As a victim, I agree with the proposal. It is fair to assume that at the time of hack, users would consider positions at euler were gone and therefore net their exposures thereof. I think right now it is important to get the redemption done asap and let ppl get back our funds.
I propose a small tweak to the proposal. The fact is that BTC and ETH has appreciated a lot since the hack. For USDT/USDC/DAI depositors, (1) if they did not borrow ETH/BTC, or did borrow other stable coins, then their asset should still be calculated by USDT/USDC/DAI, (2) if they did borrow xETH/BTC, their position would have been liquidated, so calculating using xETH/BTC price at hack time still benefits them. In the current plan, distributing ETH to stable coin depositors at hack time price benefits them unnecessarily, but hurt ETH/BTC holders unnecessarily. A simple tweak is that for any account with net assets in USDT/USDC/DAI ( in other words, net deposited USDT/USDC/DAI is larger than borrowed ETH/BTC), distributing DAI/USDC to these accounts in their $USD NAV at hack time first, after that distributing ETH to the rest. This logic should be fair easy to implement
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I have a proposal below which can solve this issue. The idea would be for net USDC/USDT/DAI depositors(as long as stable coin value at protocol pause time > borrowed ETH/BTC at protocol pause time), calculate their NAV at $USD (NOT ETH share), then prioritize DAI to pay back them. The leftover ETH fund will then be distributed to remaining ETH/BTC depositors. This is easy to implement, and reduces user A haircut and user B premium. Itās fairer. The drawback of original proposal is to use $1600 ETH to calculate net stable coin depositorās ETH share, but distribute ETH at $1900 market price to them.
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This The least the team can do is to cap fund distributed to a user by max (balance USD value on hack day, balance USD value today) and use the remaining funds to compensate people getting harmed proportionally to (balance USD value today - USD reimbursed). Otherwise, you are literally taking money from some peopleās pockets to put in other peopleās pockets. This is both incredibly unfair and a legal liability.
In general, this all feels very rushed and with very little concern for usersā interest. Euler was proud to market themselves as the place to deposit your stakedETH derivatives and now you are harming everyone who followed the advice.
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Before I criticize this recovery plan, I want to first commend the Euler team on doing a great job on recovering most of the stolen assets. With that said, this plan is one of the worse ways to reimburse depositors who are primarily long ETH/BTC holders. The primary cohort of the TVL were depositors of ETH derivatives (primarily wstETH, stETH and cbETH) who then borrowed against those assets, primarily with various stablecoins. The rush of cbETH borrows by both ETH and stablecoin depositors alike during the hack was a reaction to the draining of the exploited collateral pools and not the common usage of the protocol. This plan damages the primary cohort of users of the Euler protocol who were ETH LSD (wstETH, stETH, cbETH) and wBTC depositors.
The ideal way to reimburse depositors would be in the same exact token denominations as they deposited (or like-kind assets in the case of net USDC-USDT-DAI stablecoin depositors). Returning assets in other forms is both arbitrary and creates large and damaging tax implication for long wstETH/cbETH/stETH/wBTC depositors that can only be addressed by receiving back their assets in the same denomination as the tokens they deposited. To make matters worse, this reimbursement plan further compounds this damage by then transferring value from net ETH/wBTC depositors to net stablecoin depositors, which is neither fair nor equitable. This punitively damages the majority cohort of users which were net long ETH LSDs/BTC without good reason to the benefit of net long stablecoin depositors.
I urge the Euler Foundation to rebalance the recovered funds & sherlock insurance payout to replace the drain pools in the specific tokens that were originally deposited and permit users to withdraw tokens in the type and quantity they deposited once debts are offset.
My preferred method is the restart of the protocol, but I understand the team feels this is technically infeasible and respect their expertise in this regard. In the absence of this method, letās rebalance the recovered assets in the proportions that are missing and consider the suggestion of 0x1984 in paying back net stablecoin longs in stablecoins first. Then the ETH LSDs/wBTC longs in the remaining ETH LSDs/wBTC assets as close to their original composition of collateral as is possible to minimize damage to them. Euler should be making every effort to give depositors back their assets in the denomination of tokens they used as collateral. This should include using Treasury assets if necessary.
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The āeth deposits are being forced soldā argument applies to people with eth deposits and borrows in of other assets (i.e., stables). For those people, their borrows are paid off by effectively selling their eth deposits at the price at the time of the hack, which is generally not what those people intended.
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I like the idea. But how would it work for someone in my position where the stablecoin debt I borrowed against my wstETH collateral is also deposited in Euler?
My position is similar to: deposit 100 wstETH, borrow 100k USDT, swapped 100k USDT to 110k USDC, deposited 110k USDC into Euler. My health ratio was about 2.0 at that time and is higher now. But as I understand you plan, I would need to come up with 100k USDT to pay back my debt, but I cannot do that since that was swapped to 110k USDC which is also deposited in Euler.
We need the team to tell us why they decided to go with the dual pricing snapshot (one for virtual liquidations taken at the time of the freeze, and one for assigning claims now) approach over the much simpler approach of just using the current prices for both liquidation and claims assigning. This cuts to the complaints that are erupting from every corner, because the net effect is to bail out bad shorts at the expense of good longs. What was the reasoning behind this specific part that is causing all the drama?
Additionally, the plan as written has what Iām going to call a āHankā Problem. Hank is a guy who had 100,000 USDC deposited to Euler and was just earning supply interest on it, no borrows. Because so many longs are going to be deprived of their profit (while the hacked assets which were mostly in ETH appreciated handsomely), itās going to create a net surplus of recovery funds which will flow in part to Hank. Hank, who had 100,000 USDC deposited, is likely to walk away from all this with $105,000 in assetsā¦ What possible justification could there be for Hank to make a fat profit from all this while others are taking a haircut on their ETH?
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This is exactly why we need a opportunity to payback debt, that would increase the liquidity in each asset massively amd enable in many cases (especially the depositors of exotic assets) to be paid back natively.
Depositors of exotic assets need to receive their token as to recover it on market (in size) is expensive for slippage. Same as for borrowers trying to liquidate borrowed funds.
Please consider this payback opportunity.
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In my opinion, the proposal is fair and straightforward, and I support it without any changes. Itās important to acknowledge that there will always be some users who disagree or are unhappy with any proposal. However, I want to emphasize that a more complicated solution could increase the risk of smart contract failures, which would put our funds at risk (again). Additionally, itās essential to recognize that the funds are no longer in the same form as before the hack, and therefore, the current proposal seems like the go-to solution.
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I agree with the proposal, it looks like the simplest and the most reasonable solution.
Thereās a lot of misunderstanding about the calculations. If you read the plan carefully:
- Euler will price your assets and debts in ETH at the price on the day of the hack.
- The debt will be subtracted from the assets, both nominated in ETH.
- The remaining assets will be converted to ETH at the price of the redemption block. That will be your NAV.
- Youāll receive a reimbursement proportionally to the share of your NAV in the total NAV.
This makes a lot of sense. Weāll repay our debts at the time of the hack, and the remaining assets will be converted to ETH at the current price. It would be wrong to use only the current price because it may cause liquidations to some users without letting them avoid it. The protocol is basically dead at this moment, the contracts are non-functioning, they cannot be enabled temporary to allow repayments and avoid liquidations. Itāll take months to fix and re-deploy them, and prices at that moment may make it even worse for some users, e.g. their debt may be too big for them to repay. Repaying all debts at the day of the hack is the simplest solution that will let you get your money ASAP. No trades are possible.
This is wrong. Hankās $100k will be converted to ETH at the redemption block and returned to Hank. Thereās no profits for stablecoin depositors and no haircuts for BTC/ETH depositors.
You are wrong. Hankās 100k USDC will be converted into a percentage claim on the entire pool of returnable funds. If people who were long ETH and BTC are deprived of their profits, by using the prices at the time of the freeze 16 days ago to liquidate all open borrows, there will be a surplus of overall recovery funds relative to post-liquidation NAV (because most of the money was sitting in ETH which pumped). That surplus flows proportionally to all affected users based on their NAV. This is how Hank ends up getting $105,000 worth of recovery funds when he started with only 100,000 USDC deposited.
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This math is wrong, please read the plan carefully.
User A: 1.25 ETH collateral 1,000 USDC borrow
1000 USDC will be converted to ETH at the hack day: 1000 / 1600 = 0.625 ETH
The debt will be subtracted from the collateral: 1.25 - 0.625 = 0.625 ETH
Remaining assets will be converted to ETH at the redemption block: 0.625 ETH will remain 0.625 ETH
User B: 2,000 USDC collateral 0.625 ETH borrow
2000 USDC will be converted to ETH at the hack day: 2000 / 1600 = 1.25 ETH
The debt will be subtracted from the collateral: 1.25 - 0.625 = 0.625 ETH
The collateral will remain in USDC (it wonāt be sold!): 0.625 ETH * 1600 = 1000 USDC
Remaining assets will be converted to ETH at the redemption block: 1000 / 1900 = 0.5263 ETH
User A will receive 0.625 ETH, user B will receive 0.5263 ETH. User A will lose nothing in ETH, user B will lose nothing in USDC. All fair.
All accounting in Euler is nominated in ETH.
Iām not going to argue with someone who cannot read. Read the plan please before making conclusions. Or ask ChatGPT if reading is too hard for you.
You obviously didnāt carefully read the plan at all, as you have multiple material mistakes in your response to Jeff the baker. If you canāt understand what was written in the initial post then just wait till they post some examples to make it clear to you. Go read the post again (slowly this time), pay particular attention to this part: ā * All account NAVs will be summed to get the total NAV. Each account will be able to claim the recovered ETH, DAI, and USDC according to its proportion of the total NAV.ā
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In this form, the plan is completely unfair. All responsibility is shifted unevenly to depositors. In this calculation formula, only funds that have made large deposits in stablecoins win.
I urge you not to agree with this condition, not to sign a contract where you agree to the terms and file a class action lawsuit against the companyās management.
There is a high probability of classifying the actions of management as fraud.
I also urge the management of the company to fairly distribute losses evenly. Those calculations that you proposed are not transparent.
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Yeah the debt will be denominated in ETH.
This is the problem, this makes your USD debt higher, because the calculation fixes the ETH price at the moment of the hack.
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Nice case of confidently incorrect, rare to see a āyou canāt readā when someone gets the basics wrong.
User A: 1.25 ETH collateral 1,000 USDC borrow
In your example, User A receives 0.625 ETH returned, equal to $1,187.5 at current rate of $1,900 and they have kept their $1,000 for a total of $2,187.5 returned.
If User A is able to repay their $1,000 borrow which is still likely in their wallet, they will be returned 1.25 ETH less $1,000. 1.25 ETH is $2,375 at current rates.
In the NAV scenario laid out in the OP, User A is $187.5 worse off than if they were given the chance to repay. Which arguably they should because they created a position which they would have been rewarded for by the market had the protocol not been hacked.
Tell me which AI I need to speak to in order to increase my understanding to your heights. Or maybe have some decorum.
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I disagree. This is not a solution to the problem, but juggling numbers in favor of funds, I they were the main providers of USDC!