What if a flash loan seizes Compound governance and drains the treasury?
A flash-loan governance seizure — borrow the token, pass a malicious proposal, drain the treasury — is protocol-specific theft that bleeds into ETH (-4.9%) via DeFi-governance-trust contagion, not market direction. Rhymes with the 2020 flash-loan governance attacks (Beanstalk, $182m) that exploited instantaneous voting power. Mitigation is well-known now (timelocks, vote-locking), so a successful hit signals a laggard protocol; contagion is shallow and the broad-crypto spillover round-trips quickly.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a mixed shock. An attacker borrows governance tokens via flash loan, passes a malicious proposal, and drains the protocol treasury. The trigger decomposes into signed root‑shocks — Crypto confidence ▼ · Crypto liquidity ▼ — which propagate through our causal graph to the markets below.