Compound – a leading DeFi lending protocol – has rejected a proposal requesting reimbursements for DAI liquidations caused by a questionable oracle in the platform’s most recent governance vote.
More than 120 users with a combined $85 million of positions liquidated in the adverse event will receive no compensation. Three-quarters of active voters took a stance against the requested payout.
What happened?
On Thanksgiving morning, a spike in the price of the DAI stablecoin to $1.30 on Coinbase led to the liquidation of more than $85 million worth of positions on Compound. The price of DAI did not surge nearly as high on any other exchanges, prompting the suggestion that the price spike may have been targeted and intentional – with the knowledge that Compound relied exclusively on Coinbase’s price feed as an oracle.
The proposal
Recognizing that the liquidations were either a result of an isolated price anomaly (or at best, poor oracle implementation by Compound developers) affected community members put forward COMP proposal 032.
The proposal requested the use of a feature in the Compound Comptroller contract, which can disburse COMP tokens to particular addresses for reasons deemed appropriate by a community vote.
If successful, proposal 032 would enact an 8% reimbursement for those users liquidated, paid out automatically in COMP tokens. The amount of COMP tokens to be disbursed would equate to about 0.55% of the fully-diluted COMP supply.
The result
In order to pass, the proposal required a majority and at least 400,000 votes in favor of the reimbursement.
Unfortunately for the 121 users liquidated in the event, voters in favor of the proposal were strongly outnumbered, with 212,952 votes “for” vs. 681,290 votes against.
Calls to amend the oracle
Members of the Compound community have called for the current oracle system to be fixed regardless of the proposal’s outcome. One community member highlighted that a single price feed cannot be solely relied upon as an oracle, especially when price anomalies such as the DAI spike arise.
Other users also pointed out the historical lack of liquidity and reliability of Coinbase’s DAI market, further confirming the sentiment.
Can Compound users feel safe?
The vote sets a precedent that may be worrying for some Compound users, demonstrating that the community may not be willing to cover future losses from adverse events on the platform. Whether or not the decision results in a migration of users to other protocols, however, is yet to be seen.
