IMP: Compensation of the events of 17/18 May

Venus Governance Venus - Governance Discussions
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I appreciate the new Venus team taking the time to conduct the AMA today, however a pressing concern still remains: How will the exploit-affected users be compensated? Here is the relevant excerpt from the AMA:

"11. I know that although JL is no longer a member of the Venus team, he mentioned that those who were liquidated at XVS & SXP on May 17/18 will be compensated. I understand that VIP-29 is very important for platform protection, but investor confidence is more important. There are enough funds in the treasury to deal with this problem, and new tokens can be minted to make up for the loss.

A：JL said at the time that Venus was considering compensation for those who suffered losses due to the liquidation, but he did not give a reasonable plan. We believe that compensation for users who have lost due to liquidation means hurting those users who have responsibly controlled their loan ratios during extreme market events, and it would be unfair to users who still hold XVS. Because the budget required for compensation to be provided by venus, this needs to be decided by the XVS holders. We feel that the community can further discuss this matter."

Building onto the above, it is important for the community to discuss this. If i remember correctly, the protocol had about 6~ million XVS deposited on Venus around 17/18 May. The exploiter addresses had over 1 million of this XVS, and the remaining 4.5~ million was held by Venus users. We should take a screenshot of the vXVS balances from 17 May and compensate the holders 1:1 from the unreleased supply, and this has already been suggested a month ago here. If we can use 3.3M xvs to reduce bad debt of the protocol, we can also use another 4.5~ million to compensate the millions in losses faced by the loyal users.

This is not an unreasonable solution as the XVS will be awarded to all vXVS holders, regardless of whether they were liquidated or not, so it removes the argument of this being unfair to those that managed their debt levels well (which is a flawed argument imo, because nobody accounts for a 70% price manipulation dump within 8 hours)

We got rekt by the exploiters and the liquidators, and it is only fair that we be compensated. Ideally, people should be compensated for other crypto liquidated as well, but given the nature of the current situation, at least 1:1 vXVS compensation is absolutely reasonable. This platform is backed by Binance, it would make for a lot of bad PR for people to know that in case the platform gets exploited, they will not be compensated despite the platform having $20M+ in reserves/treasury and around 60% of unreleased token supply

Let’s come together as a community and finalize this as soon as possible.

Hoping for a thorough discussion.

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As the person that wrote the thread that is referenced in this post. I fully agree with this proposal. I believe that to restore faith and confidence in the protocol those that were affected by the oracle not functioning and manipulation by two accounts we can’t just conveniently leaved people behind that were unfairly robbed of their money, because that is what happened. They were robbed, plain and simple.

The council need to consider the negative social media storm that will hit them if they don’t compensate VS the effect of paying out a couple of million of XVS to those that were affected. A snapshot and compensation 1:1 for ALL holders is the RIGHT thing to do, regardless of whether the price in the short term will be affected.

Remember, no one will invest in a protocol if people trash it on social media all the time because they were affected and the protocol didn’t make the wrongs right.

For those concerned about the effects of the sudden release of XVS the council can decide on a slow release over a 6/12 month period. There are many options available here if the council only cares enough to explore it.

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I would like to add that a compensation of vXVS to vXVS holders (for example from a snapshot on May 17th) would also have the benefit of complementing VIP-29 by eliminating more shortfall from the protocol. For example, at the moment, I have a shortfall on my account that I am not incentivized to repay that would largely be covered by the compensation mechanism suggested by OP.

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I would suggest calculate the price of xvs before the exploit and minus the average percent the crypto market dropped in that period. Somewhere between $30 and $40 is my guess. Those liquidated below that threshold should be compensated.
While not perfect it should filter out the irresponsible borrowers, while keeping all those who borrowed within the safe max.

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All xvs holders have suffered heavy losses

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I think this is a good idea. The compensation XVS can be released over a period of time to avoid any price impact. Pancake bunny did something similar with their compensation pool after they got exploited with a flash loan attack last month. Not to mention that the XVS given as compensation will have a lower price impact than the XVS being given to shortfall wallets because those will be liquidated and market sold, whereas the 1:1 XVS compensation to affected hodlers will mostly be HODLed

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I agree. I did not plan on selling my Venus anytime soon but now have lost almost all of it. I’ve seen other protocols compensate the loyal users after exploits. I think Venus will fail without this and doesn’t show support for the community. I don’t care if it’s locked for 2 years. I can’t afford to put in any more money into Venus after going from 360 xvs to 9 and also losing bnb after being under 30% borrow rate. I bought in at $4 and all the way to $125. And what’s crap is I still owe more VAI.

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The same happened to most of the loyal XVS supporters who have been with the protocol since day 1. It’s been 7 weeks since the incident occured, and sadly the new team has not engaged with this topic or discussed it with the community so far. I hope the team can understand the importance of this issue with respect to confidence/trust in the protocol. If they don’t compensate the affected xvs holders now, that’s a poor example to set for new investors in the future