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Curve Crisis Averted, NFT Loans Protocol Now Votes on Next Steps
JPEG’d DAO voters are deciding how to account for a $1 million bounty.
Aug 18, 2023, 7:29 p.m.
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The NFT-backed loans protocol that lost nearly $12 million in crypto during the recent Curve exploit (and then paid a $1 million bounty to get most back) now has to decide how to fill the hole.
JPEG’d is a NFT-collateralized crypto lending app that issues customers a derivative of ETH, called pETH, that’s tied to their loans. Hungry to earn extra interest, many of those customers parked their pETH in a protocol-endorsed liquidity pool on Curve, the popular trading protocol on the Ethereum blockchain.
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Their yield bet went bad when in early August exploiter drained that pool and others. But JPEG’d agreed to pay the exploiter a 611 ETH bounty to get 5,495 ETH (90%) back. The move saved the protocol from financial uncertainty and its customers from complete decimation on their positions.
But someone has to eat the missing 611 ETH. In a vote running until Saturday, investors governing the JPEG’d DAO are choosing between six proposals that each place that burden on a slightly different party. The option that’s overwhelmingly in the lead splits the pain between non-paying customers of JPEG’d and the DAO itself.
Called option D, it would see pETH price speculators and yield farmers who did not deposit into Curve via JPEG’d in-house service, called Citadel, get most of their money back, but not all. That’s in contrast to paying customers: pETH minters who paid a small fee to earn interest in a Curve pool through Citadel. They get made entirely whole.
The DAO will incur a net loss of 484 ETH (about $802,000) and 861 million JPEG tokens (about $450,000) under this plan. It also plans to replace pETH with a new derivative token that it will airdrop to all holders, but that will happen no matter what option wins.
A pseudonymous user experience, or UX, developer for JPEG’d who goes by the screen name 0xtutti said option D is an “in-between” solution to the sticky problem. But “everyone gets a share of the recovered assets” no matter which option wins out.
“Generally the community cared about protecting paying customers as much as possible,” 0xtutti said.
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