This is a counter proposal to the initial draft of the compensation plan proposed by the core team and the snapshot vote DIP-18. We think our following proposal will best compensate all the affected LPs and making the protocol more transparent with brighter future.
Issues with the initial draft
- The examples of Corn and Grain cited in the initial draft should not be considered successful recovery attempts. Their respective value is trading far below 1$, and the burning progress in the first year for Corn happened in the broader context of an unprecedented bull market. Burning progress over the past 6 months is far less impressive, that’s the picture we would most likely be looking at in the case of DFX.
- It doesn’t seem fair that the DFX project team is not pitching in from their corporate funds to help with the recovery. They are asking LPs to bear the entire risk and burden of their coding mistake. DFX project team needs to help in more material ways for DFX to regain trust and have a chance at a future.
- It would seem fair that the DFX team offers transparency over the status and amount of their corporate treasury.
Issues with snapshot vote
- With only 4 days after the initial draft being published, the core team quickly moved the proposal to snapshot vote without enough discussion with the community and allowing alternate proposal.
- The snapshot only allows for veDFX to vote which only comes out together with v2. A decent number of LPs have not yet got ve token since it is quite new.
- ve token holder may not act the best interest of the community and the victims of the hack. One of the big voters voting “yes” for DIP-18 looks very suspicious, looks like VC or core team member who just lock in the ve token for the voting.
Return all the recovered funds to all the affected LPs based on the snap pre-hack. This shouldn’t be contingent to a vote by the community.
In addition to the emission of the debtDFX token described in the initial draft, the DFX team will disclose publicly the state of their corporate treasury. A quick calculation based on the DFX emission plan, founders and the treasury hold 35% of the circulation which is roughly 2.8 mil USD, this is in addition to a 5 mil USD raised from private investors in 2021. For the sake of the demonstration, let’s assume that DFX currently holds $2m liquid asset.
After emission and distribution of the debtDFX token to all the impacted LPs, the DFX team will buyback debtDFX tokens from LPs that are willing to sell using their entire corporate treasury at a value of 1$ per debtDFX token, the DFX team will now be holding $2m in debtDFX token to continue operating.
Total missing funds from the exploit are approx. $5m, in this scenario assuming $2m distributed from the DFX team to LPs, these end up holding 40 cents on the dollar in cash, and 60 cents on the dollar in debtDFX tokens.
All the affected LPs are eligible to vote for the proposal. For this major incident of the protocol, the decision shall be made among all the LPs instead of ve token holder.
Benefit of the new proposal
- Stakeholder (Team + LPs) end up having a vested interest in the future success of DFX and can keep the LPs for the protocol for longer time.
- Minimize the present value of the losses for all the LPs.