SIP-21: LP Remuneration Plan

Summary

Distribute 37,465,830.6 SDL and $3M FRAX from the protocol treasury to pro-rata to affected LP’s, establish a security fund, and make a bounty offer to the exploiter to return funds.

Abstract

This SIP seeks to:

• Establish a remuneration plan for LP’s afflicted by the metapool exploit on Apr-30th, 2022.
• Offer the exploiter a bounty for returning the stolen funds.
• Expand Saddle’s security infrastructure through means of a dedicated fund.
• Distribute $3M FRAX pro-rata to all affected LP’s.

Motivation

As a result of the exploit on Apr-30th, 2022, ~$11.9M was lost (see an additional transaction here) from Saddle’s sUSD metapool.

Fast and effective remuneration has proven to bolster the morale of communities impacted by exploits in the past. A common response to an attack by afflicted protocols, in addition to remuneration, has been to “bribe” the attacker– that is to say; offer them some amount in return for their cooperation and compassion. While this has not always been successful, no solution should be ignored. The proposed security fund (to be managed by the Delos HQ multisig) would be used to finance future audits, increase the Immunefi bug bounty awards, bring auditing firms on retainer, run Code4rena contests, and other security initiatives.

Specification

In order to secure the 3M FRAX for distribution to affected users, Saddle will enter a deal with Frax, the terms of which are as follows:

• Frax will use 3M FRAX to purchase SDL from the Saddle treasury
• The SDL will be purchased at an FDV of $150M [a 50% discount to SIP-13]
• Frax will permanently lock their SDL as $veSDL
• Saddle will distribute the 3M FRAX to affect LP’s pro-rata

In addition to the FRAX– 37,465,830.6 SDL will be set aside for affected LP’s, division of said SDL is proposed as follows:

• 10% set aside for a protocol security fund

  • 50% of this to be offered as a bribe to the exploiter for returning the funds [SDL will be returned to the security fund if no agreement can be established with the exploiter]

• 90% to be distributed to affected LP’s pro-rata

  • 20% of which would be claimable immediately
  • The remaining 80% vesting linearly over 12 months

For: Distribute the 3M FRAX to affected LP’s pro-rata. Also set aside 37,465,830.6 SDL for distribution, of which 90% is for affected LP’s pro-rata and 10% for establishing a security fund.

Against: No change.