Over the last week, we’ve been discussing a few options internally relating to ways in which a compensation plan can be put in place. In this post, I will detail those that have been suggested to us, for the consideration of the wider DAO.
It is worth saying at this stage that should it be feasible for us to do so, I believe it would make things ‘simpler’ for us to cleave the chosen mechanism in two: one variant for the affected token holders themselves, and one for the LP holders (i.e. WETH/CC10, WBTC/WETH/DEFI5). This is a statement made in a personal capacity, and holds no weight from the core team.
My reasoning for this is that in the event that a court determines that the drained funds do in fact need to be returned (and compel the attacker to do so), if the DAO is the mechanism through which that return should be effected, it may complicate matters if there is a single mechanism that muddies the water across both affected token holders and LPs (a court may not take the view that LP holders are directly affected here due to the nature of liquidity).
Note that Snapshots have not yet been taken to fully assess the damage inflicted across all affected pools (either native index or LPs), but this data is all onchain and can be aggregated at any time, modulo a little bit of complexity due to cross-chain presences on Polygon and Arbitrum.
The two options I present below are both currently live in production.
This boils down to a zero-coupon bond token being issued against the value of funds lost (either in ETH or, e.g. a stablecoin such as DAI), which will either be paid off and fully redeemable at some future date (e.g. 4 years from now), or will default in the event that sufficient collateral cannot be raised against them in this time.
Such bond tokens would be readily tradeable on AMMs in the event that the affected wish to redeem them for whatever their market price currently is: turning them, effectively, into a speculation bet on the probability of payoff. The source of assets backing this bond (be they from protocol revenue, donations, or the return of funds via the legal system) does not have to be determined at this stage.
The CORN token is a token that can be burned for an underlying repayment token XYZ - again, such as DAI - at a rate of
XYZ in underlying contract / CORN supply. As with the bond mechanism above, it is up to the community to determine how the repayment token XYZ is ‘fed’ into the contract in order to be redeemed, and the method for doing so can vary over time.
A user can, at any time, choose to burn their CORN token, but by doing so, forego any future claim (as the token is burned): they can choose the ratio at which they are comfortable with claiming repayment.
Auxiliary: NDX Backstop
It has been suggested that the Indexed DAO set aside (either formally through Governor Alpha or through a gentleman’s agreement) roughly 500,000 NDX from the Treasury, with the intent that if NDX is to ever reach a price that would cover the impact of the index token assault (LP damage notwithstanding), these tokens would be auctioned off - perhaps at a fixed price - and the proceeds used to fund recovery through either of the above mechanisms. This is not a decision that needs to be made right now, as both cases above leave the ‘where the assets backing the claim’ question open for the DAO to determine.
Again, the DAO welcomes all feedback on this matter - if there’s something I can do to explain these two options a bit further, please ask, and I’ll attempt to do so.
I’d like to thank everyone again for the support they have given to the DAO during an absolutely torrid time. We’ll recover from this, and we’ll build back stronger than before.