Hello folks
The following is Aave Request for Comment (ARC). I tried my best to follow Governance docs. Please review this improved proposal and give feedback on what do you think should be different/changed/improved. I will update this post with any suggestions below.
ARC: Recovery of ONE holders on AAVE Harmony
Short Description
Following the Harmony bridge exploit, AAVE users who staked their ONE coin into AAVE are now not able to withdraw ONE from AAVE. The goal of this proposal is to compensate these users.
What Happened
In June 2022, an exploit in Harmony bridge caused an essentially infinite print of 1Assets, such as 1USDC, 1USDT, etc. This caused them to depeg and fall in value essentially to 0$. Read more about the exploit here. Now, having huge amounts of these 1Assets, bad actors have deposited them into Aave Harmony and borrowed out ONE tokens staked by other users. Aave protocol was using global price feeds for USDC, USDT and other tokens, so it allowed these transactions. Since then, Aave paused all operation on Harmony. Owners of those borrowed out ONE tokens are now unable to withdraw their coins, despite being technically unaffected by the original exploit.
The Problem
There are currently 54.30M ONE tokens (1.04M$ at the time of writing) fully borrowed out on Aave Harmony. These belong to holders of aHarWone token (0x6d80113e533a2C0fe82EaBD35f1875DcEA89Ea97), which is the deposit proof Aave issues upon deposit. This token is 1:1 with the ONE token deposited. Normally users could redeem their aHarWone for ONE tokens, but now they are borrowed out and thus unredeemable. This loss of assets originally unaffected by the exploit really broke the trust for Aave users, and is bad reputation for Aave as an ecosystem.
The Solution
I propose Aave to take responsibility for the borrowed out ONE coins ONLY, and compensate the depositors. According to the Dune Dashboard, Aave DAO has a reserve of 86M USD (at the time of writing), with roughly 2M USD of profits coming in every month. I propose Aave DAO to dollar cost average 50% of profits coming in, into ONE coin, until the total number of ONE coins in Aave’s ownership reaches 54.30M tokens - the exact amount of borrowed out ONE (+ small amount for gas). Once the full amount is reached, Aave Dao will transfer these tokens to holders of aHarWone, in proportion with their holding. This plan is designed to not instantaneously deplete Aave’s treasury, but to gradually save some of the profits. This would make innocent users whole and improve Aave’s reputation and popularity.
- Yes, I would vote for this proposal
- No, I would vote against this proposal
- Abstain
0 voters