DISCUSSION: Resolve the Distribution Plan for the Recovered Funds from Arbitrum GLP

Proposals
21

The moment the majority of recovered funds were converted to stables the next course of action should be to return the stables to GLP holders.

If the recovered funds had been immediately been converted to a basket of assets that closely resembled the makeup of GLP pre-hack, or had been invested in GLV straight away; so that GLP holders maintained consistent exposure post hack (similar to what they intended with their initial investment) , then the GLV option would be more appealing.

However, unless there is an appetite to make GLP users whole for the basket of GLP assets pre hack (which it doesn’t seem like there is) then it makes no sense to then move these stables into GLV and unilaterally decide for all users to reenter a trade after a large price increase.

1 Like
22

Just sharing a few thoughts.

  1. Most affected people (including myself) were long time investors in the protocol, and would prefer of course to be made whole in the respective assets held.
  2. Probably, many GLP holders were here (this is my case) only to vest esGMX. I had a lot of GLP in the past, converted to GM v2 and bought back only for vesting.

So in a sense, everything should be addressed together and I have an original proposal for that.

  1. We should give the option for GLP holders to receive either stables at time of the hack (since it is what the treasury has), OR an option to be made whole including a compensation in esGMX. For instance 110% of the current value of the GLP, including the recent increase of parts of the assets.
  2. The stables that the protocol holds would immediately buy GMX for the portion of users (long term aligned) that choose esGMX and the protocol would burn them.
  3. All previous GLP vesting, and the new vesting would go to the GMX vesting (so people would need to have more GMX to vest the new esGMX, making it again a well suited option for long term alignment).

At most, if everybody choose the esGMX option (which I doubt), that would be a 2.5% inflation long term of the GMX supply, which seems to be within the boundaries. And it should be a positive event for the GMX price (for which a squeeze is coming anyway, because within 1 or 2 years if enough people keep compounding as they do now, the liquid supply will be very scarce).

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Great to see consistent progress from the GMX team!
The redemption contract for GLP V1 is a critical step for restoring user confidence looking forward to seeing the final distribution plan implemented fairly and efficiently. recovery of GLP funds on Arbitrum is a major win for the community
thanks to everyone involved in negotiating and securing those assets

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  1. Distribution methodology – claim and redeem process with a long-term (3 years?) expiration. Setting a deadline for redemptions would allow DAO to return unclaimed funds to the treasury.

  2. DAO-sponsored reimbursement- I am against it. Users should acknowledge all risks themselves by investing in GLP and getting a well above average yield for years. Therefore, a shortfall of just ~5% of funds should not be a concern for the DAO. As a reminder, in the name of decentralization, we denied help to Archi Finance users (who are the same GLP holders) just months ago.

  3. Form of distribution- stablecoins. This is the simplest, fastest and most secure solution. The fact that the Security Committee decided to convert all funds (ETH) to stablecoins ASAP speaks for itself and leaves no other logical options.

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In terms of the discussion of “users being made whole or taking a ~5% shortfall”, I think that decision was already made a while ago when trying to contact the person who discovered the exploit.
Not making GLP holders whole after that statement could potentially expose the receiver of the bounty and/or GMX to legal action from GLP holders ?

1 Like
26

To echo others, the priority should be returning the property of users as quickly as possible.

The best path forward:

  1. Methodology: Claim + Redeem Process.

It’s really the only feasible option. Reconstituting GLP will take much longer due to the required overhaul of the V1 system. The priority is speed so that the funds owner’s have the ability to make their own decisions.

  1. Reimbursement: Yes

Two million dollars is 44% of the DAO treasury. It is a significant portion, but survivable and worth earning the respect of our users and the greater Ethereum community.

  1. Form of distribution: GLV.

This decision is made more complicated by the recent market movement. The correct decision was made to stable users assets after recovery, but in hindsight this has left them only exposed to part of the recent price runup. This is out of everyone’s control.

Others here have made honest points as to why depositing the recovered funds into GLV now comes with the possibility of risk that the owners of these funds may not agree with.

Having considered these points, I believe that the best solution practically, ethically, and that considers the interests of ALL affected user demographics, both active and inactive LPs, as well as esGMX holders is depositing the recovered funds into GLV and IMMEDIATELY making the newly minted GLV tokens claimable as outlined in Saurabh’s Claim + Redeem Process.

Reasoning:

Time and price sensitive users (active LPs) have the immediate option to claim their funds and allocate them as they see fit, experiencing as low as ~0 duration risk in GLV. Practically, users who want out will have access to the same value as in a stable distribution.

Over the following years that the claim process is ongoing, passive GLP depositors who are unaware or otherwise unable to immediately claim will experience the closest thing to their preferred position. They made the decision to deposit into GLP and we can best honor their intentions with GLV. The long term consequences of allocating funds in ways that are misaligned with their owner’s intentions (100% stablecoins) should be taken as seriously as the short term risk of distributing GLV. We need to remember that the active LPs are the demographic who are most likely here voicing their opinions here. Inactive depositors are under represented.

Another benefit of GLV distribution is that it expedites the entire process since the potentially complicated issue of users who have unvested esGMX earned from GLP can be essentially eliminated. GLV can be used to vest esGMX at the same rate as GLP, unlike in a stablecoin distribution scenario. This essentially leaves affected users with the same decision they had previously: remain exposed to GLV (previously GLP) to vest their earned esGMX, or not.

– On a secondary note (truly, the interest of the users far outweigh this), there is a real possibility that some funds previously deposited in GLP will never be claimed, and with this option the protocol will retain this liquidity at the end of the claim process.

2 Likes
27

I believe the best course of action is to return Funds to LP asap to restore public sentiments, the discussion should have never been about storing funds in GLV or anything. User’s should be made whole in the sense that bug bounty of 5m was to be paid to hacker from Immunefi program, why is the shortfall being counted as GLP loss, if i discover a vuln and reported to immunefi for 5m payout would gmx take it from the pool affected and payout? If the answer be no, then the shortfall should always been a seperate pool of funding. If you going to sell the idea that this attack was a bug bounty, treat it as such.

Not affected by this hack, but the handling of this incident is pretty bad for service recovery from a hack, might lose LP trust in general not just being from V1 standpoint. Dont understand why this needs a vote even.

Using 1 block after the hacked transaction look at GLP contract state, airdrop the USD value to EOA addresses, smart contracts will then be handled differently Reroute the GLP Address (Assuming proxy implementation) to retrieve funds via the Claim Function, given all integration should have something made for claiming fee’s for GLP.

Additionally just for Archi, bypass the contract address get holders EOA state and airdrop it.

No need to make the process complicated. Please handle the post action recovery better, This is not the time of saying “Put fund back into GLV” it is obvious the idea of doing so is to push TVL.

4 Likes
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I absolutely agree with this opinion! There will never be a way to solve this problem that satisfies ALL participants in the platform. Therefore, we need to take the shortest path and return the funds to the community. If you have them in USDC, as mentioned earlier, then return them in USDC at the exchange rate that existed at the time of the hack. There are many ways to do this quickly, openly, and honestly. Getting into endless discussions is a dead-end path!

1 Like
29

Keep it simple and fair.
Funds should be returned directly to users based on a snapshot – not via GLV.

Not everyone wants exposure to V2 or GLV.
If this was a bug bounty, treasury should cover the shortfall, not GLP holders.

No complex processes. Just make users whole.

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Just airdrop the group coins that represented GLP to projects users and any other investors in GLP. The fact that you guys are sitting on user funds is really bad look.

Make the users whole so give them the BTC the Eth the link the usdc the entire bag that they purchased under your product. This is important because you need to held resposnisble for protecting users as you should or risk the entire GMX protocol.

Dont make it complicated. Keep things simple: Maybe make another pool that consists of the same tokens, then allow users to remove or airdrop simple simple..

Do it quickly as your community is more important to keep GMX going.

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Prefacing by saying its nice that we are able to have this conversation, and the efforts in recovering exploited funds should not go unnoticed.

While the “shortfall” is a large amount of money, I think it sets a good precedent to make up the difference between the returned amount and the $ value of the funds at the time of exploit.

Distribution via GLV seems like a clean approach, and allows users to pick up an instrument similar to GLP.

2 Likes
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How can you give someone BTC, ETH, LINK when prices fluctuate?

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Those were the assets for the share in GLP.. so that would be the same assets returned.