Weekly Gauge #72: Tales of a governance warrior
Humpy’s journey
Governance plays a pivotal role in shaping the direction and sustainability of protocols. Often referred to as governance wars, the challenges of governing DeFi protocols can let emerge influential and somewhat controversial figures like the most famous one known as Humpy.
From his early maneuvers with Balancer's veBAL tokenomics to his attempts to influence Sushi's governance and his recent endeavors with Compound, Humpy's actions illustrate the complexities and challenges of protocol governance. Through a series of strategic moves and alliances, Humpy has navigated and, at times, disrupted the governance landscapes, leaving a lasting impact on the DeFi mechanisms. This article chronicles his journey.
Historical attempts
1.1 balancer
Shortly after the release of Balancer new veBAL tokenomics, back in 2021-22, the yet unknown from the public whale “Humpy” progressively acquired a large share of the veBAL supply, enabling him to direct most emissions of the protocol towards pools he was a prominent LP (starting with CREAM and BADGER pools).
A few months later, despite the various upgrades of the veBAL design notably the establishment of weight caps for pools based on the fees they generate, the creation of the core pools in BIP-19, and the killing of various gauges, the situation was still largely in favor of humpy who then shifted his dominance to a new veBAL liquid wrapper token pool Tetu.
At this point, the control of BAL emissions was mainly disputed between 3 shareholders, Balancer contributors, Aura Finance liquid wrapper, and Humpy through Tetu and his various wallets.The resolution of this situation would finally come with the agreement of the Peace treaty which stipulated, among other things, that Humpy would start voting for pools beneficial to the protocol and both parties would unwind a large amount of veBAL, to prevent from 51% attack.
The peace treaty episode is probably the first time Humpy became more generally known from the wider DeFi public.
More coverage of this episode in Weekly Gauge #23: https://weeklygauge.substack.com/p/weekly-gauge-23-burying-the-hatchet
1.2 Sushi
Contrary to what the sequence of events might suggest, Sushi was probably Humpy's first target in 2020. However, the governance battle we will discuss here takes place in early 2024.
This attempt from Humpy to influence the distribution of a protocol’s incentives in favor of pools where he controls major shares is the first to introduce his -at this time recently launched- project Golden Boys and token $GOLD.
The plan was to inflate $SUSHI token supply to 750M and direct part of the new emissions toward the $GOLD pools in the same fashion as Balancer vetokenomic. However, because Sushi governance is only partially on-chain and gated by the team, the proposal could not go through and resulted in a much more hostile relationship than the Balancer episode.
Indeed, while the Sushi team could prevent Humpy from passing his proposal, he was also able to counter those of the Sushi team, since in addition Humpy, as a true war strategist, had allied a number of delegators to his cause which we can refer to as SushiCitizens.
Jared Grey (Sushi Head chef) POV: https://x.com/jaredgrey/status/1767605925773250965
As a good foreshadowing, Blockworks noted in december 2022 when Balancer released their vetokenomics, that the exchange “stole significant market share from Sushi” and already mentioned the ongoing situation between Humpy and Balancer.
Finally, the Sushi team used tokens from the protocol treasury to counter Humpy’s dominance and created a new entity called Sushi Labs that is now holding the DAO assets.
Three shots at compound
2.1 Situation summary
Since the attempt with Sushi didn’t meet a successful ending, Humpy’s project Golden Boys interest has now shifted to Compound, indicating his preference for the last DeFi Summer blue chips projects presenting deep liquidity for their native token.
The Golden Boys started by asking for 92,000 COMP on May 10th, to bootstrap a new liquid wrapper vault -once again demonstrating its solid mastery of governance systems- , but got rejected 2 times with arguments referring to counterparty risk introduced by the Golden Boys multi-sig setup.
The third proposal ended up passing for 499,000 COMP after introduction of the trustsetup contract that would define a constrained set of actions that can only be executed with prior approval from Compound Governance.
The passing of the last proposal, while getting a lot of media coverage since Humpy is now notorious in the DeFi space for his ability to take advantage of his large capital to influence big protocols, mobilized researchers and risk managers internally and on socials. The resolution came under the form of a mitigation proposal internalizing the COMP staking module and offering sufficient rewards to satisfy Humpy’s yield expectations.
Initially, the goldCOMP design offered “to earn yields averaging 10% annually” from a “99/1 goldCOMP/wETH Balancer Pool” assuming that “the Golden Boys multi-sig converts the yields generated by goldCOMP from Balancer Pool into COMP”
2.2 Flaw of the governance model
Spot COMP tokens carries voting power, as a result stakes engaged to influence the protocol operations are not proof of a long term commitment and provide a convenient set up to facilitate governance attacks.
Compound Governance Module Docs
2.3 Yield projections
Based on proposal amendment figures,
Considering the revenue figure as market reserves for the protocol, averaging $7.8M YTD, 30% of it would be to be shared by sCOMP holders, amounting to $2.35M yearly. To match the 10% APR announced in the first goldCOMP vault proposal, this assumes that total market cap of sCOMP would reach up to $23.5M, effectively less than the 499k COMP asked in the last version of the golden boys proposal.
links:
Compound proposal 247: https://compound.finance/governance/proposals/247 (Failed 10/05/24)
Compound proposal 279: https://compound.finance/governance/proposals/279 (failed 20/07/24)
Compound proposal 289: https://compound.finance/governance/proposals/289 (Passed 28/07/24 ; Canceled 30/07/24)
Conflict resolution proposal: https://www.comp.xyz/t/alphagrowth-stake-compound-product/5478 (Passed 30/07/24)
In conclusion, Humpy's journey through the governance realms underscores the intricate balance between influence and community consensus in DeFi protocols. His strategic engagements highlight the vulnerabilities and strengths within these systems, prompting necessary reforms and discussions around governance models. While Humpy's tactics have often been contentious, they have undeniably driven critical evolutions in protocol governance, emphasizing the need for robust and resilient systems.