Disbursement of the recovered WETH from the Curve finance exploit

Proposals
1

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 that may be voted on by JPEG’d token holders in the near future regarding the disbursement of 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 1:1.

Please note that these are preliminary numbers and are subject to change before formal voting commences.

Option A:

  1. JPEG’d DAO reimburses unrecovered funds (611.35 WETH) and losses to pETH/ETH liquidity providers hurt via arbitrageurs.
  2. JPEG’d Citadel liquidity providers are reimbursed 100%.
  3. pETH arbitrageurs receive their cost back in ETH or JPEG, depending on which asset they used to purchase discounted pETH.
  4. Non-Citadel liquidity providers are reimbursed 100%.
  5. JPEG/pETH liquidity providers are airdropped liquidity tokens at the time of Snapshot. Any single-sided JPEG added to this pool after the snapshot receives the JPEG back they added.
  6. Realised losses to liquidity providers of the JPEG/pETH pool are reimbursed.
    Net ETH cost to the DAO: 1,446.37 ETH

Option B:

  1. JPEG’d DAO reimburses unrecovered funds (611.35 WETH) and losses to pETH/ETH liquidity providers hurt via arbitrageurs.
  2. JPEG’d Citadel liquidity providers are reimbursed 100%.
  3. pETH arbitrageurs receive their cost back in ETH or JPEG, depending on which asset they used to purchase discounted pETH.
  4. Non-Citadel liquidity providers are reimbursed 90%.
  5. JPEG/pETH liquidity providers are airdropped liquidity tokens at the time of Snapshot. Any single-sided JPEG added to this pool after the snapshot receives the JPEG back they added.
  6. Realised losses to liquidity providers of the JPEG/pETH pool are reimbursed.
    Net ETH cost to the DAO: 1,124.54 ETH

Option C:

  1. JPEG’d DAO reimburses unrecovered funds (611.35 WETH) and losses to pETH/ETH liquidity providers hurt via arbitrageurs.
  2. JPEG’d Citadel liquidity providers are reimbursed 100%.
  3. pETH arbitrageurs receive 90% of their cost back in ETH or JPEG, depending on which asset they used to purchase discounted pETH.
  4. Non-Citadel liquidity providers are reimbursed 90%.
  5. JPEG/pETH liquidity providers are airdropped liquidity tokens at the time of Snapshot. Any single-sided JPEG added to this pool after the snapshot receives the JPEG back they added.
  6. Realised losses to liquidity providers of the JPEG/pETH pool are reimbursed.
    Net ETH cost to the DAO: 1,051.13 ETH

Option D:

  1. JPEG’d DAO dos not reimburses unrecovered funds (611.35 WETH), but covers the losses to pETH/ETH liquidity providers hurt via arbitrageurs.
  2. JPEG’d Citadel liquidity providers are reimbursed 100%.
  3. pETH arbitrageurs proportionally absorb the unrecovered funds (611.35 WETH) with non-Citadel liquidity providers. They will receive this amount in either ETH or JPEG depending on which asset they used to purchase discounted pETH.
  4. JPEG/pETH liquidity providers are airdropped liquidity tokens at the time of Snapshot. Any single-sided JPEG added to this pool after the snapshot receives the JPEG back they added.
  5. Realised losses to liquidity providers of the JPEG/pETH pool are reimbursed.
    Net ETH cost to the DAO: 835.02 ETH

Option E:

  1. JPEG’d DAO dos not reimburses unrecovered funds (611.35 WETH), but covers the losses to pETH/ETH liquidity providers hurt via arbitrageurs.
  2. JPEG’d Citadel liquidity providers are reimbursed 100%.
  3. pETH arbitrageurs receive their cost back in ETH or JPEG, depending on which asset they used to purchase discounted pETH.
  4. Non-Citadel liquidity providers absorb the white-hat cost (611.35 WETH) and receive their lp positions back less this cost.
  5. JPEG/pETH liquidity providers are airdropped liquidity tokens at the time of Snapshot. Any single-sided JPEG added to this pool after the snapshot receives the JPEG back they added.
  6. Realised losses to liquidity providers of the JPEG/pETH pool are reimbursed.
    Net ETH cost to the DAO: 835.02 ETH

Option F:

  1. JPEG’d DAO dos not reimburses unrecovered funds (611.35 WETH), but covers the losses to pETH/ETH liquidity providers hurt via arbitrageurs.
  2. JPEG’d Citadel liquidity providers are reimbursed 90%.
  3. pETH arbitrageurs receive 90% of their cost back in ETH or JPEG, depending on which asset they used to purchase discounted pETH.
  4. Non-Citadel liquidity providers are reimbursed 90%.
  5. JPEG/pETH liquidity providers are airdropped liquidity tokens at the time of Snapshot. Any single-sided JPEG added to this pool after the snapshot receives the JPEG back they added.
  6. Realized losses to liquidity providers of the JPEG/pETH pool are reimbursed.
    Net ETH cost to the DAO: 341.03 ETH

*edited to add … regarding the disbursement of recovered WETH to all addresses having incurred losses in that event.

*edited to add arigatopunks suggestion on the phrasing of point 1 of each option.

1 Like
2

For clarity, this should be re-worded as “JPEG’d DAO reimburses unrecovered funds (611.35 WETH) and losses to pETH/ETH liquidity providers hurt via arbitrageurs.”

I understood the original wording, but the English in it is ambiguous.

3

can we have an option G to vote/discuss on too? Basically its F but the only difference is we would put Jpegd citadel @ 100 percent reimbursed and take away from non citadel LPs to make up the difference.

Many of us want to keep Citadel LPs 100 percent and dont view non citadel LPs as an equal to the citadel LPs.

4

Do you mean non-citadel LPs would get nothing? Could you write the option down?

6

@0xtutti

Can we please add in a provision to do a runoff (subsequent vote) on the top 2 options if the first option has less votes than the sum of the other options? It is possible we have three or even four different options with significant vote shares.

7

I’m afraid this would slow us down in reopening the vaults.

8

Sir, I firmly believe options D or E are the fairest choices. Both A and F are too extreme. D and E distribute the losses evenly, without unduly burdening investors or harming our Citadel LPs. Given that the hack wasn’t JPEGD’s fault, it’s only right we consider D or E.

Choosing A not only puts undue pressure on our investors, but also sends a wrong message about bypassing Citadel fees.

Choosing A for PR is not just shortsighted but also misguided. We’re in a bear market; the PR benefits will likely go unnoticed. More importantly, upsetting our investors in such a way can actually lead to negative PR