The NFT-backed lending protocol that lost nearly $12 million in crypto during the recent Curve exploit (and then paid a $1 million bounty to get most of it back) must now decide how to fill the gap.
JPEG’d is an NFT-collateralized crypto lending app that issues customers a derivative of ETH called pETH tied to their loans. Hungry to earn extra interest, many of those clients parked their pETH in a protocol-approved liquidity pool on Curve, the popular trading protocol on the Ethereum blockchain.
Their yield bet went bad when the exploiter emptied that pool and others in early August. But JPEG had agreed to pay the exploiter a bounty of 611 ETH to get back 5,495 ETH (90%). The move saved the protocol from financial uncertainty and its clients from complete decimation of their positions.
But someone has to eat the missing 611 ETH. In a vote that runs through Saturday, investors ruling the JPEG’d DAO will choose between six proposals that each place that burden on a slightly different party. The option overwhelmingly leading splits the pain between JPEG’d non-paying customers and the DAO itself.
Called Option D, it would see pETH price speculators and yield farmers who don’t deposit into Curve through JPEG’d in-house service called Citadel get most of their money back, but not all of it. That’s in contrast to paying customers: pETH coiners who paid a small fee to earn interest in a Curve pool through Citadel. They are completely made whole.
The DAO will incur a net loss of 484 ETH (approximately $802,000) and 861 million JPEG tokens (approximately $450,000) under this plan. It also plans to replace pETH with a new derivative token that it will send to all holders, but that will happen regardless of which option wins.
A pseudonymous user experience, or UX, developer for JPEG’d who goes by the screen name 0xtutti said option D is a “workaround” to the sticky problem. But “everyone gets a share of the recovered assets,” regardless of which option wins.
“In general, the community felt it was important to protect paying customers as much as possible,” 0xtutti said.
