Reimbursement Proposal [Horizon Incident]

This proposal has been withdrawn due to the feedback by the community.

A new community-driven proposal is being drafted involving members with TradFi background, with DeFi builders and with community moderators.

Introduction

The Horizon bridge incident resulted in the loss of $99,340,030.00 worth of digital assets across approximately 65,000 wallets and 14 different asset types (details in the table below). The Harmony team feels it is important for the overall strength of the ecosystem that harms to impacted wallets are mitigated in a manner that is feasible and most viable for the project.

Our community is a critical component to Harmony’s success, and the team appreciates your patience and understanding as we continue to work on this path forward together.



Proposal

The Harmony team has worked tirelessly to brainstorm and develop paths towards reimbursing those who were impacted by the recent hack of the Horizon bridge.

Important Highlights

  1. Reimbursement will be in the form of ONE tokens and span a three-year period. It’s important to note that the current state of Harmony’s treasury has limited our ability to provide any solution which involves immediate reimbursement.

This proposal will require a hard fork of the Harmony blockchain as it will increase the supply of ONE tokens.

  1. Impacted wallets will have to claim their tokens across the three year period. Distributions will be made on a monthly basis and claims can be done at any time that tokens are available for the impacted wallets.

Claim events will collect all tokens pending in that wallet.

Option #1

The first option proposed is an estimated 100% reimbursement with a minting of 4.97B ONE, which equates to a 3-year monthly emission of 138M tokens ($2.76M using the token price of $0.020). Minted tokens will be gradually brought into circulation over the 3-year period.

Option #2

The second option proposed is an estimated 50% reimbursement with a minting of 2.48B ONE, which equates to a 3-year monthly emission of 69M ONE tokens ($1.38M using the token price of $0.020). Minted tokens will be gradually brought into circulation over the 3-year period.

%Reimbursement $Amount ONE Amount Monthly Emission (for 3 yrs) $Monthly Emission (for 3 yrs)
100% $99,340,030 4,967,001,500 137,972,264 $2,759,446
50% $48,810,015 2,483,500,750 68,986,132 $1,379,723

Resolving De-pegged Loans

The Horizon bridge hack has led to the accruing of uncollectible loans across a handful of DeFi lending protocols that participate in the Harmony ecosystem. Traders took advantage of arbitrage opportunities by borrowing ONE against de-pegged stables with no intention of repaying the borrowed ONE, resulting in a situation where ONE suppliers no longer have enough liquidity to withdraw their supply. Resolving these uncollectible loans is a crucial component of restoring faith and trust in Harmony with those impacted.

Failing to resolve these uncollectible loans may result in DeFi lending protocols choosing to drop support for Harmony on their platforms. An additional 86M ONE (included in the proposed options) will be minted as part of the reimbursement plan, and distributed to certain affected DeFi protocols over the same 3-year period, to mitigate losses resulting from uncollectible loans.



Distribution, Claiming & Timeline

Token distributions will occur monthly. The amount of ONE distributed will be based on the USD value of tokens lost across impacted wallets from the time we perform a snapshot. From the snapshot forward, the smart contract managing this process will make distributions based on the number of pre-calculated ONE tokens, not based on their fiat-currency value as market conditions fluctuate.

Example

If an impacted wallet lost $1,000 USD from the hack, that wallet will receive a total of 50,000 ONE tokens; 1,388.8 tokens distributed monthly over the course of three years (50,000 ONE / 36). This wallet will have to connect to a website in order to claim its distribution for the month. The price of ONE will not impact this number – the user will continue to receive a total of 50,000 ONE regardless of token price.

Timeline



Repegging

Affected assets are currently depegged due to DEX arbitrage trading. Harmony has sought out options to bring these assets back to a pegged status. However, we have identified that repegging is not a feasible strategy due to market and treasury conditions.

The team is working on plans to reinstate DeFi on Harmony despite these limitations, and we aim to publish more information on our DeFi strategy in the coming weeks.



Next Steps

We take reimbursement of impacted wallets seriously and strongly encourage our community to provide their feedback below. We will be reading comments and considering your suggestions and opinions.

The snapshot vote will begin on August 1st and close on August 15th. We encourage taking time to vote and, if you’re staking, communicate with your validator(s) to ensure their decision takes your sentiment into consideration.

Thank you for being patient and we look towards moving forward together.

The Harmony Team



FAQ / Additional Details

1. Why inflation as a source of reimbursement funds?

  • We decided against using the foundation treasury in the interest of the longevity and wellbeing of the project as reimbursing from the treasury would greatly hinder the foundation’s ability to support the growth of Harmony and its ecosystem. Harmony foundation is committed to continue supporting Harmony for years to come and plans to reserve the foundation tokens to facilitate this.

2. Why does the community vote on deciding the reimbursement percentage?

  • a. The Harmony team wants to solicit input from holders about the content of the proposal since it will impact all ONE holders. Your vote and voice is needed to ensure the best viable path forward is taken.

  • b. The proposal requires a hard-fork which means the Harmony team alone cannot put the proposal into effect; validator participation and buy-in will be needed in order to bring this to production. If you are staked with a validator, we urge you to communicate with your validators to help ensure their decision is made with your feedback in mind.

3. Why snapshot a future date vs before the hack event?

  • We believe this process is fair and simple to execute. The alternative is taking multiple snapshots covering pre-hack and identifying the wallets that held through, wallets that sold for a loss, and wallets that opportunistically bought. The latter tactic would complicate the overall process without adding additional value.

4. Why reimbursement over 3 years and not immediate?

  • This is primarily to prevent market disruptions from a sudden increase in supply of ONE tokens.

5. Why uniform reimbursement over 3 years instead of a customized reimbursement plan that could recover smaller wallets faster?

  • This is to avoid gamification of the process by whales who could split their holdings across multiple wallets to maximize their payout.

6. What is the strategy if validators don’t agree?

  • Given that the validators are aligned with Harmony chain’s growth, we hope they will be easily persuaded that reimbursing the losses will reinstate the trust that is key to Harmony’s success. We encourage communicating with your validator (if applicable) to ensure their decision is made with your thoughts in mind. In the event of failure to obtain required validator participation, we will resort to “no reimbursement”.


Impacted Assets, Token Count, and Value

(*at time of incident)

Token Name Address Count of Tokens Dollar Value
1USDC 0x985458E523dB3d53125813eD68c274899e9DfAb4 41,200,000 $41,200,000.00
1ETH 0x6983D1E6DEf3690C4d616b13597A09e6193EA013 13,100 $14,410,000.00
1WBTC 0x3095c7557bCb296ccc6e363DE01b760bA031F2d9 592 $11,840,000.00
1USDT 0x3C2B8Be99c50593081EAA2A724F0B8285F5aba8f 9,981,000 $9,981,000.00
1DAI 0xEf977d2f931C1978Db5F6747666fa1eACB0d0339 6,070,000 $6,070,000.00
1FRAX 0xeB6C08ccB4421b6088e581ce04fcFBed15893aC3 5,620,000 $5,620,000.00
1BUSD 0xE176EBE47d621b984a73036B9DA5d834411ef734 5,530,000 $5,530,000.00
bscBNB 0xb1f6E61E1e113625593a22fa6aa94F8052bc39E0 5,000 $1,100,000.00
bscBUSD 0x0aB43550A6915F9f67d0c454C2E90385E6497EaA 640,000 $640,000.00
1FXS 0x775d7816afbEf935ea9c21a3aC9972F269A39004 110,000 $585,200.00
1SUSHI 0xBEC775Cb42AbFa4288dE81F387a9b1A3c4Bc552A 415,000 $468,950.00
1AAG 0xAE0609A062a4eAED49dE28C5f6A193261E0150eA 6,620,000 $66,200.00
1AAVE 0xcF323Aad9E522B93F11c352CaA519Ad0E14eB40F 990 $61,380.00
1WETH 0xF720b7910C6b2FF5bd167171aDa211E226740bfe 43 $47,300.00
Uncollectible Loans Tranquil, Aave in ONE 86,000,000 $1,720,000
Total 76,205,725 $99,340,030.00
4 Likes

Is there another option that involves a community discussion? This proposal currently offers no other choice spare the two presented.

44 Likes

DO NOT MINT MORE!

This will really screw those who are staking. Did we not learn about inflation? When you increase the supply, price does not follow.

33 Likes

“We gonna give you tokens that will be heavily inflationary, but don’t hurry, every little thing is gonna be alright”

13 Likes

This is a lot to process but thank you all for pulling something like this together…

I hope that all members of the community consider what this means… and lend their voice to this proposal…

1 initial thought…
Is there any expectation that the foundation treasury could be deployed in some way to help with this repayment plan?

Especially those whom allowed this hack to not be corrected, as the security issue was brought up by several within the core team and from the community before the hack. Would any core leadership have their compensation be impacted in some way to compensate for this massive recovery package on the backs of all harmony holders?

Essential, will anyone whom allowed this hack to take place take a pay cut, from the compensation they were scheduled to receive, as a show of good faith for an obvious lack in judgement about allowing security to not at least match what has been suggested for the many projects issues grants on harmony?
@lij ?

33 Likes

2 weeks for this shitty proposal & no repeg. Payment in ONE aka inflation and coins becoming worthless. A hard fork to kill the small chance this chain had. WTF.

It boggles my mind that not only do we lose money, we also pay for the reimbursement ourselves via inflation. You guys have no shame to call this a “reimbursement proposal.”

TL;DR The “community” loses their funds AND foots the bill to fix their shit.

EDIT: Dumped everything I had in this chain. I’m out.

29 Likes

Can the proposal add a BURN after the wallets are reimbursed?

Personally though, what’s lost is lost (we know the risks of crypto and that it’s not FDIC insured)…Re-peg is more important.

16 Likes

How about DO NOT impact the supply?! Trying to be Luna here down the road??

21 Likes

Minting more ONE?? already the supply is too high, increasing more will further hurt the tokenomics.
Isn’t there any other way? like doing a fundraising event with all the bigshots in the ecosystem or giving some stake in the company to CZ for that stolen amount etc.

27 Likes

Let me make sure im understanding this….you idiots get hacked 2/4 multi sig and some how the community needs to eat this? Bc you care so much about chain growth? What chain growth thus far??? Wtf have you guys done in the last year…you have no ones trust moving forward…so you fcked over bridge users bc your incompetence and now wanna fck current holders, investors and stakers…by increasing supply….what are you guys smoking???

34 Likes

This is absolutely garbage, scrap the whole proposal and go back to the drawing board Team!

27 Likes

Use the treasury now or it won’t matter what you have in the future

18 Likes

Let me get this straight: no word for weeks, to the point where projects like OneVerse had to take matters into our own hands to bring backing to your tokens, and the proposal you come back with is a LUNA-style hard fork and a 3-year vest?

-So we didn’t learn from DFK’s failures on locked tokens and vesting schedules
-We didn’t figure out how to make the project teams who’ve been having to figure out everything for ourselves even partially whole
-There is no triage, nor plan for bringing active project money/participation back into the chain

I think any reasonable person can look at the “development” happening on NuLuna and see where this leads. OV’s still going to do what we can, but this proposal is frankly unacceptable by our standards.

The community should not foot the bill for Core’s negligence. Full stop.

26 Likes

There’s not unfortunately. All this community talk is pure BS. They got fleeced and won’t even repeg the stable assets. They clearly already took their decision - same old LUNA story.

3 Likes

Absolutely disgusting and shameful you would even present this….put your money where your stupidity is…

14 Likes

Please DONOT add more tokens to the existing supply. It will hinder our investment. This is not good for community. DONOT ADD DONOT ADD

15 Likes

This is a massive supply increase. This will in no uncertain terms be paid for by those of us who hold large amounts of one by the value of the token absorbing the cost of the hack through dilution. I am not at all happy with this given this is about 95% of my portfolio of which I put my investment money into in good faith. I had zero exposure to bridged assets because I was faithful and determined to see Harmony succeed and held $one through the downturn, and yet if this passes I’ll be footing the bill. There’s gotta be a better way.

39 Likes

DO NOT increase the supply. This is SHAME

12 Likes

How should I look at this steament? A threat?

11 Likes

Seems like a threat but ONE would be gone with that result.

3 Likes