The below response reflects the views of L2BEATâs governance team, composed of @kaereste and @Sinkas, and itâs based on the combined research, fact-checking and ideation of the two.
We are voting FOR this proposal, however, we have some concerns outlined below.
Weâre generally in favour of protocol owned liquidity and the concept of putting idle tokens to work by generating LP fees for the DAO while also increasing the liquidity of the HOP token.
The only thing that weâre trying to wrap our minds around is whether this additional liquidity opens up the DAO to a potential governance attack - or at least makes it a bit easier for a bad actor to carry it out.
Hereâs our understanding of the situation, and the thought process behind the idea of potential governance attack:
As it is, the HOP currently available in different liquidity pools is as follows:
Uniswapâs V3 WETH/HOP Pool on Mainnet: 889k
Velodrome 's V2 WETH/HOP Pool on Optimism: 1,3M
Camelotâs WETH/HOP Pool on Arbitrum: 442k
Uniswapâs V3 WETH/HOP Pool on Base: 301k
Quickswapâs V3 WETH/HOP Pool on Polygon: 209k
Total of ~ 3,14M
With the injection of an additional 1,5M HOP across the different liquidity pools through this proposal, the total amount of HOP in the market would be approximately 4,6M HOP. Even assuming that a bad entity starts at 0 HOP, then theyâd be able to accumulate just shy of 30% of the delegated supply by draining the pools of their HOP.
Seeing that the threshhold for submitting an on-chain proposal is set at 1M, quorum is set at 3M, delegated supply is ~15M and average participation over the last 10 votes has been approximately 8,36M votes, we can envision an entity spending a little less than 100 ETH (~$225,000 at current prices) to drain all the pools of their HOP, and use it to submit a proposal to drain the treasury.
The treasury having $1,85M in non-native assets makes it for an attractive target thatâs worth the cost to carry out the attack, should it be successful.
While the circulating HOP supply is at 72M -which is significant compared to the just 4,5M tokens an attacker could accrue through DEXes- we just want to point out that with the lack of participation in HOP governance, with the voting period being just 1 week long, and with the lack of a security council that could help revert a malicious vote, the risk of a governance attack is an important factor to consider.