The Use of 1.39M creamY Rescue Fund

Summary

Use the 1.39M creamY rescue funds in protocol development and improvements.

For: Use 1.39M funds in C.R.E.A.M. Finance protocol development and incentivize $CREAM / $USDC pool on SushiSwap

Against: Do nothing

Background

Two weeks back, we rescued $1.39 million liquidity locked in the creamY Swap pools. Of the $1.39 million, a significant portion was from fees generated by creamY Swap. However, as we began to unwind the funds we realized some portion was the result of an issue with the creamY oracle that returned the wrong price of cyUSD. Specifically, the oracle should have returned the actual price of cyUSD (total value / total supply), but instead returned a constant value of 1e18.

As a result, every user who previously provided liquidity to creamY Swap withdrew less than would have been returned were the oracle functioning properly. The good news is that these losses were slightly offset by the $CREAM rewards distributed to creamY Swap LPs.

We have rescued these funds (here is the transaction on Etherscan) and redistributed them to CREAM’s multisig contract. We are submitting a proposal to C.R.E.A.M. DAO that recommends we utilize these funds for the following:

1. $1 million treasury assets will be utilized for ongoing protocol development. The CREAM team will submit an annual budget to our governance platform for the approval of the CREAM community.
2. $390,000 will be allocated to an incentivized $CREAM / $USDC pool on SushiSwap. This pool will serve to “buy and make” $CREAM tokens. This will make CREAM the first protocol to execute on Joel Monegro’s vision to utilize buybacks for market-making rather than burning tokens.

The “buyback and burn” model is well known in crypto. However, once tokens are burned, they essentially destroy value for existing token-holders since these tokens could otherwise have been used to finance future development and growth. Tokens are capital assets that can be reused after they are bought back. One potential use case is to issue $CREAM from the treasury to incentivize future partnerships and other important community activity.

While we believe this is the best path forward for the rescued funds, we understand the importance of community governance and will submit a proposal along with this post to be voted on in the coming week.

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Discussion link: https://forum.cream.finance/t/the-use-of-1-39m-creamy-rescue-funds/380