Recapitalize SharkSwap in return for 15m SHARK

SharkSwap was exploited by a sophisticated attacker (or group of attackers), leading to roughly a $1.80m loss for liquidity providers (LPs). A full post-mortem on the attack will be published in the coming days. SharkSwap will undergo multiple audits and multiple rounds of further stress tests in the meantime before relaunching.

However, given the strategic importance of SharkSwap to SX Network and the close alignment between the two communities, it is highly important that confidence is restored on SharkSwap. The following proposal makes LPs whole on SharkSwap and should prove to be highly value accretive for SX Community Fund:

• SX Community Fund invest $1.80m of its liquid assets for 15m SHARK. This reflects an implied price of $0.12 per SHARK token, which is roughly a 20% discount to the market price of SHARK prior to the exploit. Based on exploited LP balances, this will be a combo of ETH, USDC, and SX. • Post-transaction, the SX Community Fund will retain 20m SHARK (5m from initial airdrop), which it can use to airdrop to SX stakers and/or sell on the open market. With roughly 60m SX currently staked, the SX Community Fund could airdrop roughly 0.33 SHARK per SX staked (representing a staked SX token distribution of ~$0.05).

With a total possible supply of 100m tokens, a $0.12 price represents an implied fully-diluted market cap of $12m for SharkSwap. SharkSwap currently charges a 0.4% fee on all trading volume, with 50% of the fee (i.e. 0.2%) being used to buyback and burn SHARK. SharkSwap has averaged approximately $300,000 of trading volume per day since its launch, with average daily protocol revenue of $600. Assuming no growth at all in the DEX, at the current price, SharkSwap will be burning 5,000 SHARK per day. This would be 1.32m SHARK per year, which is roughly a 1.32% buyback yield on fully diluted supply. However, with the upcoming migration of SX.Bet, the launch of multiple other apps on SX Network, and the full launch of liquidity mining, it’s not hard to envision trading volume increasing substantially.

Post-exploit, SharkSwap will also retain roughly $5m in protocol owned value (roughly $0.05 of PoL). In short, a price of $0.12 per SHARK, even in the current market environment, is highly likely to be accretive for the SX Community Fund in the medium to long-term.

SX Network continues to generate substantial protocol revenue and should be able to refill its liquid balance sheet relatively shortly given the continued rapid growth in the SX.Bet platform. The SX core team has multiple years of runway, with no need to tap into the SX Community Fund for years.

The proposal is for:

1,050,000 USDC 381,532 DAI 261 ETH 500,000 SX

In return, the SX Community Fund will receive:

15,000,000 SHARK