Reimbursement Proposal [Horizon Incident]

What @mbarret3 is suggesting here is equal to a junk bond yield.

If I am not wrong, these are TradFi equivalent, non-investment grade debt-instruments which usually get traded in the open market as well. Do have high yields as well.

This is generally done when loans become non-performing assets, are removed from the books & also get traded in the open market to generate cash flow over time. Good one, mate.

@TrickLuhDaKidz - Well, it’s 1/3rd of the supply - but staggered release wr.t. trading volume.The team had so many core protocol engineers - I am not sure what broke down as the time passed, which led to this mess. The hack did do a number, so there’s some empathy - but it isn’t without acknowledgement of justified problems.

I would agree with you on the cash injection part, but the question is : Is there enough equity left for the foundation to even part with for the fundraising? You’d need anchor investors - Someone who can buy it from the open market to keep it float, without chewing out foundation equity. A lot of smart money cashed out.

BadgerDAO had insurance, but they did not get cover for the event. Poly Network got almost half of it back with an emotional appeal that those were funds of ordinary people. Harmony - Well, we all saw what happened when you involve law enforcement first, low-ball the party holding customer & ecosystem funds as hostage. Hackers were all-in after that.

I think if they really deliver on sharding tech first & move forward, there’s a very brief sliver of hope - and stick with the timeline. That’s when a fundraising could happen - Economic blowouts are inevitable, and this will be an opportune time for Stephen & Jack to do some active headhunting & venture work with stringent milestones. Support the team first - instead of standing in their way.

Tech is a bloated business sector in itself. It’s better to things like start community owned-private labels, subscription service lounges, identity management solutions, private-ad networks, than gimmicky nonsense. Getting one-seriously experienced PM or PMM could change the trajectory here.

Should approach Big 4 consulting firms & their incubator programs for financing opportunities. It would provide them with requisite guidance as well for things like IT & cybersecurity risk management, governance, HR transformation. Real services for real paying customers, you know. Otherwise, its already over & there’s no coming back from this.

We are seeing some exits already in the making.

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Earlier you said:

The new proposed (but not final) solution is still going to be a Treasury minting option, but on a far less aggressive scale ($33M USD per year for 3 years).

The original proposal by Harmony:

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.

Are those not the same?

As an long term community member I have stayed relativly silent so far, however I feel that the moment has come for me to say something hopefully helpfull.
Without being math. confident I think that the transaction costs should slithly encrease in favour of a budget pool which gradualy refil the missing gap. Also I think that the ONE community might rather help by periodical donations thus helping to decrease the whole amount. Once again I did not work the math out but printing new coins and making a hard fork is radical and without a deflationary mechanism to balance the print in inflation might bring very dificult future for the ONE community. We are community and we can definetly come as ONE and build a solid solution with fair compromises.
Another Idea in my mind is to wait for the treasury to increase and instead of printing and hardforking just distribute from the treasury, that seems logical to me but once again I am not math confident.

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Here is My proposal: Create a brand new DeFi Coin and call it Magick ONE, total supply 100 000 000 and use that to figure out the problem Harmony One has!!! Make it about DeFi and gaming. Build it on Cardano and bridge that to Harmony! Cardano has a whole new level of community and they will help us if the Magick Coin brings value to the Cardano ecosystem! Thats my word!
There is a perfect solution out there and it will surface if we aproach the issue with paitience understanding and grace!

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Ah - My bad. Yes, it is the same - But the context is quite different.

Few things here :

  • It’s sets a fixed hard-cap incentive to stop the Treasury bleed. Most of the trading volume is at Binance anyway, and the order books for most other exchanges are running thin, or illiquid. It’s 93-94% down, staggered increase in issuance Inflation where trading volume can absorb it would have negligible effect on price (at every leg down from here) because H1’s effective average trading volume is 50M USD/per day. 450k ONE or 90K USD issuance is peanuts, and could be effectively absorbed without a significant price impact.

  • This isn’t a total collapse as everyone is making out to be like LUNA 2.0 - which was a total collapse, because price action was immense to keep up with sell pressure, and trading pairs were literally removed. Stakers are still getting rewards here, leverage is still available, "price action is only taking a beating like other L1’s.

  • The question of “bad debt” or non-performing asset here usually becomes about principal recovery at minimum. A credit risk improvement (if ONE air-dropped assets held, instead of immediately sold) would still result in a price multiple gain, if not just only facilitate principle recovery (albeit less gain if it were the original asset). It’s one foot in the grave already, but there is a difference between ~0 and 0.

  • I don’t think we can really apply the logic of 20-40% of its current value lost by inflation, because it is “issuance inflation” for a volatile asset like crypto (a stock equivalent with dividend) - would be an short term trend in market cycle IF selling pressure gets absorbed in daily trading volume.

  • Your purchasing power is dependent on the redeemable price, and the price is totally dependent on euphoria.The risk adjusted returns for Harmony & crypto over a time horizon > USD inflation. This IS a new cycle.

This is the crypto investment thesis at EOD - That your unrealised fiat could lose notional USD/native currency value in the short-term, projects building for on-chain utility would give you risk adjusted returns that beat currency devaluation in the long-term, over fiat currency.

Moving forward

  • A Tech milestone achievement, critical development or partnership achievement can create options for a fundraise, with a token swap & time-lockup - creating treasury runaway.

  • I still think they could get a cash injection upto 10-20 million in cash could allow them to do a Treasury buyback & then, get some investors into play here. At 1-2 cents, that would be equivalent to $1B ONE available for re-hypothecation, let’s say, get new developer/business dev founders doing ZK-work or investors. It would dilute investor equity slowly in short-term during bear market, but provide them with an opportunity of 10x-15x if even breaks half of ATH price. Why recycle through another L1 like Aptos or NEAR when H1’s secure resharding implementation & elastic RPC are much closer?

  • Yes - Bizdev & ops could use more work, ops deficiencies require patchwork and the team’s advisory council could be expanded. Some ecosystem projects could be let go, but the chain could still be saved. Mission critical DAO’s for this project could be restricted to 6-7. (As long as workload for core protocol engineers are not wasted on product development; but feature enhancements & reinforcing security of existing products - Or they are secured to still work at Harmony :sweat_smile::saluting_face:) Exit = Death.

  • The remaining liquid cash & cash equivalents must be 100% reported to the community moving forward via financial reports, and expense receipts as well.

There will be a time for fundraising & expedited resolution of bad loans, but just not today. A partial capital injection today & bigger fundraiser in future w.r.t critical project milestones could fast-track partial pre-payment of bad loans & even reduce the need for more issuance inflation. The value proposition today is non-existent.

I’d still say this - For all the crap H1 really gets, the user experience is relatively much smoother most of the times as compared to its peers. But yes - If Tse still wants to play dictator instead of team coach & help, the project is already dead.

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A couple of ways i’ve been thinking about.

Option 1:

Make every non stable coin asset trade into stable coin. Commit buyback to peg tokens to to their value.

Example:

In your original post you value 1wbtc at $20,000.
Make 1WBTC tokens redeemable into $20.000 worth of 1USDC / 1DAI / 1USDT. (This is the part I am not sure if is possible)

This will reduce the amount of impacted assets, and simplify the payback process.

Commit to buy back (make arbitrage bots) stable coin tokens 1USDC / 1DAI / 1USDT in order to peg tokens to 1 dollar. Assets bought back to be burned.

Doing it this way will repeg (at least close to) all assets at a minimal cost as private arbitage bots and speculators are likely to do much of the repegging itself (I think) if Harmony commits to this buyback. Over time, assets will reduce in ciruclation of unbacked tokens.

Then there are two different routes to go:

Route 1:

Integrate these unbacked assets into new trustless bridge, run bridge on fractionalized assets and over time buy back tokens.

Issues:
Possible bank run situation due to factionalized backing

Route 2:

Continue buyback when assets are below peg, until assets are out of circulation.

Issues:
At some point could become very expensive very fast, especially after launch of Trustless Bridge as these old tokens are looked upon as relativley worthless.
Will cause a (somewhat limited) impact to Defi protocols

Option 2:

Create a new token Horizon Bridge Hack Bond (HBHB) with a circulating supply of 99,340,030.00 (Dollar value of hacked assets)

Make 1Assets redeemable for HBHB tokens in the dollar value.

Mint all nessessary one tokens at current value. Hold in a locked wallet.

HBHB holders will be airdropped one tokens in dollar value including an an interest rate (say 5%) at regular intervals over a course of 3 or 5 years.

Liquidity pools could spring up and people who need their money now could cash out. Others would see it as an investment opertunity (the 5% and potensial increase in One value)

If any tokens remain after dollar value payouts are completed, the remaining tokens are burned.

Issues:

Governments/SEC might have something to say about this.

Basically kills all of Defi. No stable coins left.

Higher circulating supply of One tokens in a few years.

No accountability from Harmony Foundation

Allthough token minting is a dangerous president to set in a situation like this, I see almost no viable option where this wont happen unfortunatly. Might aswell mint all nessesary tokens at current value, and burn tokens later if they are not needed. As long as tokens are not in circulating supply, the price impact should be relatively limited.

Edit:
Option 2 could of course be combined with a buyback/repegging strategy to reduce price and preserve Defi for the time being.

Any thoughts or input here?

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Only viable option is - use all treasury to buy back unpegged assets. Make users whole , or as whole as possible - c50% would be ok at this stage:
Then over 3 years replenish the treasury through minting

Just my two cents,

  1. A 100 million dollar loan to re-peg the ecosystem.

  2. Increase the gas fees and use that to pay back the loan.

This way there is no minting.

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I really do not agree with just printing more tokens and would urge you to reconsider this

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plz fix on-chain price of one token as dex to revoke all the order books and start a fresh, there are a lot of funds stuck on dex on other cryptos other than one token in dex , no one is able to technically move or use those funds because of mismatch of prices.
Also dex will be able to make more money as transaction will start in these platforms .

Bonsoir j’ai acheter l’équivalent de 1.500.000 one avant le jack en moyenne à 0,3 dollard comment aller vous rembourser es ce que cela se fait automatiquement sur le Wallet Binance ? Good evening, I bought the equivalent of 1,500,000 one before the jack on average at 0.3 dollars. How will you be reimbursed? Is this done automatically on the Binance Wallet?

Hi,

Could you please fix the issue on aave? Many of us who are long term holders believing in the project are now stuck with our ONE impossible to withdraw. On the top of that, it got incentivised to incitate us to contribute to the defi of harmony, and now we are stuck. This should be treated outside the reimbursement for the ethereum assets which is over a long period.
ONE long term holders should not have their assets blocked during three years, how can we contribute to make the environment grow if all our assets are recovered gradually over three years? The aave situation should be treated separately for native assets and an immediate recovery should be provided. I would be more than happy to keep contributing to the new projects in such case after retrieving my ONE bag which is for 95% on aave.

Thank you for reading

Regards

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Unfortunately Aave is bit another topic, people need to repay their loan. But some take advantage when stable was not unpeged and take a loan in ONE. They lately had a voting →

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Péssima ideia. Aliás bem suja, não garantiram a segurança da rede, agora os investidores que não tem culpa da incompetência dos desenvolvedores da Harmony tem que pagar? Pelo que estou vendo toda hora o supply está inchando. Já destruíram a moeda faz tempo. Logo logo, vira pó.

Why do you want priority over depagged asset people, just because you want to invest in one future? Maybe they want as well.

I would assume you would have delegated your ones instead of staking them with Avve, you took a greater risk for more rewards instead of delegating and help secure the network and now you want to switch places to be a long term supporter… emm

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Snapshot should be done to a date in the past. If snapshot is in the future people will buy tokens a few minutes before the snapshot and dump them a second after the snapshot. And this kind of stuff can be done by whales or people who can write code, while other people will just sit watching or play the game and loose money.

What about the brdiged assets? If you do not have a plan to bring hacked assets back to peg, what will be the future of Harmony? Without stables and ETH, BNB, etc, who will be interested in using Harmony for finance? What would be the solution then? New trustless bridge? So the old bridge assets will become worthless? This will devaluate all tokens that are paired to Stable coins liquidity pools today.

Moreover as said by many just issuing more ONE is a questionable solution. Maybe in next bull market ONE will go up again, but in the meanwile most will dump ONEs and just quit the platform.

Would it be fasible to use funds to buy back bridged assets and burn them?

The proposed plan is better than nothing, but in my opinion a long term sustainable vision should be provided too.

There is no perfect solution.

Snapshot at day before the hack: Seems resonably fair. But includes people who sold during the hack to save themselves in the compensation. (Who may at this point have even left the chain, and have no plan of returning)

Snapshot day(s) after the hack: Weeds out some of the people who sold to save themselves. But starts including speculators who were never a part of the incident to begin with.

Buy back and burning (artificial repegging) would in my opinion be the best solution as it includes a bit of both. People who have held their assets get rewarded, speculators who have supported the assets till now get rewarded. (People who sold are excluded, and short term speculators are excluded)
But it does pose it’s own problems and risks of course.

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Could Harmony and/or @stse provide some clarification on a few details from the original post/proposal?

I know the reimbursement strategy is being reworked, but I assume some of these items/ideas will still be implemented as part of the forthcoming updated proposal.

There are also a few key details that may not have been discussed in the original proposal. Could these also be addressed?


Making Reimbursement Claims

An affected user will be able to claim their ONE coins:

  1. Monthly when each distribution is made
  2. Sporadically over the course of the 3-year distribution period (but only up to the amount of ONE that has been distributed as of that point in time)
  3. All at once at the end of the 3-year period

Is that correct?

Will there be a “grace period” after the claim ends on “October 30, 2025” to allow users to collect their final distribution (e.g., a month, 3 months, 1 year, etc)? Or is that the one and only day to claim the final distribution?


What Happens to Unclaimed ONE?

What will happen to the coins that are not claimed by the end of the distribution and/or grace period? This should be stated in the proposal.

I suggest unclaimed ONE either be burned or used to buy back unpegged assets (and burn the unpegged assets).


How is “Lost” Value of Tokens Calculated?

Currently 1USDC is ~10¢. Would that mean a wallet would be reimbursed 90¢ for every 1USDC they hold?

At that point, Harmony’s already reimbursing nearly the whole unpegged token (aka, a “buyback”), but without any of the additional benefits of buying back the unpegged tokens.

Which leads to the next suggestion…


Burn Pegged Assets During Reimbursement Claims

This is straight-forward and could potentially improve the peg’s status.

In order for a wallet to claim their reimbursement ONE, they need to exchange the unpegged assets that were recorded in the snapshot. These unpegged assets would then be burned. This should be part of the claim process.

Doing nothing about the unpegged tokens is not an advisable strategy.


Two-Week Discussion Window

This is stated in the VDAO Charter. All proposals require a 2-week discussion window. Please abide by this. The initial proposal only offered 6 days of discussion, eschewing established practices.


Governance Voting is Broken

How does Harmony intend to hold a governance vote on reimbursement when it’s currently impossible to hold a proper vote? This has been an issue since February. Will Harmony help resolve this issue prior to holding a reimbursement vote?

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I would appreciate if someone from Harmony could spend 20 seconds replying to the questions here please:

Thank you.

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The difference is that users who have assets locked and frozen in AAVE seem to be in a similar situation to Celsius customers. The rest of the users still have a choice between selling or waiting for the solution.

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