A management vote on the Compound Finance DeFi platform assessing compensation for users who lost cash due to DAI liquidations is hours away from resolution, with votes against overwhelming.
The thirty-second governance proposal would distribute COMP tokens to compensate for the loss of DAI stablecoin investments liquidated. With around six hours remaining, a majority vote of 76 percent currently opposes the proposition.
The proposal proposes to provide 55,255 COMP to affected customers, representing around 0.55 percent of the overall supply. Compensation determines at 8% of the amount of DAI liquidated and pays in COMP using a 14-day average of prices.
On November 26, an unusual rise in DAI prices on Coinbase resulted in an out-of-sync DAI price compared to other exchanges and liquidity providers. Due to the issue, users’ DAI positions liquidate on the Compound platform, resulting in a loss of cash.
Polychain Capital, with nearly 50% of the vote, Blck, and Dharma are the top addresses voting against the plan to reward users. At the time of publication, there were 681,290 votes against.
According to Compound’s governance principles, a proposal must receive a majority of votes and at least 400,000 votes. After which queues in a time lock can be adopted after two days.
The Proposal Garnered Less than 24%
At the time of writing, the proposal has garnered 212,952 votes, or less than 24%, with contributions from various DeFi protocols such as InstaDapp, the DeFi Pulse Index, and DeFi Rate.
Following the first proposal to increase the DAI reserve factor to de-risk the DAI market and protect against future improper liquidations, this second step details the mechanism for compensating users for funds lost in the 11/26 liquidation events by distributing 55,255 COMP (0.55 percent of total COMP supply) to affected users. Distribution carries out behind the scenes by two primary contracts: the Reservoir and the Comptroller. The Reservoir is an immutable contract that lives outside of governance. It also drips 0.50 COMP into the Comptroller contract on a block-by-block basis. The Reservoir continuously accumulates COMP at a drip rate independent of the Comptroller’s distribution pace. The Comptroller contract regulates the use and distribution of COMP for a variety of purposes. The contract includes but does not limit to distribution to borrowers and lenders in each market, reserve building for community needs, and voting.
The Benefits of This Move
Currently, the Comptroller distributes 0.352 COMP/block (70 percent) as liquidity incentives and accumulates 0.148 COMP/block (30 percent) as treasury reserves. Compound’s treasury is rising at a rate of $149,000 per day. This equals $4.5MM per month, at the current COMP price of $155.
Kain Warwick, the founder of Synthetix, also voted for user compensation, stating why in a recent tweet. He added that while Compound Finance is one of the safest DeFi platforms available, there are hazards. Thus, this is the most significant liquidation due to anomalous prices.
He stated that because COMP holders and depositors indirectly align, this move would benefit overall trust restoration and stakeholder alignment.
Additionally, he proposed that utilizing a more accurate pricing reference, such as Chainlink’s oracles, could help prevent future Dai price incidents.
The plan will be rejected six hours after voting concludes in its current form.
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