Recovery ONE: Burn Phase

Ecosystem Resources
1

Recovery ONE: Burn Phase

Released: 10/20/22

As Harmony’s Recovery Plan enters into the new burn phase, R1 remains resolute and committed to the recovery of depegged assets, and the strengthening of the Harmony ecosystem. The latest proposal from the Harmony core team uses treasury funds to target 100% participation and 100% reimbursement of 1Assets over 4 years while maintaining 0 minting. To initiate this strategy Harmony will provide grants to partners that create mechanisms to remove and burn liquid 1Assets from the Harmony ecosystem. The larger multi-year plan implores strategies to build tech, attracting new daily active users, unique wallets, delegates, partners, and the trust of our community.

What is Recovery One’s approach to the new recovery and burn parameters?

To begin, we know many 1Assets are not held in the wallets of the asset holder but rather are in Defi protocols and in DEXs. We also know many 1Assets are not in the affected user’s wallets, having been already redeemed for less than parity as a means to exit. We understand that approximately 50% of 1Assets holders purchased after the bridge incident. Most importantly we realize many individuals that held 1Assets before the incident, still hold and want their full funds reimbursed. We have considered all of these dynamics and we will address each one in time.

Recovery One’s initial action will be to drive liquid 1Assets toward burn mechanisms. Collectively the partners will implement different strategies to remove depegged assets at low cost, thus incentivizing the market to participate in our recovery process. Consequently, this new supply and demand dynamic will drain the liquidity of 1Assets to affect the trajectory and value of these assets over the 4-year time period. These strategies target the long-term 1Asset holders with a 100% reimbursement.

Round 1 - The Recovery Exchange

Recovery One will receive an initial USD 50k / month budget in USDS to assist with the recovery and burn phase. That grant will be put to work through the Recovery Exchange where 1Asset holders can exchange 1Assets to receive USDS. The first token that we will be reimbursing is 1USDC token. The Recovery Exchange will have two exchange rates.

The Recovery Exchange:

Exchange Rates:

  • Non-rONE Voter
    • 1USDC can be redeemed at a .07 for all users, limited to $1,000.00.
  • rONE Voter
    • Users who voted with rONE are eligible to redeem 1USDC at $0.10 immediately, limited to $1,000.00.

Round Mechanics:

  • The exchange will remain in effect until all $50k of the available funding is utilized or Round 1 ends.
  • We will collect data, such as participation, unique wallets, amounts redeemed by wallet, and amount of depegged assets burned to influence our redemption decisions for Round 2.
  • Recovery One expects Round 2’s 1Asset exchange rate to be higher via Harmony’s burn parameters and 100% reimbursement target by year 4.
  • Recovery One plans to increase the wallet limit to $2,000.00 USDS for Round 2.

Please visit the Recovery Exchange

R1.fuzz.fi

GitHub Exchange Contract

FAQ

What is the Recovery Exchange?
It is the updated r1.fuzz.fi destination for present and future Recovery One initiatives.

Why not have a higher parity value for users?
We need to focus on doing more with less early on. We can raise the parity level by clearing low-cost 1Assets that exist on the market by incentivizing redemptions profitably. This will use the free market mechanics to push the parity level up over time while simultaneously reducing the circulating supply, as we burn directly through the Horizon bridge contract.

Why give particular preference to users who voted with rONE?
Recovery One was conceived to represent the community and secure the best deals for the redemption process. We stepped in to aid the recovery process and we provided complete documentation of our intentions regarding how we plan to issue redemptions. Although we can no longer work with newly minted tokens as funding, we have always sought to bring value to the Harmony community- starting with active users who vote for ecosystem change and who voice their needs. We have heard each and every member of the community who took the time to give their opinion on the recovery process. This is our way to show rONE users our commitment and to start the recovery process as best as we can with the amount funded. And we will do better as time progresses.

Disclaimer: Nothing in this post should be taken as financial advice.

Past Posts

https://talk.harmony.one/t/recovery-one-foundation/21455/191

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Paying 3 separate entities to buy and burn 1usdc from exchanges, and not mentioning any of the other assets that make up 60% of the lost value.

This incredible plan is very well worth the almost half a year wait. The amount of brainpower that must have gone into this is inconceivable. I am in awe and draw my hats before the masterminds that came up with this.

I’m very thankful to potentially recover a fraction of my lost funds some years or decades in the future. I feel blessed to witness this historic recovery, you will forever have my undying gratitude.

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This is Huge news we will be one of the first using FDIC Stable. I would love to see it on tranq it’s a true game changer.

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If I had to guess , I would say that the intention is to repeg USDC and liquidate it into USDS. And open up borrowing and lending on USDS for Tranq. Not a bad gameplan,

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Sounds like a multifaceted strategy! It will take time.

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How much money was stolen on Horizon Hack in USDC?

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image

From- Reimbursement Proposal [Horizon Incident]

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So why are they not burning 1 eth and 1wbtc first. Those could cost alot more to repeg 2 years from now?

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1USDC is the largest value. 1Eth, then 1WBTC.

r1.fuzz.fi
Part 1- 25,000 USDS has been sent to the Recovery Exchange.
Part 2- The remaining 25,000 USDS will be sent to the Recovery Exchange.

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Why are there 2 parts?

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Limit the risk probably in case something happens to the first half.

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Congrats R1. You guys got Harmony to take action. Now that the recovery & reimbursement is live the core team can get back to building value for the chain & ecosystem.

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Part 2 was sent to Recovery Exchange.

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I really like that action is being put in place and that we have a path forward is there a plan with R1 host an AMA or Townhall to explain in a more simple and definitive way how this process will look. I love the idea that stably will be utiilzed , But what about Devs and building and funding? Maybe providing an update with to Community should be consdiered via Townhall / ama.

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With Round 2 would you consider some sort of methodology for increasing the redepmtion rate based on demand? Even if it is manual that would be better than the current.

With the existing model it creates an environment which benefits arbitrage and expends USDS at a higher rate than may be dictated by market, at least until fair market rate matches exchange. Whilst the market is below redemption rate there’s significant arbitrage opportunities above minimum and once the market rises above the rate, we would expect exchanges to drop significantly. Modulo’s implementation is pretty good for this, but the current cap on Modulo will see the same issues.

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Cman, Thank you for your feedback. Please keep the great ideas coming we welcome all ideas and collaborative efforts!

The recovery plan and its partners are creating a vector toward the target of 100% participation and reimbursement over 4 years.

Dynamics in play:

  • Modulo’s mechanism which includes min and max created the ceiling (.10cents) as well as an average price of around $.082 - .085 cents, the mean price.
  • The Recovery Exchange set the floor, as we watched the market settle in at .07. R1 also affirmed Modulo’s ceiling at .10cents.
  • Tranquil- they are draining the liquidy from their pools at a market price .88 -.89cents.
  • “Depegging Node” - has and will continue purchasing 1USDC and burning at market price as well .82 -.89cents.

The market (where buyers and sellers, gather to facilitate exchanges) will see this cumulative vector and this will be the road to recovery for depegged 1asset holders.

We will be making slight adjustments to our Recovery Exchange in time. Once again we welcome your feedback and suggestions.

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Thank you for your response. I understand what you are saying with regards to the different participants contributing to the market dynamics.

If we look at both Modulo and yourself and the on-chain USDS exchange rate in real $ as traded against WONE - with the current USDS exchange at ~$0.90 and the cap at 0.10 - we see that with the current market rate at $0.09 that it is no longer profitable for automatic arbitrageurs pending movements in USDS exchange or a significant influx of USDC into the LP’s. I can see that Modulo is hitting cap and sitting there for hours on end, whereas this was not happening a few days ago.

I know you can only speak for R1, but are there any metrics that you would consider using for when to increase the exchange rate? I understand that in the interests of efficiency and with the 4 year timeline you could in theory keep it at 0.10, however Tranquil will continue to purchase into the LP’s and thus I’d expect the participation in both Modulo and R1 to trend towards 0 - which I expect may change your performance in the KPI’s towards future funding rounds from Harmony.

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Open up borrowing and lending on Tranq , RONE , SONE , ONE , USDS. Need to Increase traffic on harmony.
Traffic is down!!

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Let me guess - AAVE is last on the list? Will be tackled in 2028?

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Do you intend to continue doing the multiple exchange rate tiers?

This initial round rewards those who voted with rONE with a higher rate. I would be cool continuing that if R1 so chooses. I would also be in favor of either allowing more holders/wallets into that higher tier or creating a new tier altogether. For example, there could be a premium rONE voter tier, a previous R1 exchange user tier, and the intro tier for first-time R1 exchangers.

My thinking is to reward users who participated in the exchange, similar to rewarding users who participated in the rONE vote. And by rewarding participating with a slightly higher exchange rate, it could encourage more holders to start participating, and even allow already-participating holders to continue exchanging by using new wallets.

The more burn the better.

I’m sure R1 has their own ideas on incentives and tiers, but the main point is that there needs to be a reason for holders to exchange their 1USDC at a marginal exchange rate. Because currently, I don’t think many non-rONE voters will exchange for .07 when 1USDC is going for .0995 on DEXes. Even the higher rate for rONE voters isn’t much better than what can be earned on-DEX. Although, hopefully the rising price of 1USDC can be concluded to the result of successful early recovery efforts (burning > 600k 1USDC already).

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