This proposal has been withdrawn due to the feedback by the community.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