UPDATED PROPOSAL FOR VOTING - DEBT TOKEN FEE SHARE INCREASED TO 30%
Since we have now had 3 days of discussion, can the team please put the proposal below up for a Snapshot vote today? I have updated it to say that 30% of protocol fees will now be allotted to the debt token (up from 20%) after the discussions here and in Telegram.
Proposal for Compensation
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All those who lost BZRX in the attack (except for the development team) be compensated in full directly from the bZx DAO with BZRX. This will involve a payment of about 20m BZRX, or less than half of the liquid BZRX in the treasury directly to victims (no selling of BZRX). To be clear, this will also include setting up a new swap contract on BSC/Polygon so that the people who did not swap their BGOV/PGOV for BZRX before the attack, are now able to do so, including those who are PGOV/BGOV LPs (since the BZRX bridged to BSC/Polygon for this purpose has now been stolen).
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The development team’s personal losses of BZRX will also be compensated in full, but they will be paid in vBZRX (not BZRX) which will vest slowly until July 2024. This is done partly to maintain liquid BZRX funds in the treasury for the operation of the protocol and not empty the treasury, and also as a gesture to the community and other victims of the attack who are having to accept a debt token and cannot be paid back immediately.
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All other losses resulting from the attack (in all other tokens) will be compensated by issuing a debt token at a 25% premium to be repaid over time by the protocol from 30% of protocol revenue and fees (so protocol revenue breakdown will be 50% to Ooki/BZRX holders, 30% to debt token and 20% to treasury). This approach has some similarities to what Pickle Finance and Indexed Finance did after their hacks, although there are differences.
In effect the bZx DAO is making a commitment to repay the remaining losses over time, similar to a loan with a 25% premium.
Specifically, a tradable debt token will be issued with an initial face value of $1, and it will be given to victims in a 1.25:1 ratio to their losses. So for example, someone who lost $10,000 in the attack will receive 12,500 debt tokens nominally worth $12,500 when fully repaid (although the actual market value will vary and initially be much lower than that).
The DAO commits to using 30% of protocol fees earned on all 3 current deployments (BSC, Polygon, Ethereum), as well as all future deployments (unknown at this stage, but possibly Optimism, Arbitrum, AVAX, etc) to market buy the debt tokens at least once every month (possibly more) up to a token price of $1 (the face value of the token) until all the tokens are purchased and the losses from the attack are repaid in full (with premium). The once a month and 30% figure is a minimum - the DAO may choose to buy back more of the debt token at its discretion.
All attack victims who hold the debt tokens till the buyback is completed will therefore receive 125% of their losses in compensation in return for waiting. Victims can of course choose to sell or trade their debt tokens at any time, but the initial liquidity pool will be seeded at a price far below $1 in order to discourage the first claimants of the debt token from dumping their tokens into the liquidity pool in the first minutes and hours and making a profit at the expense of those who are slower to claim their tokens. Instead, the market price of the token will rise naturally over time as the debt token is bought back by the DAO and reward long term holders.
- Any assets recovered from the attacker (unknown at this time, although there is speculation that some of the USDT may be recoverable) will be given directly back to the victims who lost that particular token. So for example if 50% of USDT is recovered, then it will be shared among all victims who lost USDT in proportion to their losses, and their allotment of the debt token accordingly reduced. However, this only applies until the debt token is issued and claimed. Once the debt token is issued, all recoveries will be used to market buy the debt token and benefit all victims equally. This is done to prevent double dipping by victims of the recovered currency - you cannot get debt tokens for all your losses AND get a share of the recovered assets.