Yesterday, the Tribal Council action to move forward on the Fuse exploit reimbursement was vetoed by the NopeDAO on chain. This does not imply that reimbursement itself was not approved, rather that this vote requires further governance. Following the Tribal Council Process, TIP-112 will go to a normal DAO vote on Wednesday June 15.
The TIP-106 snapshot voted in favor of repayment, but it was not specific about how that repayment would be implemented. The DAO will need to sell some assets and acquire others. The final implementation details of a direct repayment will be discussed below. In order for the community to have as much context as possible, members of the core team will be posting analytics in the comments.
This forum will also serve as a place to discuss the current proposal and its impact on the Tribe DAO and the PCV. The next step is the on-chain vote. Only delegated Tribe via the Tally UI will be able to vote. If you wish to participate in the on-chain Tribe vote, please remove your TRIBE from Fuse or elsewhere if needed and delegate it to yourself or another party prior to the vote starting. If you intend to delegate and haven’t delegated already, follow the guide here.
The table above is an instantaneous picture of the protocol yesterday evening. You can see fresh PCV stats on the official analytics page or on my unofficial fei-tools webapp. The bad debt amounts for each tokens is taken from the Rari hack report prepared by @storm. The amounts recovered if Fuse bad debt is cleared is the amount of tokens that are currently unrecoverable by the protocol (because markets have bad debt), but that will re-become part of the protocol if Fuse is taken back to a working state; these tokens have been removed from the protocol accounting (Collateralization Oracle) by this OA action mid may (tx).
As we can see, total cost to the Tribe DAO to repay users is around 33M$, and would decrease the stable backing of FEI (TIP-107, TIP-111) from 51% to 40% (around 27M$ of the Fuse bad debt is denominated in stablecoins). To keep the same percentage of stable backing, around 15,000 ETH would have to be sold at the current price (~11% of the DAO’s ETH holdings). The Protocol Equity would decrease by around 22% (33M$ spent on hack repayment, from the current PCV equity of 144M$). The collateral ratio of assets backing user-circulating FEI would drop from 162% to 149%.
Oddly enough, the amount of user-circulating FEI would decrease, because 20.3M FEI would be freshly minted to repay the bad debt, but over 22.7M FEI would re-become protocol-owned, because the protocol had provided FEI in Fuse pool 8 (20.8M), 18 (809k), and 27 (1.07M).
If the approach chosen is for the protocol to repay all bad debt in Fuse, the logistics for converting PCV (ETH/FEI/DAI/LUSD) into USDC/FRAX/USDT is not set in stone yet. To repay bad debt, a FuseFixer contract has been deployed.
If that proposal to swap 20k ETH to DAI executes (veto is still active), the stable backing pre-hack will be 67% before hack repayment, and 56% after hack repayment.
A BIG shout-out to Eswak, always appreciate ur comprehensive statistic working !!
I bought $Tribe just a few days before the hack event, despite endure some book loss, still believe Tribe DAO is one of the most integrity, decentralized and trustworthy DAO in Crypto.
Notice some FUDs yesterday about the Veto, I think a $33M total cost to recover all RARI pools and regain trust and reputation is worthwhile. With 10% of PCV’S total Value to settle down the dust, Tribe DAO could keep the partnership with FRAX, OHM, Balancer and many other important parters in the grand DEFI space.
I hold $TRIBE and I am a fuse user, but I didn’t participate in governance - until now, I guess. Before the veto yesterday, people only had positive things to say about Tribe DAO. High integrity, serious etc etc. The veto was an own goal in my opinion - the people that vetoed were insiders. Elliot only took off Fei Labs from his discord title yesterday. The only things it achieved was reputational damage to Tribe DAO, making people angry and now motivated to vote.
Tribe DAO is financially strong and will remain so even after full Fuse reimbursement. FEI is backed by 162% of collateral and nothing prevents the Tribe from selling more ETH to increase stable backing in the future.
Hi espria – thanks for joining the conversation!
You’re right that this has caused reputational damage, and the system definitely can and should be explained better. Various Tribe DAO teams are working hard on this right now.
In response to your point, and I think this is important to reiterate: this is an example of the governance process working. There was a proposal, it was signalled as desirable by snapshot vote, and the Tribal Council attempted to execute it under their express-lane mandate. Enough community members disagreed with this approach to veto it: so now it moves to a full DAO vote.
This is all part of the process of handling controversial governance issues in a decentralised way. No one party is sovereign; the community is. And the veto is just one part of the broader system of criticism and consent that lets us make truly community-driven decisions.
Rather than viewing this an an own-goal, I think we should be proud that Fei Protocol and the Tribe DAO is a governed in a genuinely democratic way, that our decisions are subject to scrutiny by all of us.
Thanks @jamierumbelow for your reasonable response. I agree with you that it is part of the governance process - it just seems strange because of the lack of communication, how quickly it happened and who voted, but let’s all hope for the best.
its good to see per @jamierumbelow the updated governance, while imperfect, still works - NopeDAO voters well done!!!
@JackLongarzo - this is a pretty major disclosure that was omitted from community discussions so far, and a massive reason to halt any discussion of FEI’s reserve (PCV) being used for repayment of a hack on a seemingly abandoned project (is it fair to assume that the team that left worked on exploited code changes):
I don’t see how anyone can continue to push for this binary vote, unless to get a resounding NO vote for repayment, so that the real work of fixing Fuse and figuring out the path forward with the impacted parties in mind can proceed.
on a seemingly abandoned project (is it fair to assume that the team that left worked on exploited code changes)
this interpretation is incorrect, a single person who left had worked on the affected code that was exploited. Fuse is not an “abandoned” project, major development has taken place such as the introduction of plugins using ERC4626 + flywheels in pool 156 since the merge. Tribe Turbo was also launched.
Finally, a DAO vote on repayment is clearly the next necessary step.
Fuse has a lot of promises and potential for the future. The codebase is open-source and quite standard, so developing on top of it should be fairly easy to do.
A project hacked 2.5 times in 9 months to a tune of $100M sounds fundamentally flawed, only reckless or investors that know that their losses due to smart contract risk will be covered by another protocol’s treasury would continue to use it.
I still don’t see how you or anyone else who cares about Tribe DAO can seek a hack repayment for a project that has been abandoned by its founding members and core devs using reserve of another project that has not been abandoned but will suffer possibly catastrophically as a result of it.
Until there is a clearly communicated roadmap for Fuse, clearly identified team behind it, and trust in the implementation I see no reason to repay the hack or restart lending on Fuse.
I suspect that this is type of attitude is how we got here in the first place. Maybe taking things a little bit more seriously when transacting with 100s of millions should be a thing.
I think you’re underestimating the reputational damage associated with this considering both Frax Finance and Olympus DAO are major affected partners.
Frax Lost │ $12,387,925.41
Olympus Lost | $8,911,449.24
If you think long term, The only realistic 4pool has usdc, Dai, Frax as the other three stable coins so maintaining healthy protocol relations with Frax are essential. Also Olympus could add demand for Fei through bonds in the future but they much more recently generated 50mill demand for Fei through the swap for 50 million in Dai.
I agree there is no reason to restart lending on Fuse, but to not repay the hack would surely burn these bridges indefinitely and break trust in the Tribe as a whole seeing as how Fei and Rari merged and are no longer separate protocols.
One could also argue Trust is the most important aspect of your product when your main product is a stable coin.
Fuse is clearly not abandoned or we wouldn’t be here today. Several DAOs which are partnered with TRIBE DAO had millions of dollars in Fuse and need to be reimbursed. For a 30M dollar hit, TRIBE DAO can maintain its partnerships and trust in the FEI stablecoin. It’s not a trivial amount of money, but the alternative is worse.
I guess I’m not sure what is this current reputation that’s worth protecting at the risk of losing the peg and the protocol? Being taken advantage of?
Can’t find it any more, but I think I saw a summary saying:
200M TRIBE paid for the merge
115M FEI paid in rage quit
11.5M FEI paid for settlement of the previous fuse hack
Abandoned by the founding members of Rari Capital, after the hack repayment
4.4M FEI paid for Fuse related bug bounties, since the core team left
40M FEI lost in the hack
The 2 protocols you mention have excellent core teams, but post disclaimers on their own documents for users to be aware of smart contract exploit risk when using their platforms.
What does it say about their reputations if they are acting like they are the only victims meanwhile the Fei Protocol has been impacted 4-5 times more than either. They were both using Fuse, just like Fei, before the merger, and took on that smart contract risk before there was FEI reserve to cannibalize.
Why don’t we first agree on a path forward for the Tribe DAO, then find a way to work with our partners and users to help them recover with us, not at the cost of our protocol. That would help rebuild trust and reputation more so than destroying the project.
non trivial hit of 30-40M is on top of 40M hit the Fei protocol took itself, and a lot of other hits it seems that we are finding out about. the path proposed is not in the best interest of the Tribe DAO
i guess in my mind surviving to fight another day is more meaningful than being extinct with pride/reputation in tact
Without reimbursement, TRIBE DAO is not going to survive to fight another day. Not only will the DAO be screwing over the protocol’s users and partners, potentially losing said partnerships and damaging FEI in the process, but you can also expect lawsuits to follow.
I am not unbiased, all of my funds are in Fuse so we will not agree on the reimbursement but I do wholly agree that the merger with Rari was unfortunate and it’s fucked up that Rari’s technical team all left after the merger leaving TRIBE DAO holding the bag. I think clawing back compensation and even suing those guys is called for. What should have happened though is that the clawback proposal should have been made months ago, alerting everyone of the issues and any lack of faith in Fuse. All of the us and the projects using fuse would have withdrawn their funds and no one would be out 80M dollars.
TRIBE DAO has enough funds in PCV to cover the reimbursement and continue to do well, no hobbling required. In fact, if the reimbursement had happened a month ago when it should have, we would be in an even better financial situation.
The greatest risk to Fei depeg is not repayment of the hack. It’s been the gross overweight of maintaining primarily eth exposure in the treasury for the past 6 months (6 weeks since the hack). Burning all protocol relations and user trust in an effort to protect PCV seems like an irrational move motivated by lack of treasury foresight management.
The treasury and protocol will be fine as long as the treasury actually gets re-balanced into primarily stablecoins.
This means selling ether.
Whether or not the optics of the Fei+Rari merger have been beneficial for Fei in general is separate issue and one the tribe conclusively voted for when the tokens merged.
both of you seem to have great insights in the situation, and what should be done with respect to PCV management, future of Fuse, and Tribe DAO. I hope this translates into a more active long term community participation
your arguments are a bit subjective, optimistic, but still not based on concrete examples and figures. its likely that a repayment of the hack balance from FEI’s PCV will have a very adverse impact on its peg, and possibly initiate a bank run if FEI becomes under-collateralized
some clarity on my position, we should continue to work towards recovery of the funds and ways to minimize the impact of the hack on Fei and everyone else included, however it should not be now or ever tied to FEI’s PCV
how about a recovery plan based on the size of the hack impact. you could be recovered an agreed portion of the impact in 3 months, 12 months, 24 months, or 36 months. this would give Tribe DAO breathing room to generate revenues and find ways to thrive with its partners and users
i find the threats of lawsuits in defi distasteful and the overall concept disgraceful, but not everyone agrees, which should be a consideration
