Overview

For every 1 USD value lost during the hack (Approximately 5M), DFX will airdrop 1 debtDFX (name TBD) token to the LP’s address. In other words, if a liquidity provider lost 10,000 USD in value due to the V2 exploit, they will be airdropped 10,000 debtDFX tokens.

Note: The recovered funds will also be sent with the airdrop of the debtDFX tokens.

The debtDFX token contract will have a burn function that allows users to redeem for USDC (on a 1-to-1 basis) sometime in the future. However this can only happen relatively far in the future when the protocol has sufficient revenue (and the DAO votes for it to happen).

---

In the meantime and pending this proposal, a Balancer debtDFX/USDC liquidity pool will be created. DFX is committed to using protocol revenue to buyback and burn debtDFX tokens using the Balancer pool on a regular basis (likely monthly). Core contributors have suggested starting with 100% for the first year, and 50% afterwards.

Another benefit of the Balancer pool is that it allows the public to buy and sell debtDFX tokens, thereby providing price discovery for debtDFX as well as an exit for those who do not want to wait.

Moreover, 1M DFX tokens will be provided from the founders’ allocation to help LPs in the recovery efforts over 2 years. Approximately 41,666 DFX per month.

The main idea is to use the tokens to incentivize the pool with DFX yield, but other ideas can be entertained.

Folks who no longer believe in the project can sell their debtDFX tokens at a discount, while others who do believe in the protocol can LP their tokens and earn additional DFX yield. This rewards committed LPs while also allowing other LPs a way to recuperate some of their funds (at a discount priced by the market).

---

Summary

• Create debtDFX tokens (Approximately 5 Million)
• Airdrop recovered funds and debtDFX tokens to those effected by V2 Exploit.
• Create Balancer LP for debtDFX/USDC and incentivize it with 1M DFX tokens from the founders allocation over the course of 24 months (2 years).
• Guarded launch will follow with a successful passing of this proposal.

---

Reference Links

Forum Post: https://forum.dfx.finance/t/debt-token-for-hack-victims/426/11 Pool Loss Calculation: https://docs.google.com/spreadsheets/d/1KTsi5TBScpR9oPxNIJyeh9vxnJ7n7MlXnQkj-Wonwbc/edit?usp=sharing LP Wallet Recovery & Debt Token Calculations: https://docs.google.com/spreadsheets/d/1MTaFBpNZe_YeRLhh2NGTLPy-lswcSTJ3aIvM-vFc4Ew/edit?usp=sharing