Compound ($COMP) Bug Results to $90M Unintentional Payout

Briefly –

  • A DeFi protocol Compound lost tokens worth $90 million after a software bug.
  • The founder urged money return via a tweet. However, he retracted the tweet later.
  • No borrowed or supplied funds faced the risk.

COMP holders unexpectedly received tokens worth $90 million following a buggy software update. Compound (COMP) is a DeFi autonomous protocol that uses blockchain technology for its self-executing ‘smart’ contracts capabilities. Generally, users provide their coins to borrowers at specific interest rates, quantified as APY (Annual Percentage Yield). Thus, the $29 million worth of tokens payout to a single user and 70 million to a different one was beyond what holders expect.

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That had Compound founder Robert Leshner pleading the asset’s return. He also included threats in his tweet, stating that the firm might publicize its users’ private data and reporting receivers to the IRS (Internal Revenue Service). However, Leshner retracted the tweet later.

Paying Compound vs. Paying IRS

Ben Carman, a BTC developer, stated that the crypto company couldn’t reclaim the funds without blockchain rolling back. Moreover, the law does not force anyone to pay the money back. If holders decide to hold 10% and send the rest tokens, they will not count the returned assets as income to the Internal Revenue Service. However, if they retain all the assets, users will incur income tax according to the token’s value on the receipt. That is if Compound reports them to IRS. A decentralized finance protocol Alchemix recently suffered a similar loss. However, most of its users returned the erroneous rewards.

Nevertheless, Alchemix lost $4.8 million, a small amount compared to the $90 million loss in Compound. However, Compound can receive credits since the error did not affect borrowed or supplied funds. However, market players remain warry on the event happening again.

DeFi Sees Growing Investor Interest

San Francisco-located Compound is among the many DeFi protocols, and it utilizes smart contracts on blockchain to reform traditional financial institutions. Robert Leshner, its founder, is a former economist that aims to boost interest in cryptocurrency, thus his move to launch Compound. Meanwhile, the DeFi sector has witnessed considerable expansion since the start of this year.

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