Vote 6: CREAM exploit compensation for early Vault exits

PROPOSAL SUMMARY

If executed, this proposal will allocate either $919.9k (112k GRO) or $1.38m (168k GRO) worth of Vesting Gro DAO Tokens ($GRO) as partial compensation for Vault holders following the CREAM exploit.

This will allow users who commit to the protocol to recoup much more than they lost from front-running exits.

BACKGROUND

This is a short summary of the CREAM hack. You can read more about it on twitter (see reference below).

• On Wednesday 27th October, CREAM finance was hacked and lost ~$130m. Unfortunately, Gro protocol had 2 of its 7 strategies allocated into CREAM at the time of attack, totalling $9.24m (15% of protocol TVL).
• Because the CREAM losses were not realised on CREAM’s side, Gro protocol could not automatically account for the loss, and required manual intervention to assess and realise it.
• Before the loss was realised, some Vault users withdrew their funds quickly, to avoid sharing the Vault downside.
• The core team took action to prevent further front-running as described in the post-mortem (see reference below)
• Since the exploit, $782k plus $2.14m of $CREAM has been recovered by the Gro team and redistributed to Vault holders, resulting in a net loss of $6.31m (15.0% of Vault TVL)
• The value of the funds withdrawn from the protocol in this time period was $2.95m, resulting in an additional $413k lost between the remaining Vault users (1.0% of Vault TVL)
• There is also $46.6k of $CREAM due to Vault holders in a Uniswap v3 pool (which uses different data structures) that the Gro team had not included previously.

PROPOSAL TO USE $GRO TO COMPENSATE VAULT HOLDERS FOR EXTRA LOSSES SUFFERED BY OTHER VAULT HOLDERS LEAVING

Gro proposes that the DAO allocates either $919.9k (112k GRO) or $1.38m (168k GRO) worth of Vesting Gro DAO Tokens (GRO), which is worth either 2x or 3x the value of front-running losses to affected users plus the outstanding CREAM recovery. This allows users who commit to the protocol to recoup much more than they lost from front-running exits!

• Vesting $GRO can be claimed immediately at 30% value (with the remainder going into the vesting bonus)
• Alternatively users can vest it over 12 months (and claim from the vesting bonus during that time).
• The amount is 2x or 3x the sum of: (1) $413.3k of front-running losses + (2) $46.6k outstanding CREAM recovery, which the core team proposes to include in this proposal to ensure fair distribution of recoveries to all Vault holders.
• This proposal balances the interests of Vault holders by giving them flexibility, with the interests of GRO holders, by reducing the immediate supply of GRO into the market
• It increases the vesting bonus, which makes vested GRO more attractive, and therefore enhances the overall utility of Gro protocol.
• The price used for GRO is $8.20, which is the market price according to CoinGecko as at the time of the Snapshot vote.
• The proposal will be implemented following the updates to the rewards centre which allow immediate 30% claim (see reference below), and is conditional on that vote passing.

HOW WAS THIS PROPOSAL DISCUSSED?

This proposal was put together by early contributors behind the Gro protocol. It has been shared in the Gro governance forum: https://community.gro.xyz/t/cream-exploit-compensation-for-losses-caused-by-early-vault-exits/176/7

REFERENCES

CREAM exploit post-mortem https://twitter.com/groprotocol/status/1454049695332962306?s=20

Rewards centre update vote https://vote.gro.xyz/#/proposal/0x8e0fb22cc79de63ee7f63b90f2625de20fa26b5db0414df1eefe2ba925c9b155