Proposal: $EXA Bad Debt Liquidation Plan

Background

• Due to significant price volatility, the EXA Lending Pool has accumulated approximately $140K in bad debt (Based on prices as of February 24).

• Currently, the Extrafi Rainy Day Fund holds $950K (https://debank.com/profile/0xC918a60e4D40d15959A85fa8b35f6dB96907BabF).

• While this bad debt is manageable and does not impact the protocol’s solvency, a structured resolution plan is needed to ensure efficient risk management and fund allocation.

Proposed Solution

To effectively address this bad debt, we propose a phased liquidation approach as follows:

Initial Coverage:

• Allocate $30K from the Rainy Day Fund as an initial coverage for the bad debt.

Gradual Proportional Liquidation:

• Each month, a portion of the newly accumulated fund in Rainy Day Fund will be used for gradual liquidation within next month, based on EXA’s proportion of the total Lending Pool size, until the full bad debt is covered.

Rationale

This approach considers the actual scale of the bad debt while ensuring that the liquidation process aligns with EXA’s weight within the total Lending Pool, maintaining a balanced and sustainable debt resolution. A gradual liquidation method prevents excessive one-time fund depletion, allowing for more efficient capital management while adapting to liquidity depth.