The entire crypto market saw a minor uptick as Bitcoin and Ethereum flashed green after a long time. The DeFi tokens also followed suit. However, for Compound Finance it was a wholly different tale. The prominent DeFi interest rate protocol Compound Finance announced detecting an unusual activity in terms of the distribution of COMP following the execution of Proposal 062.
This was enough to send its native crypto-asset to a major downturn and even break a previously tested support area of $300. To put things into perspective, COMP has been consistently declining since forming a lower high last week. However, in just a few hours after Compound Finance’s tweet regarding a bug, the token shed over 12% and was currently priced at $296.
Glitch in DeFi protocol
Compound Labs, the team behind the DeFi protocol, revealed that the recently introduced execution of Proposal 062 brought about a bug that alloweed users with unusual amounts of COMP to be claimed.
The purpose of the upgrade in question was essentially to divide the distribution of COMP token to liquidity suppliers and borrowers on the basis of governance-set ratios and not of the previous 50/50 share model. This new model also introduced minor bug patches. But the new bug came in the recent upgrade as part of the Comptroller contract and enabled users to claim as much as $50 million in COMP tokens.
Following the entire fiasco, Robert Lesher, who happens to be the founder of Compound Labs stated that the Comptroller contract address contains a limited number of COMP tokens. He also went onto clarify that a different Reservoir contract address contains a majority of the reward. Hence “the impact is bounded, at worst, 280,000 COMP tokens, the exec added. Talking about the upgrade, the exec stated,
“Proposal 62 and the new contract were written by a community member, with review from multiple other community members. This is the greatest opportunity, and greatest risk for a decentralized protocol–that an open development process allows a bug to enter production. There are no admin controls or community tools to disable the COMP distribution; any changes to the protocol require a 7-day governance process to make their way into production.”
Leshner also stated that Labs, and members of the community are currently investigating the discrepancies in the distribution of the COMP token.