[PRFC] Victim Relief Proposal (v3)

General Discussion
1

This is a v3 proposal which is largely based on VictimsBFF/TommyGenesis’s previous ideas and calculations.

This proposal should ideally be passed timely as ETH price has been rising making this proposed repayment more taxing for victims & the DAO.

For new forum readers, please see the previous proposal and discussion below: [PRFC] Victim Relief Proposal (v2) - #21 by VictimsBFF

Prisma DAO currently holds liquid assets such as mkUSD, USDC, USDT, ENA and LP tokens etc, excluding PRISMA, of which in total tops $3.3M on-chain. Numbers can be found on the deployer’s(LINK) and fee receiver’s(LINK) on-chain using Debank. The total ENA tokens held is approximately $400,000 USD.

To summarize:

  • Users in the discord have pointed out that they would like to have some dev emissions or team treasury to be used to repay victims as part of this smart contract breach.

  • Team/DAO claims there are no additional funds, team allocations, special wallets nor anything that is team/dao controlled that can be used anywhere towards victim repayment (other than the fee receiver).

  • I would like to propose to the DAO and voters to kindly use the ENA tokens towards initial repayment for victims to mitigate future debt and provide relief to victims, given the facts above.

  • I would like to propose a 35 ETH upfront cap repayment to victims, making most users whole and leaving $1.7M assets in treasury and 52 weeks(12 months) in runway assuming a worst weekly protocol loss around $30K.

  • For the remainder of the victim debt I would like to propose that 100% of the weekly protocol profit (after lockers are paid), mint fees etc be converted to ETH and put towards repaying victims, in a smallest to largest loss fashion. And Profit = Fee Revenue - Payout, just for clarification.

  • Although this proposal is somewhat idealistic, we are sadly in a really negative situation where the longer this debt takes to pay off barring any other creative solutions it might be just too taxing to ever be repaid on the protocol if ETH price reaches anywhere near 6-10k+. I hope for everyone’s and the protocols sake that the funds can be retrieved.

Additionally

  • If the team/dao is able to recover funds from the hacker, this proposal should be paused (even if passed) and the victims are repaid the whole remainder of their lost funds in WSTETH (or ETH equivalent values).

  • If there is ever an option for outside funding or team actions to aid in restoring the protocol and victims, it would be nice to have the option on the table as a backup/mix, Quoting @TommyGenesis from the previous thread. “perhaps the protocol can find funding in other ways, such as further investment from partners like Yearn and Convex if they are willing, or some commitment from team to reinvest their own mkUSD rewards from vePRISMA, etc”

  • I would just like to state that this proposal does not wish to harm the Prisma flywheel nor negatively affect the token and token holders.

Proposed Detailed Action Plan

Using Capped 35 ETH/victim (Equivalent to 29.9138 wstETH as of 5.20.2024) as the Upfront Payment

Wallet wstETH loss wstETH repayment Loss left in wstETH
0x56A201…D291ED 1281.897208 29.9138 1251.983408
0xcbfDfF…Cc9eA8 632.473987 29.9138 602.560187
0xC48737…073379 281.597436 29.9138 251.683636
0x9FceDE…379f70 254.15799 29.9138 224.24419
0x1B72Ba…B02d89 118.919959 29.9138 89.006159
0x3B15CE…9f89CB 88.211928 29.9138 58.298128
0x16F570…d87E15 81.199696 29.9138 51.285896
0x4A3Fce…b257eC 68.080547 29.9138 38.166747
0xf8D1C9…8Ce0aa 52.374561 29.9138 22.460761
0xf9Ca66…397418 31.825258 29.9138 1.911458
0xc47faE…c5C7C8 28.218348 28.218348 0
0x774bB9…6Ef79F 22.816279 22.816279 0
0x19562D…405212 21.92391 21.92391 0
0x1b0041…10123B 15.755664 15.755664 0
0x3B82eE…AA4bfF 9.498108 9.498108 0
0x14B30b…82353e 3.006842 3.006842 0
0x409C6c…ff643e 2.74901 2.74901 0
Totals in wstETH 2994.706731 403.106161 2591.60057

UPDATE: And the dollar(mkUSD) amount of this table is dependent upon the price when the DAO purchases. It has surged significantly since the discussion of a repayment plan.

REMINDER: As of 5.20.2024, the ETH/USD came at around $3600/ETH, wstETH’s price is at around $4200/wstETH. 20% up from what it was a week ago. So the DAO needs to ACT ASAP in case of the price risk.

And it can be told from the table above that 7 victims with less than 35 ETH’s (equiv. to 29.9138 wstETH) loss will be paid off and one left with only 1.91 ETH unpaid. 9 victims are left each with a significant remainder of loss after the upfront payment.

Swap mkUSD for A 100 ETH in Advance as Buffer for Monthly Repayments Continuity

Logic for this buffer

  • As communicated with Prisma team on TG, a 7-8 months runway is more than enough even if fee receiver were in loss, should we consider the following as an alternative/safety to the continuity of the repayment plan, though not expecting the receiver tol be in continuous loss for long ideally

  • if the fee receiver is in loss, then the monthly repayment can come from the fee receiver reserve in a bare minimum fashion(like 10 ETH per week) with a hard cap of maybe 10 weeks’ payout (10x10=100 ETH in total) if protocol were continuously in loss (logic behind is that the typical cycle of crypto borrowing is like 3-6 month at most, check AAVE’s and other borrowing protocols’ history)

The DAO could make a surplus purchase of this 100 ETH in addition to the total upfront amount when swap the mkUSD for ETH. For the following reasons:

  • Since there is expected to be some more volatility of ETH price afterwards. And having this ETH surplus buffer de-risk the ETH price volatility when making monthly repayments.
  • The chance of ETH going up is much higher given the rumor that SEC is seriously considering approval of ETH etfs. This surplus stays in the DAO’s control and acts as an alternative allocation to the pure mkUSD, and could help make the fee receiver money more diverse and robust even if not needed for repayments.

Monthly Repay the Remainder of Each Victim’s Loss:

As for the reminders of each victim’s loss, I propose the DAO to pay a minimum 10 ETH/week to the victims by utilizing the fee receiver’s profit apart from the payout fees to vePrisma lockers if protocol’s fee receiver’s revenue profit allows.

  • Profit = Fee Revenue - Payout

  • If this profit doesn’t allow the 10ETH/week repayment, then use the surplus buffer of 100 ETH to pay 10 ETH/week in order to ensure the basic continuity of the repayment process, for up to 10 weeks in total.

  • If the buffer of 100ETH runs out and the protocol is still in loss, then pause the repayment until profitability. If profit, using the profit to repay victims each month after the depletion of the buffer 100ETH.

Proposing Small Loss First for Monthly Repayment

As TommyGenesis and others put forward in discussions, the small victims most likely suffer unproportionally heavily in this hack. SoI would like to propose that the monthly ETH be put towards repaying victims, in a smallest to largest loss fashion.

2 Likes
2

Thanks bt8 for posting this, it is nice to see the dao has more funds than initially discussed in the other thread. I agree with everything apart from the way the repayment is distributed.

I believe pro rata is the fairest method as everyone gets their entitled % of the repayment, not more and not less. Asking some of the victims who have already suffered substantial losses to take a haircut on the repayment seems distorted. But rather than argue over which distribution method is better, it would be easier to present both options for the veprisma holders to vote on.

Below is a table for the pro rata repayment

Wallet wstETH loss % of debt wstETH repayment Loss left in wstETH
0x56A201…D291ED 1,281.897 42.81% 172.551 1,109.346
0xcbfDfF…Cc9eA8 632.474 21.12% 85.135 547.339
0xC48737…073379 281.597 9.40% 37.905 243.693
0x9FceDE…379f70 254.158 8.49% 34.211 219.947
0x1B72Ba…B02d89 118.920 3.97% 16.007 102.913
0x3B15CE…9f89CB 88.212 2.95% 11.874 76.338
0x16F570…d87E15 81.200 2.71% 10.930 70.270
0x4A3Fce…b257eC 68.081 2.27% 9.164 58.916
0xf8D1C9…8Ce0aa 52.375 1.75% 7.050 45.325
0xf9Ca66…397418 31.825 1.06% 4.284 27.541
0xc47faE…c5C7C8 28.218 0.94% 3.798 24.420
0x774bB9…6Ef79F 22.816 0.76% 3.071 19.745
0x19562D…405212 21.924 0.73% 2.951 18.973
0x1b0041…10123B 15.756 0.53% 2.121 13.635
0x3B82eE…AA4bfF 9.498 0.32% 1.279 8.220
0x14B30b…82353e 3.007 0.10% 0.405 2.602
0x409C6c…ff643e 2.749 0.09% 0.370 2.379
Totals in wstETH 2994.706731 403.106 2,591.601

Edit: to clarify, this post is suggesting that upfront and future repayments are to be distributed pro rata.

2 Likes
3

Thank you for putting this together. I like it.

1 Like
4

Thanks for the hard work!

As one of the victims who was hit hardest I’m, selfishly, leaning towards @Victim’s pro rata repayment.

However we need to act fast so I could be convinced to go with the original proposal if it makes things quicker. In that case though I’m not sure monthly payments should favor smaller victims since everyone would get nearly 30 wstETH upfront. So it’s not like anyone would be broke, no?

Imagine also a worst case scenario where Prisma for one reason or another loses steam and repayments slow to a crawl or stop at some point in the future. Then the biggest victims would be the ones left with the short end of the stick. I don’t think this will happen but nothing is certain in life.

1 Like
5

Thank you for your proposal bt8

I think 20-25ETH is better as it leaves more runway for users who still want to participate in the protocol to keep growing. The more growth we have, the higher the chance that all the users get paid and that token holders also benefit. The exploit also affected Prisma token holders who have suffered due to token decline in ETH terms, in some cases that loss is excess the exploit wallet losses. The team members also have been impacted.

Thus our resolution should try to take into account the future prospects of the protocol, not only repaying users but also protecting the brand and keeping runway for future work to be done.

The 20-25 ETH per user to start allows some users to get full repayment, others to get partial and for the protocol to grow again.

Richard has already pointed out in discord that the ENA value is not to be counted in the protocol as it is earmarked to the users who generated the ENA. We want users to continue to use the referrals and bring value to mkUSD and Ethena collab.

Regarding repayment for the remainder amount after the 20-25 ETH per person i think it should be slightly favorable but not completely from smallest to largest. Could create a function that would support the smaller wallets but not 100% of it from smallest to largest.

It should be in all of our interest to not only make the victims of the exploit whole but also to continue the protocol and increase the value proposition for future users.

6

Hey, no worries at all, and thanks for the kind words.

I completely agree that it’s in everyone’s best interest for the protocol to succeed.

Although I suspect you are proposing and arguing less ETH per victim to try and pass it in the vote, even though we have spent days discussing and crunching numbers to arrive at the above lol.

I would sincerely hope that all readers and DAO participants can support my 35 ETH figure. I devoted considerable time to calculating this amount, ensuring it leaves ample runway for the team and DAO to continue operating effectively. This figure aims to provide immediate relief while also helping to prevent future debt, which could be both costly and burdensome.

Concerning the ENA distribution, Richard also mentioned on Telegram that it was up to the DAO to make the final decision, which is why I included it in my proposal. Given the post-airdrop context, are referrals still as crucial now that the airdrop is completed? I hope this is considered thoughtfully.

Respectfully I don’t think it’s very nice to argue against using the ENA for victims meanwhile not addressing the various user concerns regarding team tokens/allocation that was brought up in the discord. I hope this can be left up to the voters.

Repaying from anything but smallest to largest instead of pro-rata unfortunately extends the repayment time for all victims considerably. But if there is a way to create a function that you propose then it sounds fine by me.

7

Hi bt8, a few points. I’m not part of the team. I have been active on discord but under a different handle and prefer we skip ad hominem style responses and focus on the content. This would be like me saying you are user number 0xf9Ca66…397418 and your proposal for 35 eth is because you want to get your recovery with no regard for the future of the protocol. Its not helpful.

Your proposal is a proposal, not set in stone. I agreed with tommys approach in the prior proposal which suggested a slightly lower ETH payment per user in order to ensure the protocol had enough runway to prosper. I think we should be at 20ETH and if the protocol grows we can pass another proposal in the future that accelerates payments to victims. In this case everyone is in alignment towards protocol success: protocol, team, prisma token holders, victims.
The more we have growth the more likely that even the larger victims can have a substantial or full recovery.

Regarding ENA the airdrop is not completed. It continues each month and will have a round 2 in 90 days, so yes i think its important that we stick to our agreements. Ethena incentives will continue for at least 180 days and taking from those users will make others hesitant to work with Prisma in the future. Again, the focus here is for continued operation and growth. Refs and collab with ethena is a source of growth for the protocol and I think its prudent to keep those alliances going.
The goal is to ensure recovery for the even the largest victims and protocol success.

I dont know the token allocations for the team as i’m not the team. I’ve seen people make accusations in the discord regarding team selling but i’ve never seen the team respond to them directly. I have no idea if they are true and what investors or the team should be blocked from doing with their tokens. If you have a specific evidence with a proposal with regards to what the team should be allowed to do with their tokens you can clarify your concerns.
I didn’t see anything that was actionable regarding team tokens.

I agree it will take longer to repay victims if its done pro-rata but in this case the largest holders will at least get something.
I’m open to either way but i think it deserves some discussion.

I mostly came on here to add the perspective of actions that ensure future protocol success.

My goal is for full repayment for all victims and for prisma TVL to go up 20x in the next year and avoiding any actions that could prevent that.

There’s a lot of branding, full stack work and supplementary work (prisma.lol, prisma monitor to name 2) that would be shame to throw away by not keeping a long term focus.

8

Hey no worries,

Which handle are you active in the discord under?

I understand that you might not be a victim directly affected by this issue. While I recognise your preference for a 20 ETH payment, I believe the protocol and its runway can sustain a 35 ETH payment without compromising its future success.

From a logical standpoint, it makes sense to provide relief to the victims now, as the debt will become more burdensome if ETH continues to rise. Since the first proposal in the forum, the losses have already increased by over 20%. If ETH were to reach 6k, the situation would be even more challenging.

I don’t have any evidence or accusations regarding the team. My suggestion to use ENA for victim relief is simply based on the reasoning mentioned above.

It’s important to note that all victims, especially the larger ones, need the protocol to succeed for any repayments to be possible.

Re: Large vs small, I am pasting part of a users recent comment from the discord @Alunara

“Certainly an idea, and I’d say put priority on the smaller victims so those cases can be closed asap. In the end we’ll still have 2 or 3 big victims, and it sucks to say but imo it’s better to make a few smaller users whole than to make everybody 1% whole. There’s just no way on earth the bigger victims can be made whole as it stands, aside from the protocol being revived and earning fees again.”

9

Handle on discord is irrelevant.
Alunara’s statement sounds reasonable.
Perhaps we can allocate 20 eth in total.
18 ETH up front per user. That clears up 4 users entirely and clears roughly 50% of another 4 users.
Then we could prorate the 2 ETH x 17 = 34 ETH to the remaining users according to how much they’ve lost.
This seems to be somewhere in between your proposal and that of user ‘victim’.
20 eth x 17 users x $4000 per eth approximately = $1.36 million.
This is 340 ETH that can be split amongst the users with a priority towards smaller users.
If we commit to $1.36 million for example and ETH falls to 3500USD by the time then we can have more ETH per user at the same ratio, if ETH rises to 4500 USD then we will have less eth per user at the same ratio. I wrote $4000 per eth right now to be conservative and that would still allow a total of 340 to be purchased with existing funds and still leave a runway.

Total available is $2 million so this represents draining 70% of the treasury up front for distribution.
While this is a lot, it appears to be warranted and will still leave some protocol runway.

Quoting the wise llama Alunara’s other statement:

Focusing on dumpers is regarded, complex and probably futile. Wrt price action, dumpers aren’t as much of an issue as lack of buyers is
You don’t get buyers if the protocol has been castrated
So you can completely neuter the protocol to make everybody 10% whole, or you don’t, make some smol users 100% whole, gain back users and buyers and hope that some day revenue is high enough again to start talking with larger victims again

I’m supportive of making a small number of users whole but i dont want to forget about our biggest users either. I like Tommy’s initial suggestion of future repayment amounts being fixed. So that as each smaller user is cleared out, the payments to the bigger depositors gets larger each month.

I can understand that even the medium sized depositors that lost money want to get cleared out right away and drain the entire treasury but this is unfair to any of the larger depositors, prisma holders, those that did supplementary websites like prisma.lol etc. We have the foundation of a good protocol still.

Goal is to make Prisma thrive again and everybody gets their full amount and the token to thrive too.

10

With due respect, I have doubts about the genuineness of your arguments and participation.

You mentioned being very active on Discord but are unable to share your handle.

Additionally, your figures were introduced suddenly and only explained in your third post.

11

I did not say very active, i said active.
Even if i was completely inactive on discord it doesn’t degrade the value of my input here.
Please focus on the content of the posts rather than focusing on ad hominem attacks.

I understand you want to get as much ETH as possible based on you not supporting pro rata.
I also gather from your posts on the forum that you support any proposal that gives the maximum of the treasury away, leaving less than a year of runway. I hope you can see how this would hurt the largest victims, the team, the folks who built the supplementary sites and the numerous prisma token holders.

My suggestion is to find a solution that compensates the users who were affected, with a plan to compensate even the largest users by the continued existence of the protocol with the hopes that everyone gets their recovery and for that to happen we need the protocol to thrive again.

12

@bt8 Thanks for all the hard work you put for all victims here

Personally I do think this V3 plan is thorough enough to address the needs of the victims whilst considering the limitations of the status quo of the Prisma DAO. Also, given the current risk of ETH price going up, want to say it is quite lucky to have this proposal put out this quick.

13

I’m not attempting to make a personal attack; I’m simply trying to understand your intentions.

It seems that everything you’re commenting on has already been discussed multiple times in Discord and previous forum posts, yet you claim to be active in Discord.

The figure was determined through an effort to find a reasonable compromise that would not negatively impact the team, runway, or DAO. I don’t see how it would harm any supplementary sites or token holders.

I’m okay with a pro-rata repayment following the initial relief, if that clarifies my position.

14

I think the initial post should be updated to be dollar denominated despite the debt being ETH denominated.

The initial post was based on 35 ETH when the price of ETH was lower. It also included ENA funds which belongs to other users and is useful to not hurt the few users who are still generating value to the protocol.
In total there is $2 million to allocate minus what we leave for runway and any proposal we have should work with that in mind when discussing ETH payouts.

I propose we use use a dollar denominated amount for the proposal instead of ETH while still repaying users their ETH amount.
At the time any proposal passes, that amount of dollars will be converted and distributed in ETH to users according the proportions stated in the proposal.

For example if the idea is to give each user roughly 20ETH to start we could update the proposal to be $75000 worth of ETH to each user or a total spend of $1.275million USD [17 users]

If the price of ETH falls from $3750 to $2500 then we still distribute $75,000 per user, but the amount of ETH each user gets will increase from 20ETH to 30ETH.

This way we wouldn’t need to update the ETH amount each time based on the current market price while still accounting for protocol runway.

1 Like
15

The initial distribution isn’t as much of a big deal, since it’s a larger sum. The idea of slightly favoring smaller users is that after this initial large sum, subsequent payments to remaining smaller victims will be significantly impacted by gas costs to claim.

If bt8’s proposal ends up being approved, for example, 10 victims would remain, and 6/10 would be collectively owed less than 10% of the remaining debt. The smallest would only be owed 0.07% of it.

Hypothetically, if future payments are, just for example 50 wstETH total, the bottom user would receive only 0.035 ETH per payment if paid pro-rata. It would take 54 of these payments to be made whole, and if the user claimed at each payment that would cost them a significant % of their remaining claims in gas costs.

If instead each payment is capped per user, the bottom remaining users would have fewer claims, while maintaining the same schedule for making the largest users whole.

For example, if 10 users remained, and the 2nd payment totaled 50 wstETH, the bottom user would be paid their remaining 1.91 in a single claim, and all other users would receive ~5.34 wstETH ((50-1.91)/9). The following payment, if also 50 wstETH, each user would receive 5.55 (50/9), and it would continue to go up each time another user is made whole, until eventually the entire payment is going to only the top user.

Maybe there can be some sort of happy medium, where it is scaled so maybe bottom remaining user isn’t paid back in just 1 payment, but still receives more than 0.035 each time to account for gas costs.

Could maybe do a min instead of a max? If minimum payment is set to ~1 wstETH, I think this eliminates all concerns about gas costs forcing users to stack up their claims.

Also want to mention I agree with @PrismaWillProsper that while payments should be in ETH or wstETH, it makes sense to set payment budgets in USD, since market is constantly changing.

2 Likes
16

Want to repost my replies from Discord to here and some more thoughts.
Just to clarify, my point here being focused on how the proper distribution way should be and why.

Want to advocate for the lump first payment of up to 35eth per victims instead of a pro-rata one for maximizing the interests of the whole community.

One reason is that this way will clear almost half of the victims WHOLE from the losses.

Another reason is that the first TOTAL upfront payment in V3 just makes up around 15% of the whole 3000ETH loss of this incident, assuming using pro-rata for upfront or monthly after, a lot of smaller victims have to wait much longer and being miserable while the bigger victims STILL have to wait miserably too for the same time period, until a major recovery of their losses given that the pro-rata upfront payment is not that significant.

In short, pro-rata makes no one better but even worse in the case of this incident given the distribution of the losses, while leaving a still huge hole for every victim after first/each payment whatsoever.

Maybe one reason to see why communism/socialism sucks…

AND one more evidence why leaning-toward-small-victim is reasonable is that ALL deposit insurance institutions such as FDIC of the USA banking system adopt this same policy in case of such incidents happen(such as in the SVB collapse etc).

1 Like
17

If a large upfront payment is made I still think the initial distribution should be pro rata, as it is not more or less than what everyone is entitled to. It is the fairest method. A non pro rata would be demanding some victims to take on further losses as they lose their share of the payment they are entitled to.

Can’t a smart contract be written with a distribute function that can be called by anyone? This would eliminate gas cost fears as whenever someone calls the distribute function, all the victims get distributed their share.

Perhaps a decent compromise would be, once the large pro rata distribution is done, to have a hybrid pro rata / equal payment method.

e.g. if the weekly payment is 10eth then a fixed amount to the bottom 8 victims then pro rata between the rest. Possible numbers could be 0.5eth each to the bottom 8 victims then pro rata to the rest to the remaining victims

18

Just to visualize the time durations in a comparison of (Smaller priority monthly) vs (Pure pro-rata monthly) assuming after the capped upfront of 35eth.

Some take aways for short here:

There are 10 victims still with losses after the upfront payment, all listed in the tables.

It is obvious that in the Smaller priority schedule(Sheet 1) :

  • 6 out of 10 Victims got paid off upon Month 8

  • 8 out of 10 Victims got paid off upon Month 22

  • Top whales need NO LONGER than in a Pro-rata plan to get paid up & will get MUCH ACCELERATED payments after Month 8.

while in the Pure Pro-rata schedule:

  • 10 out of 10 Victims have to wait to be paid off until Month 76

  • Top whales get flat small and slow payments every month

So is the reasoning & conclusion same for the pro-rata upfront proposal. Even with post pro-rata upfront, whales still has nearly 90% to recover after in monthly, time to recover doesnt change much.

Some more thoughts here

For the Prisma project, a swift plan that resolves issues most of the users will strongly boost the market confidence. Some may argue the big whales as the key users. But I think Prisma as a new and enterprising protocol, Growth is the key. It is more important to build up its reputation at the current stage. and many users with relatively smaller losses may not necessarily be small asset holders in reality. They may look small just because they’re trying up as PRISMA is still young.

Check the link here for details, it includes Sheet1 and Sheet2 for two scenarios: Payment Schedule After Upfront - Google Drive

1 Like
19

Thanks for that @HansVictim.

What we need to determine is that first amount; at the current levels the DAO has 48 weeks of runway.

I’ll get a table together to break this down.

2 Likes
20

@HansVictim

DAO USD like Assets
mkUSD 1,607,415.00
POL** 252,558.00
ULTRA/USDC LP 395,855.00
TOTAL USD ASSETS 2,255,828.00

** mkUSD value in the POL

Income per week
mkUSD 29,288.46
ULTRA 4,214.42
TOTAL INCOME 33,502.88

So net per week is -46,497.12 which leaves a runway of 2,255,828.00/46,497.12 = 48.5 weeks.

2 Likes