0x052c…1958

PIP-74 Choose disbursement of the addresses impacted by the Curve hack

Voting ended about 2 years agoSucceeded

Abstract

There was an exploit of the Curve Finance pETH/ETH pool related to a bug in the Vyper Compiler. This resulted in a loss of 6,106 WETH to liquidity providers of this pool. After the pool was drained a material amount of trading activity was made on the pool buying discounted pETH with ETH. This activity contributed to losses to liquidity providers.

JPEG'd DAO recovered 5,495.4 WETH related to the exploit. This post proposes a range of options for the disbursement of the recovered WETH to all addresses that incurred losses due to the Curve exploit.

The resolution of this situation requires issuing a new pETH token, which will be airdropped to wallets holding pETH before the exploit at 1 pETH : 1 ETH.

The vote is to choose one of the reimbursement distribution options below.

Background

The Curve exploit impacted the pETH-ETH pool by minting too many pETH-ETH LP tokens, effectively corrupting the pool and rendering the LP tokens and pETH valueless. Shortly thereafter, several users withdrew underlying tokens, often drastically more pETH than they deposited, repaid loans cheaply, or acquired heavily discounted pETH. Both actions contributed to damages to liquidity providers and the DAO from the exploit.

A snapshot was taken of the state of pETH and pETH LPs before the exploit to quantify exposure per address. A new version of pETH will be created and airdropped to affected addresses in accordance with the option below approved. NFT vaults will be updated to work with the new pETH token. Addresses that profited from the exploit, and thus did not suffer damages are excluded from the options.

The options range from making every impacted address whole (option A), to sharing the costs across all the impacted users at a loss of the Curve exploit (option F).

Affected addresses will receive pETH, pETH/WETH liquidity pool tokens, JPEG/pETH LP tokens, ETH, and/or JPEG tokens.

Specifications

The DAO will vote on one of the 6 disbursement options. Costs to the JPEG’d DAO are presented at the bottom of each option. Sub-item costs are also listed. There are global costs that need to be accounted for in all options in order to arrive at the final cost figures for the JPEG’d DAO in each option. The pETH-JPEG LP reimbursement is dependent on the price of JPEG at the time of the airdrop and is estimated.

There will be 800 pETH added to the new JPEG/pETH liquidity pool at the time the new pool is deployed, less 3,948 pETH minted from NFTs in vaults, less 2,001.89 pETH minted from the DAO and auto-compounder vault, 465 pETH minted by the JPEG’d DAO liquidator. Please note the pETH cost related to redeploying the JPEG/pETH can fluctuate and will depend on the market price of JPEG at the time the pool is deployed. It may cost the DAO more JPEG and less pETH, or vice versa.

For example in option A:

+7,100.93 ETH (pETH/WETH lp tokens for Citadel users) +734.16 ETH, 215.6m (pETH speculators cost)

+84.81 pETH (pETH Holders)

+3,218.3 ETH (pETH/ETH lp tokens for non-Citadel users)

+137.77 pETH, 228.3m (realized losses to JPEG/pETH liquidity providers)

= 11,191.16 gross ETH exposure

-3,948 (pETH minted by NFT vaults) -5,495.40 (ETH recovered)

-2,001.89 (pETH minted by auto-compounder and DAO) +465 (pETH minted by JPEG’d liquidator) +800 pETH and 450m JPEG (added to new JPEG/pETH pool)

= 1095.68 ETH and 893,9m JPEG