Decentralized finance (DeFi) platform Curve DAO has found itself in another controversy, as a recent ownership hijack is putting its decentralization in question. Michael Egorov, the company’s founder, announced on Telegram that he had taken 71 percent ownership of the DAO as a precaution against a possible attack.
Curve’s Controversial Launch
Curve functions as an Ethereum-based lending platform and liquidity pool. The platform operates two tokens — CRV, a governance token that holders purchase, and veCRV, a voting token created for voting on network proposals. Members can also use the veCRV to make proposals of their own.
Curve DAO has had some challenges thus far. Since the launch date on August 14, only a handful of CRV holders have managed to vote-lock their tokens. With so few people having voting power, the network’s decentralization is now threatened.
Curve itself was forced to launch its DAO on the August 14 date after an anonymous developer built contracts on the network without notifying the team. The developer tweeted that he believed the DAO was online, and he apologized for jumping the gun.
Responding, the Curve team assured the developer that his contract was correctly built. After verifying and deploying his smart contract, Curve launched their DAO.
“The Curve DAO was deployed by a community member. The contracts have been thoroughly verified by the team to ensure they follow the correct deployment process,” the team asserted once more.
They also confirmed that the user had relinquished all admin powers. The CRV tokens were subsequently listed on Poloniex and Binance.
— Poloniex Exchange (@Poloniex) August 14, 2020
It appears that the sketchy launch has spooked investors, as Curve has dealt with an ownership vacuum since. Speaking with industry news source Decrypt, Egorov explained that only about 7 percent of almost 10 million CRV tokens were vote-locked at that point. This fact indicated that not many people were participating in the DAO.
Hoping to maintain the network’s integrity, Egorov extended a vote lock for 621,860 CRV tokens under a single address. The move netted him up to 618,568 veCRV — about 71 percent of the entire CRV voting power. Thus, he now controls the fate of any proposal submitted on the platform.
Explaining himself, Egorov said in the Telegram post that he had taken action to stop a similar play from Yearn.finance, a company that runs a Curve liquidity pool. The company had purchased about 58 percent of all voting power, and Egorov took action to restrict them from exerting that power.
The CEO apologized for “overreacting” and said his voting power would decrease as decentralization improved on the network. However, the move also puts the Curve community in a bit of a bind.
For now, if Egorov chooses not to vote on a proposal, no one can vote to take action. The platform requires at least a 33 percent quorum to propose a change, and a 50 percent vote for an update to pass.