This week, R1 will narrow down the ideas. We have some good ones from the community and the AAVE team. We will strive to find a middle ground that accommodates AAVE, Harmony, and the communities, and then propose a vote here.
Thanks my friend, hope can see propose to vote soon !
Thank you to the Aave and Harmony communities for your feedback and solutions. After reviewing 14 proposals (ARC: Harmony Recovery - #169 by mbarret3), we have crafted a solution that incorporates many of your ideas and aligns with the recovery efforts. Additionally, we have considered Tranquil Finance’s strategy, which involved burning 1Assets and eliminating “bad debt” from their protocol.
We encourage the Harmony and Aave communities, along with their respective teams, to provide feedback and contribute to the enhancement of this solution. We aim to transition to a governance vote on a final resolution by the end of June.
The bad debt, stemming from the hack on the Aave protocol on the Harmony blockchain, resulted in significant fund loss for numerous users. This bad debt is currently inhibiting users from accessing their funds.
The initial step involves the implementation of the decaying oracle mechanism as suggested in Proposal 14. This mechanism allows users to liquidate these depegged assets at a progressively diminishing value. By encouraging the early liquidation of assets, this approach expedites the removal of depegged assets from Aave. As the debt is primarily comprised of wONE tokens, liquidating depegged assets using wONE tokens would withdraw those assets from the market while simultaneously providing wONE liquidity to the victims of the hack. Harmony could contribute 10% of the necessary funds for this recovery effort, and Aave could match this with another 10%, enabling affected users to recoup 20% of the pre-hack amount. Any remaining “bad debt” would be evenly split between Harmony and Aave.
Note: The depreciated assets held by the Aave DAO Harmony treasury, approximately 2m aONE and 700 aLINK, should be considered a loss and incorporated as part of the 10% contributed by Aave.
After final revisions, this recovery plan should be put up for a governance vote. If a final plan receives approval, the recovery process should span a period of four years. Nevertheless, this timeline could be extended or shortened based on market conditions.
The expected outcome of the recovery plan is to compensate users affected by the Aave protocol hack on the Harmony blockchain. This compensation would facilitate user access to their funds and reinstate their financial security. The recovery plan also aims to reestablish confidence in the Aave protocol and the Harmony blockchain.
Final Note: This effort is being carried out in good faith. This document is a draft version and we anticipate modifications and contributions from all stakeholders.
Thanks. We are trying to help where we can. Cheers.
Thanks for typing this up. I’m a bit confused with the statement above… If each Aave and Harmony contribute 10%, and then evenly split, wouldn’t that mean they just split the bad debt 50/50? Why phrase it like this, I must be misunderstanding something here. Or do you mean that 10% is up for immediate contribution and the other 40% to be contributed over time? I’m confused.
Here is a more detailed explanation:
Harmony could contribute 10% of the necessary funds for this recovery effort. This means that Harmony would provide 10% of the total amount of money needed to reimburse users who lost funds in the hack, the reimbursement rate would start at 10% at the decaying oracle implementation.
Aave could match this with another 10%. This means that Aave would provide another 10% of the total amount of money needed to reimburse users who lost funds in the hack, the reimbursement rate would start at 10% at the decaying oracle implementation.
This would enable affected users to recoup 20% of the pre-hack amount. This means that users who lost funds in the hack would be able to get back 20% of the amount of money they had before the hack, the reimbursement rate would start at 10% at the decaying oracle implementation.
In total, this proposal would mean that users who lost funds in the hack would be able to get back 20% of the amount of money they had before the hack at the start of the decaying oracle implementation.
Any remaining “bad debt” would be evenly split between Harmony and Aave. This means that any “bad debt” that remains on Aave after the decaying oracle mechanism would be split evenly between Harmony and Aave. (It is tough to get 100% participation. It is a goal, but also an ideal).
I think Aave can find ways to get close to 100% participation.
I see, thank you for explaining that. Would you please elaborate on how this “decaying oracle mechanism” works? Specifically after Aave and Harmony provide 10% each, where would aONE come from after that? Does “decaying” part mean that it would be gradually distributed with amounts decreasing/decaying over time?
20% of the amount of money they had before the hack
How do we get the other 80% or are you just fucking us all?
Did you read the proposal created by Aave? Here is Aave’s proposal. Read exactly what they are writing. Specifically read the part they wrote about “Pricing of depegged assets is impossible”.
The “decaying oracle mechanism” is Aave’s idea. They described how the mechanism would work. Their proposal is Submission 14- AAVE.
What we have suggested is a higher rate for Aave users. They suggest using the market rate for depegged 1assets (and you can find the current market rate here: https://dexscreener.com/harmony) to start and decay to 5%.
I would probably need someone to explain this to me in layman’s terms, but as long as the liquidity is available for me to withdrawl all of my assets it doesn’t really matter.
We want to clarify this. BGD is not Aave, we are a service provider engaged by the Aave DAO (the AAVE holders represented by governance) to develop technical solutions and advise with technical topics, but all decisions are on the Aave community via the decentralized governance.
The “decaying oracle” we proposed is just an additional technical idea to reconcile 1) reducing the debt on the Aave v3 Harmony instance and 2) introducing some so-called “exit liquidity” for people who supplied assets like ONE to withdraw.
It is essential to highlight that this is just another idea, as Recovery One / Harmony / any third party supplying directly liquidity (without any decaying oracle) would also allow withdrawals, but in that case, without closing the debt.
Some aspects that should be clear to the community:
- There is no perfect technical solution; the availability of funds to withdraw depends exclusively on an external party “trusting” in the recovery of the assets used as collateral. With an entity (e.g. Recovery One) supplying ONE liquidity for others to withdraw, that entity is the one “trusting” on the recovery of assets’ price.
With a decaying oracle, that entity is anybody liquidating, which in practice can be also the same entity as on the previous (e.g. Recovery One).
- Supplying liquidity directly is simply better for users to withdraw, as whatever amount gets supplied can be withdrawn.
- With a decaying oracle, as the oracle decays, the recovery rate of users just goes down because it is a mechanism to precisely “price” that recovery rate. This means that if nobody liquidates (injecting ONE liquidity) until the price is 20% of the original one, it means that nobody trusts it is worth it to hold those assets if the discount is not 80%. And the recovery by this mechanism will be 20%.
Haha, that’s exactly my position. The questions is, would this 20% be proportionally allocated to all affected users, or first-come-first-serve? I’d actually prefer the second, as I believe most owners of locked ONE have forgotten/gave up on it.
Thank you for explaining that, and clarifying you’re not “AAVE” as an entity
So this decaying oracle mechanism doesn’t guarantee full recovery of ONE, do I understand that right? Then I wouldn’t support this idea.
Why do we even need the oracle to decay? Why not just let the price be determined by the market, and as 1assets are burned by Recovery One, and price is (hopefuly) going up, there would be people interested in trading ONE for a large amount of 1assets, expecting them to go up and price and eventually re-peg. The only issue with this plan is if nobody believes 1assets will repeg, then nobody will inject ONE…
Are there any available price charts of 1assetson which we can see their market price over the last 10 months? It would be interesting to see if they’re going up or not.
Understood. I was sent this proposal by a member of Aave and I understand now that BGD is not Aave, you are a service provider engaged by the Aave DAO (the AAVE holders represented by governance).
bgdlabs, can you connect with me on telegram? I have connected with a few individuals who have made submissions so far. I have a few contextual questions and i think we can both help move this recovery process along. Telegram: Contact @matthewtbarrett
Interesting that you’ve chosen to ignore the Harmony communities suggestions.
Your use of ChatGPT to summarize was amusing, but nonsensical.
There’s an entire forum here, why do you need people to DM you directly? What happened to transparency?
All the while the clock keeps ticking, and no discernable progress.
Following up with this by the end of the week. @bgdlabs
Have new update on this weekend ?
@bgdlabs, Aave and Harmony community,
We appreciate your engagement and are eager to hear your thoughts on the framework we’ve proposed:
- Each of Harmony and Aave would contribute 10% to a recovery fund. This approach would allow affected users to initially recover 20% of the funds they had prior to the hack. (Note: This rate is above current market pricing. The current rate is at 5.4% of parity for stablecoins. https://dexscreener.com/harmony/0x0c51171b913db10ade3fd625548e69c9c63afb96)
- Implement a decaying oracle mechanism. The purpose of this mechanism is to encourage the early liquidation of depegged assets, expediting their removal from Aave and thereby facilitating users’ access to their funds. Decating to 5% as mentioned by @bgdlabs.
- The recovery process spans a period of four years. However, please note that this timeline could potentially be extended or shortened based on market conditions.
In addition to these measures, we believe it would be beneficial to consider:
- Enhancing our security protocols. Strengthening the safeguards of Aave to prevent similar bridged-related hacking incidents in the future.
- Increasing user education about DeFi risks. By equipping users with a better understanding of the potential risks inherent in DeFi and with every bridged asset, users will make more informed decisions and take appropriate precautions.
We look forward to your feedback on these points. Your insights are invaluable to us as we strive to make the recovery process as effective and efficient as possible.
The next step would be to draft an offical proposal. Receive feedback and then submit for a vote.
Increasing user education about DeFi risks
Are you really going to go there? This sounds like a mean joke. ONE is not a bridged asset, the issue is AAVE not liquidating bad debt.
As for the proposal, 10% + 4 year time horizon is not enough, I think all affected users would agree. It’s already been a year as well. I think Harmony and AAVE should split it 50/50.