Reimbursement Proposal [Horizon Incident]

Engage with tranq they are one of the best defi protocols in web3.

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Thank you for taking the time to read through all the posts!

Here’s an idea to engage the community and creatives:

Create an art campaign on ETH Blockchain.

Gas prices are cheaper and more accessible for creators. Onboarding via NFTs is the most popular way to engage the masses. Artist can make art as a plea to the larger community to save the chain. “Save the chain campaign”

Artists who bring in a substantial amount of ETH to repeg assets get an NFT which can be redeemed to be flown out to a dope spot with accomodations for the night and party with all the other creators and donors who helped with the campaign.

Buyers of art are also invited to the party but don’t get flown out and stuff.

Additionally, to incentivize this, Stephen/Li/Harmony foundation offer to match percentage of all earnings to restore peg. Oh snap. That could be a game changing announcement.

To get started as a show of good faith, BAYC bears will be sold to start restoration of peg.

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An off the rail proposition for the harmony team about the “reimbursement” proposal. (not from me)

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Dilution is never good, glad to hear you’re considering other alternatives and listening to the community. Listening to those who have and continue to support your team, will be critical to your ongoing successes. I believe in the Harmony Team. Remain focused and transparent in your ongoing communications. Thanks!

Algo stable will give us one last chance for a fight to the top.

Please look into it @stse @lij @Jacksteroo @giv @sahil @rongjian

Get the community to refine it together

Launched with a blast and we will be above 0.10 in an instant .

@stse dont screw this up

Hello, everyone. The last few days we held many calls to discuss options and tradeoffs, engaging over 20 validators, 20 community members, and 15 bridge and DeFi partners. We sincerely value engaging and gathering support from our community, partners, validators, and their delegators.

Among all proposals, one strategy is using Harmony Foundation’s treasury for partial reimbursement over months while minting new tokens to replenish the treasury over years. This aims to align the long-term commitment of the team, validators, and community.

Another strategy is increasing and repurposing fees from transactions, instead of burning the fees in the current protocol, towards reimbursement and ecosystem growth. This aims to align the long-term growth of our applications, users, and ecosystem.

We have completed a draft “Summary of the Harmony Horizon Bridge Hack” with the technical details, currently under legal review and to be published soon. Later next week we will also publish a longer blog covering many more proposals and their tradeoffs.

Again, thanks for your patience. We are eager to work with you to find a solution together.

Stephen Tse

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Is Harmony attempting to secure outside funding or loan? That would be preferred over inflation. And it would seem like the best way to secure a significant amount of funds.

Hopefully Harmony is going to implement a multi-pronged strategy to reimburse and re-peg. A single approach that relies on inflation is unlikely to be Harmony’s best option imo.

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Positive direction, glad to hear from the top. Looking forward to the additional information

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From what I heard they have been unsuccessful in doing so…

This is a step in the right direction. I hope there will be more transparency moving forward

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They need to put their pride and ego aside - the chain could literally die.

@stse you need to kiss the ring and secure something, some level of vc funding or loan. This is where you personally must sacrifice in order to save this ecosystem.

Without doing so, it’s going to require significant inflation imo. The community hated the massive inflation proposal, RIGHTFULLY SO. And we can’t rely on the market turning around and the price of ONE going up 5-10x.

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Thank you so much for your willingness to work with the $ONE community :pray:

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im guessing you were unable to get any outside funding or loan?

how about using the partial treasury in multiple stages:

Stage 1: Use 50% of the planned treasury for buying and burning as many unbacked assets. This way, there’s technically less assets to repeg. You would make an announcement a week before you start the process. Set up a site for users that want to recover as much as they can, but pennies on the dollar since this will be quick exit.

Stage 2: Use the other 50% to buy as much of the ERC tokens as you can to fund the bridge

Stage 3: Open the bridge with a percentage withdrawal fee equal to what was left unbacked in stage 2 and use the bridge fee to continue buying back the needed ERC tokens until we reach 100% backed while simultaneously lowering bridge fees. ie you were able to buy enough to reback 50% of the 1assets, you set bridge withdrawal fees to 50%. after a few months, maybe the backed assets reach 60% of unburned 1assets rebacked, bridge withdrawal fee would lower to 40% and repeat until we are 100%. You can also use transaction fees, additional funding or a loan to help buy back assets or ERC tokens to refill bridge to speed up. This will be a long term process that could take months or years, but puts us on a path to full recovery without inflating the $ONE supply drastically

You can also mint more $ONE to buy, but at a much lower amount than previously proposed. This wouldn’t be advised if its a large amount (10+% current supply) which could drastically drop the price of $ONE.

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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.

I have a concern with this. According to the quoted section, if a snapshot were performed today, ETH would be valued at $1700, BTC at $23,800, BNB at $290. And according to the initial proposal, holders would be paid off over the course of 3 years at the value of the assets at the time of the snapshot.

In 3 years time the value of those assets could be 5x higher than they are now. Which means the reimbursement for those assets might only be 20% of what they would’ve been worth had the Horizon bridge not been exploited. In this possible scenario, that would be a small “reimbursement”. The reimbursement would also be paid via an asset ($ONE) that could have also lost 20-40% of its current value via inflation. At that point, the current, horribly de-pegged price of the unbacked 1assets might be no different than the future relative value of the “fully” reimbursed 1assets.

As if the community didn’t already hate the prospects of inflation, this is another great example as to why a loan/vc funding is necessary for this recovery plan to succeed. It would limit inflation and would allow for reimbursement/re-peg to occur faster.

[I know the quoted section is from the original proposal and might not be applicable to the future proposal. I am expressing my concern with any/all proposal(s) being implemented in this manner. ]

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Appreciate the change in tone - But this needs to be backed by exhibiting skin in the game.

  • Focus on delivering the nearest critical milestones first (i.e. secure resharding…) to be provide incentive for financial backers to even put money up.

  • Your new presentation decks would need much work, as word is out in Web 3 circles & macro-economic climate is worsening.

  • Reality, ideology & execution must walk at an equal pace.

As far as operational feedback is considered, there will be a time for that as well (constructive & otherwise).

But here’s some knowledge bit for starters: :bulb:

  • If protocol inflation for other L2 scaling solutions is at + 18-20%, it is usually at times compensated by other extraneous factors such as multiple fundraising rounds continuously, a bigger protocol research group creating high impact code & achieving critical milestones (not lean), 50x-100 x in business development & good financial risk management.

  • ETH sold a portion of their foundation stake at the market top TWICE over the years & converted a portion of it into stablecoins - Giving the protocol multiple years of financial runway in hedged assets. In 2021, they sold 70k ETH at ~4878 USD = 330-340 million dollars in USD & USD equivalent at hand.

  • Whether they published the foundation’s wallet address in public or not to meet compliance requirements is an different issue - But this information is public & represents prudent financial management. It can be done, even done in a transparent manner.

Harmony One almost had a Treasury worth 1 billion dollar equivalent during ATH peaks of late 2021& early 2022 (Jan).

The operations officer converting only 20-30 million dollars in cash equivalents while the market was constantly capitulating over span of months exhibits financial inexperience - while claiming that non-issued stock (locked treasury) is good enough cushion for a multi-year runway, proved as patently false as impairment losses piled up, only to be excerbated by a hack.

Minor operational misgivings (~3.6 million USD deployment over 9-12 months represents ~1.2% use of native token treasury or 300M/ 0.36% of USD equivalent notional value at ATH) became major thorns, and for these “crimes”, blood must flow. Accountability & restoring confidence has to come through by doubling down on self-stake (financial & otherwise) to show commitment, or via weeding out dead weight.

Confidence & Circle of Trust

Usually during times of a confidence crisis, the better thing to do is to work counter-intuitively & expand your circle of interest not just with confidants, but equally well-versed adversarial thinkers as well, tbh - people more skilled at specific roles than the CEO. Going the other way (i.e. nepotistic intent, paranoia, smaller circle of trust) is a sure way forward for mutually assured destruction. Exhibit : Sculley was as critical for Apple, as Jobs was - Even though perverted history doesn’t look kindly on him (GTM innovation wins)

A leader’s job comes with generalist skillset - and they never go redundant, as long as they is absolutely clarity for communication of the vision, keen eye that zooms in & out on operational processes & minor details, grounded in reality.

Seeing forest & not just the trees, but are also grounded in reality. I have sincere hope that @stse puts on “the researcher” hat, expands the project’s technical & financial advisory council to an diverse crowd of academics & investors (different skillsets, ethnicities), fixes operational deficiencies & enables other domain C-suite co-founders to do their job.

Harmony stopped being a small startup last year & entered the major leagues, when it announced a 300 million dollar ecosystem fund & had a peak treasury of one billion dollars at one point. It should have been financially more stable. Anyone speaking otherwise, is hiding their own incompetence at the expense of others, or spread too thin to function effectively.

I’m sure that the core team would have had their own share of misgivings as well (it’s only natural for us to fail), but leaders need to decide efficiently & quickly on when working failures are untenable, require operational expansion v/s require going back to the drawing board.

Operating at scale needs to be learned - This lean team narrative is garbage, because team structures need to be flexible as needed. Ideation can live or die, as long as the team wins. I hope this eventually ends up being a humbling experience with practical learnings, instead of being the final ride on Titanic.

I would have loved saying these things as private feedback, but it hurts to say that it has taken so long for transparency, to even be a contender in conversations.

Mend your relationships with stakeholders (VC’s, partners, old & new developers, ecosystem projects), or the free markets forces would do it for you. Humility & forgiveness does pay off.

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Have to learn from vitalik to always convincing the foundation to sell the top and increase their runway .

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Hi. Thanks for linking my video.
I’m not sure why you would consider this off the rail, if you think there is some merit to the idea with some changes, let’s discuss so we can reach the best proposal.

Thank you for working with community.

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It’s good to hear what’s going on behind the scenes

To be brief:

1/ If none of your proposals include even a partial but very significant re-pegging of the 1assets, by buying back their underlying assets (for which Harmony is accountable), and

2/ If your proposals are nothing more than targeted and differentiated reimbursement offers, differing only by the combination of the 3 variables that compose it: what, how, when,

then, I can already predict the future of the Harmony blockchain: THE END!

Even today, EVM-compatible blockchains like Harmony are nothing without bridged assets and trust to keep funds safe, so users can freely move their assets from chain to chain, especially stable coins ans blue chips (BTC, ETH, BNB etc.).

And Harmony’s core team & founders know this from the beginning as Harmony’s philosophy « Harmony’s interoperability frees users from being locked on a single platform » used to be their mantra and first visual block from their website. But disappeared since… the hack.

So you need to make the BIGGEST FINANCIAL EFFORTS TODAY, not rely on better market conditions tomorrow.

Re-pegging is the only task you have to work on and the rest will follow: community, validators, users, apps, ecosystem.

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