vote.

In exchange, the DAO would consider a revenue-sharing program in the form of a new staking product, stCOMP, that was already on the protocol’s 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 told Blockworks. “Right now, we’re speaking to three or four different vendors that we’re potentially running a trial with,” he said.

Governance delegates from Wintermute, Consensys and OpenZeppelin were seen voicing their approval of the truce proposal.

Before the truce was reached, the DAO also sought to pass a subsequent proposal that would introduce a two-day time-lock delay on future fund approvals. As part of the agreement with the Golden Boys, this proposal has also been canceled.

The peaceful resolution of this conflict has been well received by markets. The token price of COMP has recovered to its previous levels of $51.8, before the governance debacle.

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