Compound's Reimbursement Proposal Fails - Decentralise #56
$100m of false liquidations and single price feed oracles
Proposal 32: Failed
A proposal to help users affected in the $100m liquidation event on Thanksgiving failed by a wide margin.
The vote which ended on Monday would have reimbursed affected users with COMP tokens for 8% of their liquidated value.
What happened?
A spike in the price of DAI on Coinbase to over $1.30 caused what many have described as unfair liquidations, as this price did not reflect the true price of DAI across multiple markets.
The event has led to a series of discussions around the limitation of Compound’s design which uses just one oracle for its DAI price feed. From what I can gather the general consensus seems to be that the system worked as designed, but not as expected.
The proposal would have seen affected users reimbursed 8% of their liquidated amount in the form of COMP distribution, but the vote was heavily defeated on Monday.
Why?
Many users expressed a view that Compound governance should not take on the responsibility and that users of the platform should have been aware of the inherent risks.
It was also pointed out that the majority of the affected $100m belonged to just a couple of users, with one address holding $46m.
One of the largest no voters was Polychain, who’s 325,747 votes made up 47.8% of the no vote count.
Eli Krenzke laid out their reasoning in Compound’s Discord governance channel.
Tl;dr: establishing a solution to the oracle vulnerability should be the first step, it would set a precedent, and the protocol should not fork out COMP to reimburse users who were liquidated in DAI.
Although this proposal failed the consensus seems to be that voters are in favour of helping affected users, but not through the mechanism outlined by this specific proposal.
Conclusion
While there has also been discussion on changes that can be made to make Compound’s DAI market more robust, I haven’t seen much discussion regarding directly addressing the single price feed oracle that caused the false liquidations.
The vulnerability could affect other assets on the protocol in the future.
There was some initial discussion in Discord, with ChainLinkGod advocating for a Chainlink oracle feed that would better represent the wider market price, but this idea does not seem to be gaining traction in the community.
I’m glad to see efforts to help affected users, even though this vote did not pass. The discussion is ongoing both on discord and the forum, so it’s possible that another proposal may be initiated soon.