Compensate users affected by UST-USDC vault issue

Governance post

Disclaimer

I am describing the issue as correctly as I can, to the best of my ability. I welcome any comments/corrections that can help illuminate the issue.

Background

Some users (wallets) were not able to withdraw any UST-USDC LP tokens from the UST-USDC vault in the “Finished” section despite having deposited UST-USDC LP tokens earlier, due to the vault no longer having any UST-USDC LP tokens for withdrawal. This issue was reported as early as March 2022 (e.g. https://t.me/planet_finance/282183) and probably there were reports even earlier than that. The web UI shows that there is still some TVL in the vault, but this web UI is incorrect. You can see on BSC that the vault contract holds zero UST-USDC LP tokens and the total value of all the tokens in the vault are almost zero https://bscscan.com/tokenholdings?a=0x0ac58fd25f334975b1b61732cf79564b6200a933 .

This problem was caused by the following: about 30% of those wallets withdrew more LP tokens than they deposited (maybe this was due to a math bug in the smart contract, not sure). For example, you can see how this wallet deposited 200,203 LP tokens but withdrew 200,822 LP tokens shortly thereafter https://bscscan.com/token/0x74d51fc48013546d716a7884cc69d0bb75807f8a?a=0x2d86c5c13d1db6ab40f7b824f5ef966ac6987aa7 (There was a claim that “this is the way it’s supposed to work, the number of LP tokens owed to a depositor are supposed to increase over time” but this claim was refuted: https://t.me/planet_finance/301015 ).

So, due to the above problem of over-withdrawing, there were not enough LP tokens left for the people withdrawing trying to withdraw later. As mentioned, currently there are 0 tokens left in the vault contract. There were 48 wallets that "lost" MORE than 50 LP tokens (worth about $100) each. Here "lost" is defined based on how much less they withdrew compared to how much they deposited. In total about 33K LP tokens (worth about $66K before the Terra collapse) was "lost" according to this definition (not counting people who unfairly gained by over-withdrawing).

The complete analysis is available at https://github.com/peacej/random/blob/master/onchain_tx/20220427%20-%20planet%20finance%20investigate%20bscscan.ipynb and is reproducible if you want to verify yourself. This code can also be used to provide the full list of affected wallets.

Proposal for compensation

OPTION 1. Compensate the affected users (i.e. users that deposited in the “Finished” USDC-UST pool and didn’t fully withdraw) at a rate of $2 per LP token. This could be implemented by using 2 BUSD, 2 USDC, or AQUA tokens of an equivalent value. To prevent sending tokens to wallets that have been lost/abandoned, the compensation could be limited to only affected users who sign up (via a Google form or something) during a set period (e.g. 2 weeks). This compensation plan could be announced via Twitter/Medium etc.

• If we hypothetically assume that wallets accounting for half of the “lost” value sign up, then OPTION 1 would imply paying compensation of about $33K.
• I personally believe OPTION 1 is the fairest, most ethical option and would strengthen the reputation of Planet Finance as a protocol on which users can safely deposit their assets without fear of technical issues causing losses.

OPTION 2. Do nothing. Before you vote for this option, please first kindly consider posting a comment about how this would be morally justified, and we could have some discussion first. Also, please consider the question: would it be worth sacrificing the reputation of Planet Finance for such a small amount of money?

Additional info

Below are examples of other users complaining about the UST-USDC vault issue. My telegram ID is @peacej42 ; below messages are from other users.

https://t.me/planet_finance/269271 https://t.me/planet_finance/264362 https://t.me/planet_finance/226307 https://t.me/planet_finance/204336 https://t.me/planet_finance/204339