Justin Sun of Tron is accused of launching a ‘Governance Attack’ on the DeFi Lender Compound

An influential major investor may be trying to manipulate on-chain governance for a decentralised finance (DeFi) protocol with substantial sums of capital, according to members of GFX Labs’ governance division.

Billionaire Justin Sun borrowed a significant sum of Compound’s governance token, COMP, according to GFX’s Twitter account, which made the announcement on Friday.

GFX labelled the borrowing as a “governance attack,” although there is nothing explicitly banning users from taking out loans to vote on projects they like.

Sun, the founder of the Tron platform and Grenada’s ambassador to the World Trade Organization, is an active DeFi user, and his primary address worth over $1 billion is extensively watched by on-chain sleuths on the DeFi platform. A request for comment from Sun was not returned by press time.

What went wrong?

Over $13 million in COMP tokens were borrowed from Sun’s wallet on Thursday before 102,000 tokens were transmitted to the world’s largest crypto market Binance.

Compound users might borrow against their TUSD holdings if an address that got $9 million in COMP tokens from Binance suggested adding TUSD as a collateral asset on Friday.

Proposal address cannot be verified to be Sun’s but GFX Labs contributor PaperImperium claims that a similar vote took taken in the governance of stablecoin issuer MakerDAO earlier this year.

PaperImperium revealed that Justin had borrowed a significant sum of MKR from Aave. TUSD-DAI Peg Stability Module, I assume, was up for grabs for a vote here. Before he cast his vote, he returned the MKR.

Creating a stability module would allow users to exchange TUSD for MakerDAO’s DAI stablecoin at a predetermined rate. The plan was rejected by the community in a poll before it could proceed to a formal vote.

An official from TUSD posted in Maker’s governance forums following the poll conclusion that they were ignorant of Sun’s actions, but “we wouldn’t risk collaborating with Justin Sun (or other whales) to manipulate votes.”

“Ownership of TUSD will be moving over to an Asia-based consortium that will collaborate with TRON to develop TUSD on Ethereum, Ethereum, TRON, and other blockchain networks,” wrote Sun in a 2020 blog post.

It’s all about utility. Many other stablecoins have recently experimented with “bribe” methods in an effort to increase their utility.

Numerous decentralised stablecoins have recently entered the market to compete with centralised ones like Tether and USDC. Furthermore, if lending protocols and other DeFi platforms do not take deposits, it will be difficult to generate interest and usage.

Services like Bribe, which lets protocols pay Aave token holders to vote a specific way when voting on proposals, respond to the growing demand for user assistance in integrations.

Following a dispute with an allied project, protocols like Abracadabra, the issuers of stablecoin MIM, have contemplated employing Bribe in an effort to get listed on Aave.


Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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