Below is a proposal to transition the Tribe DAO to a state such that:
- FEI redeems for $1 (1 DAI)
- Fuse hack victims receive payment making most victims whole
- TRIBE holders can redeem for pro rata share of remaining DAO controlled assets
- All Governance powers are removed
Logically distributing DAO assets and removing governance is a responsible direction which closes many of the risks and challenges the Tribe DAO has faced.
The challenging macro environment and specific challenges such as Rari Capital’s Fuse hack have placed the Tribe DAO in a suboptimal state. Any of the mounting technical, financial, and future regulatory risks could cause the project to be far worse off than it is now. At this stage, a responsible choice for the DAO to consider is leaving the protocol in a state which would defend the FEI peg without the need for governance.
Upon completion of this proposal, and irrespective of whether the individual pieces of it fail or succeed, Fei Labs will no longer be participating in the Tribe DAO. As such, Fei Labs believes the right thing to do is to offer the return of the unvested portion of the team’s tokens to the DAO. An on-chain vote TIP-120 has been submitted to the DAO which would allow the unvested tokens of the Fei Labs Team to return to the DAO.
Given the above, this is an important opportunity for the community to consider transitioning the protocol into a governance-less end state, while ensuring a logical allocation of the DAO assets.
The proposal includes three major independent components: consolidation, Fuse hack victim payment and final redemption. The components have a few details which need to be ironed out with relevant external stakeholders such as partner DAOs, but are largely contained below.
Over the last few DAO votes such as TIP-111: Increase stable backing of FEI , the protocol has largely consolidated its PCV into a small number of locations to protect against volatility and smart contract risk.
These have raised the stable portion of FEI’s overcollateralized backing to over 90% and have been sufficient for general risk management. For the DAO to transition to a governance-less state, there should be a final round of consolidation beyond what has already happened:
Withdraw and burn remaining protocol-owned FEI in Fuse ($1.1M), Compound ($2.0M), and Aave ($10.1M)
Remaining PCV is consolidated into a reasonable number of assets. Liquidity constraints may prevent certain assets such as stETH from being consolidated.
Claw back remaining DAO funded initiatives including Rari Infra and La Tribu
Accounting and proposed consolidation strategy of remaining assets:
- ~50,000 stETH - distribute to TRIBE holders pro rata due to minimal liquidity
- ~22,000 ETH - convert to DAI using balancer LBP
- ~18.7m LUSD - convert to DAI using periodic swaps on curve or balancer LBP
- ~$1.5m veBAL - propose OTC with Balancer for FEI, TRIBE, or BAL
- ~$1.5m gOHM - propose OTC with Olympus for FEI, TRIBE, or DAI
- LQTY, FOX, INDEX - distribute to TRIBE holders pro rata due to illiquidity relative to size (each over 1% of supply).
Given the number of steps involved, the Consolidation step would likely take multiple on-chain proposals to safely execute, with some steps coming potentially after the Fuse Hack Victim Payment portion.
During the on-chain vote, TRIBE holders voted against using PCV for the hack victim payment. This component of the proposal would instead suggest the use of the ~57M TRIBE that was left in the expired RGT peg exchanger. This could be enough to make almost all hack victims whole, dependent on the intrinsic value of TRIBE.
For simplicity, FEI or DAI equivalent to a 7 day time weighted intrinsic value of the TRIBE in the peg exchanger would be allocated for hack victim payment. This would be done after the consolidation step, with the final block window being set as 7 days prior to the snapshot block of the snapshot vote for this step. The 57M TRIBE would be counted as circulating TRIBE for the purposes of calculating intrinsic value and the stablecoins of corresponding value would be released for the hack victim payment. After payment, this TRIBE is then counted as “redeemed” and no longer circulating for the Final Redemption.
Intrinsic value is calculated as (PCV - Circulating FEI) / Circulating TRIBE. Circulating TRIBE excludes the treasury and any irretrievable DAO-locked TRIBE. We believe that this is an appropriate metric to use, because the final stage of this proposal would remove TRIBE’s governance capabilities and transform it into a redemption receipt for intrinsic value.
The total amount of hack repayment funds would be distributed equally to each affected address capped at the dollar value lost. Calculating the loss amount would use the same block as the end of the intrinsic value calculation window described above.
To receive this payment, hack victims would also be required to return the Fuse cTokens associated with their position (to prevent double spending and ensure debt repayment), as well as executing a release of all claims arising from and relating to the hack for all DAO participants and TRIBE holders.
Note that law enforcement is working to recover funds and any recovery could result in an additional pool of funds for the hack victims who have not already received full payment.
As TRIBE tokens are redeemed, it is crucial that no governance powers remain, which could empower stragglers to raid the remaining PCV. Therefore the protocol would need to enter a terminal state before allowing redemptions of TRIBE. The terminal state would look as follows:
- FEI becomes wrapped DAI, redeemable 1:1 and fully backed specifically by DAI
- TRIBE becomes redeemable for a pro-rata claim on each remaining asset after setting aside DAI backing for FEI. Notably this excludes all TRIBE in the Treasury
By having the FEI backed 1:1 by DAI, both FEI and TRIBE holders would be able to claim simultaneously. This also allows the redemption window to be open indefinitely if desired by the community. Alternatively the redemption window can be open for 1-4 years with the remainder sent for example to a non-profit or charitable foundation like the Ethereum Foundation.
The steps outlined in the Consolidation step would make TRIBE redeemable for DAI, stETH, LQTY, FOX, and INDEX.
To calculate the final amounts, the unvested token return and consolidation need to take place first. These affect the composition of PCV, the outstanding FEI, and circulating TRIBE. Estimates can be calculated post consolidation.
Once all the necessary changes have been made and the final contract state is audited holistically, a DAO vote would globally revoke governance powers of all forms including the main DAO, Tribal Council, and Guardian. TRIBE and FEI would then become redemption receipts.
*In order to allocate the unvested tokens from the timelock, transactions have been submitted to un-delegate and re-delegate from a handful of delegates. No new delegations have been submitted.
The 3 components of the proposal (Consolidation, Fuse Hack Victim Payment, Final Redemption) would each be snapshotted independently to build non-binding consensus, then development can be completed, and each step would subsequently be put to a binding on-chain DAO vote. The purpose of the snapshots is to determine which parts of the proposal to include in the on-chain vote(s), and whether to adjust or change any pieces. The calculations for the latter two components rely on the execution of the former to have specific numbers so TRIBE holders can vote with complete information, with the largest variable being the stETH and ETH position.
For that reason, the main parts of the consolidation step (stETH unchanged, LUSD and ETH converted to DAI) will proceed to snapshot the week of Aug 22 after allowing time for community input—with a DAO vote to follow shortly after if the snapshot passes. After that, assuming a successful snapshot of the latter two components (Fuse Hack Victim Payment and Final Redemption), it could take 1-2 months to complete development and security audits for both pieces before the final on-chain votes.
If approved by the community, we believe that responsibly bringing the project to the state proposed above is a positive outcome for the parties involved. The Tribe DAO community is made of DeFi and crypto believers, who will continue to build and participate in the crypto ecosystem with all of the lessons from this journey.