On Dec. 14, the majority of the Compound Finance governance community voted against a proposed compensation plan for users affected by the Dai (DAI) liquidations that occurred on Nov. 26.
Figures from the Compound governance dashboard show 681,290 votes against with only 212,952 votes in favor. Also, COMP whales like Polychain Capital and Dharma were against the plan judging by their “no” votes cast.
As previously reported by Cointelegraph, some leveraged COMP farmers suffered massive liquidations amid a temporary glitch in the oracle price feed for the Dai (DAI) stablecoin coming from Coinbase on Nov. 26. With Dai at a 30% premium, some traders saw their positions become undercollateralized — triggering the debt liquidation process.
In total, Compound liquidations on Nov. 26 amounted to about $89 million with over half of that sum due to the Dai price glitch. In response, the project proposed a compensation plan amounting to 8% of the liquidated amount for affected wallets using a 14-day COMP price average.
If passed, the project would have paid out 55,234.95 COMP as compensation to the 121 users affected by the liquidations. This sum amounts to about 2% of the 24-hour COMP circulating supply.
With the two biggest losers on the day being “looper whales” — recursive COMP farmers — a flat 8% compensation plan did little to reimburse their substantial losses. Indeed, as pointed out by a poster named “Dmitry” on the proposal discussion board, the 30% deviation in the Dai price meant liquidations occurred at a median penalty rate of 18%.
Some forum posters also raised issues with the fact that 61% of the compensation package would go to two COMP farmers. Some community members argued that the plan rendered the losses incurred by “smaller farmers” insignificant.
Rather than raising the compensation percentage, a section of the community called for a cap on the reimbursement to the two largest wallets affected. Such a move would still keep the compensation outlay at the initial amount stipulated by the proposal while ensuring more equitable distribution.
Other reasons given for voting “no” include criticisms against the project that the proposal does nothing to address the vulnerabilities that led to the liquidations in the first place. DeFi projects continue to suffer opportunistic profiteering exploits due to smart contract bugs and centralized price oracles.