Thank you @mbarret3 . I filled the form.
Our pleasure. Thank you! We will try to facilitate some feasible solutions.
Another month in the books, ready for some results.
Filled the form as well, hopefully we can have a more productive discussion.
Is there a point to attempt the proposal again, or will Aave work with Recovery One?
From the technical side, we would like to present to the community a solution that could move forward on at least a partial recovery, depending on the will of the Harmony/Recovery One team.
Currently, the Harmony recovery program seems to be progressing quite slowly, with less than 10% of the assets depegged burned after ~10 months (~2% of depegged assets burned by the recovery exchange and ~4% of depegged assets burned by modulo), so we think it makes sense to consider options targeting a partial recovery.
The objectives of the following technical solution are:
- Provide a mechanism for Recovery One (or anybody else) to provide liquidity of ONE and LINK to the affected users.
- Reduce or completely remove the outstanding debt on the Aave v3 Harmony pool.
The current Oracle price for depegged assets, following how Chainlink works, is based on the global market price of these assets, not the one applying to Harmony-bridged ones.
Pricing of depegged assets is impossible, because:
- If you believe they will re-peg they should be priced at current oracle price minus a discount for the recovery time.
- If you believe they won’t re-peg, they should be priced at 0.
There’s no “correct” way to approach this pricing problem, but it is possible to use the oracle as a mechanism for partial recovery.
We propose to introduce a decaying oracle that will continuously discount the price of depegged assets based on time, from the current Chainlink price, till a minimum value (e.g. 5% of the current price) after a predefined amount of time (e.g. 3/6/12 months). During that period, any address will have the option to liquidate these assets at an ever-growing discount. The repayments injected by liquidations will provide holders of ONE and LINK liquidity to withdraw.
The currently liquidatable users can be found on the chaos-labs risk dashboard.
This solution should align perfectly with the ethos of the Recovery One Team: if believing in a re-peg, they should have a clear incentive to liquidate as early as possible, as the debt consists mostly of wONE tokens. Also, by liquidating depegged assets with wONE, the Recovery One Team will remove depegged assets from the market, while at the same time providing wONE liquidity for hack victims.
Important to highlight that the mechanism of Aave liquidation itself assures really optimal compensation to affected users, as they receive “directly” the liquidity via the aTokens, without any secondary market mechanism like the one used on the general Harmony recovery.
Liquidating only at a higher discount and later will implicitly price the confidence in the recovery by the recovery team.
- The liquidation bonus of all collaterals should be set to 0 as the discount on the oracle price already acts as a liquidation bonus.
- Even if rates are minimal at the moment, the
aave-v3-corenow provides a zero interest rate strategy that should replace the existing interest rates of all assets on the harmony network.
- The Aave DAO Harmony treasury currently holds around 50k USD in assets. The depegged assets should be burned, following the recovery program. These ~2m aONE and ~700 aLINK should be considered a loss and will never be withdrawn.
- The Harmony team stopped the liquidity mining shortly after the hack, as incentives didn’t make sense. They also pulled the funds though, which essentially means users can no longer claim their previously promised rewards. Therefore we think it would be reasonable for them or the Recovery One Team to compensate those users, as technically those rewards belong to them.
- At the current moment, and without good certainty on the Harmony recovery program, we don’t think any new deployment of Aave should be considered, as there could be technical risks.
It is important to highlight that even if we can help with the technicalities of this proposal, same as with other cases like asset listings, the proposal (Snapshot in this case) should come from the Harmony/Recovery One team or community members.
Why would I want to pay WONE to liquidate a user to get some depegged USDC at an increasing discount if I can already get those USDC at a 95% discount in most DEXes? We’ll have to wait until the decaying oracle price is at a 5% of current price, say in 12 months or more?
Hi @rlfin. This solution is designed more as a mechanism to “reconciliation” the way Aave works with a situation like the current one, with assets depegged but progressively increasing in value. The objective is not trying to be optimal arbitrage-wise, but providing a relatively technical clean solution to the Harmony/Recovery One team.
As we proposed time before, another strategy currently and always available (with some small change on the freezing status) is for the Recovery One team to 1) supply ONE getting aONE, which will allow other aONE holders to withdraw 2) liquidate positions with unpegged assets collateral and WONE, that way getting that collateral, that if their program works, will go back to peg over time 3) withdraw the WONE deposited on step 1).
We didn’t see symptoms of being interested in this approach, so this extra solution is just an alternative, which will price even more explicitly the confidence in the recovery program combined with the time exposure in the form of a discount.
From the perspective of the protocol, it is clear that the sooner liquidations happen, the better. But if they are not happening means that the price of those depegged assets is not aligned with the price of liquidation.
Why is this an “alternative” approach? This approach would be easiest for aOne holders, so it would be great if we could do just that. That’s what my first proposal was asking to do.
Good afternoon, everyone! Happy Sunday! The AAVE team has requested that we post the AAVE and Harmony community submissions here. At the request of the submitters, I have removed the name, organization, email address, and Telegram username information from this data. Everything else is included.
Here’s the link to access the submissions: AAVE Forum: Recovery One - Community Feedback & Solutions Form (Responses) - Google Sheets
I’ll organize these better next week, but I wanted to share them as soon as I could. Thank you for your feedback, creativity, and time.
Hello just putting my postion here. I lost around 4 million Harmony coins during this unfortunate event that took place. I am writing this here so I can have it logged in. Hopefully one day can get my coins back and back on staking woth Harmony. Thanks.
Should we still fill out this Google Spreadsheet? Or post it here in the forum?
Please share your thoughts here. We greatly appreciate input and community feedback!
We should list the potential plans, and vote on them, choose the top two, then run the top plan by the Harmony team and recovery one, if it passes their approval, submit for a vote by AAVE, if the plan passes that, great. If not, we have a secondary plan or we can further refine the top plan depending on critiques recieved during the process.
The questions I have:
Will Harmony supply the One liquidity themselves (by depositing One)? Would Harmony prefer to supply liquidity in installments?
It seems based off of the R1 model of recovery, they prefer installments.
Would AAVE be willing to supply liquidity to speed up the withdraw/deposit proceess and receive subsequent installments directly from Harmony/R1?
The deppeged assets can go to whomever is willing to supply the liquidity. Although, reminder, the longer the process takes the closer those assets are getting to re-peg.
Great idea. Tobes, can you help me organize this?
Sure, based off the spread sheet answers and based off what we know so far, there seems to be fairly close to a consensus as far as how this plan will go, with some minor derivations.
1.) Harmony Team is going to start including AAVE in the recovery process
So based off this we need to find out if Harmony Team would either a.) Proceed with a complete deposit of the 54.47M ONE or b.) Complete partial deposits either as its own entity and through separate tranches, or will they have the deposits be done through R1 and included in the R1 tranches or “rounds.”
2.) If Harmony Team is going to do multiple tranches over time, we should try and establish an approx amount per deposit, and/or timeline for deposits.
This method will definitely have some issues, such as time it takes, and also availability of liquidity for user withdrawals from AAVE, ie if only 1M is deposited, only 1M can be pulled out, is there a fair/equitable way to make sure the amount is divided each round between investors.
3.) If Harmony elects tranches, we should hold a vote on AAVE to see if they would be willing to deposit all or partial 50%? Liquidity to speed up the process, and AAVE could ask to be reimbursed by Harmony, they can also Sell the depegged assets (% based off deposit amount) back to Harmony either at a depreciated value or for full value once the repegging process is completed.
Another option for AAVE would be instead of depositing liquidity, they could create an exchange for aONE to AAVE, and the aONE holders would become AAVE holders, the only question with this decision would be which blockchain the exchange would take place on.
This is my proposal, its has a few options that need to be decided upon, but fairly linear in its logic.
The only other proposal I’m aware of is from bdglabs ARC: Harmony Recovery - #153 by bgdlabs
Tobes, later this week, I’ll list out all 13-15 suggestions objectively, without giving any feedback or opinion to start. This way, we can refer to each one by its number.
However, I just have to find some free time after work and manage my parental and husband duties. Please give me until the end of this week to organize everything.
I like this proposal, the only thing I’m not sure about is the fair/proportional release of ONE. I doubt it would be easy to implement something like that, unless the pools already have that functionality. We can just have it on a first come, first serve basis, since one can’t withdraw more than one’s owed either way. And if the slow/unlucky ones have to wait a few more weeks/months, that’s nothing compared almost a year we’ve waited until this point.
AAVE does need to 100% prevent all other functionality other than ONE deposits and withdrawals, to avoid further issues.
I personnally believe that a fair mecanism MUST be implemented. Otherwise 99% of blocked users will end up not being able to withdraw anything before monthes/ years? As you said, we have already waited a year so it would be nice to see some gradual unlocking for all users. This would secure the recovery plan from the bots emptying everything in seconds as soon as some ONE are injected.
Well, the reason why I’m saying this, is because I’m pretty sure 90% of affected users are not following this thread and won’t even know their ONE is unblocked now. I believe most just gave up hope getting their ONE out.