For DeFi protocols, security of the protocol is important but not the only thing that matters – at Saddle, we also recognize that safety is as critically important a dimension.
To that end, following the 4/30 metapool exploit at Saddle, we quickly pivoted to planning for remuneration – to figuring out a way to make those who lost money to the exploit whole.
Remuneration plan announced
As of 5/24, we have posted a remuneration plan to Snapshot. The Saddle Improvement Proposal (SIP) proposes to compensate users who were affected by the 4/30 exploit in the following ways:
- Establish a remuneration plan for LP’s afflicted by the metapool exploit on Apr-30th, 2022;
- Offer the exploiter a bounty for returning the stolen funds;
- Expand Saddle’s security infrastructure through means of a dedicated fund; and,
- Distribute $3m FRAX pro-rata to all affected LP’s.
We expect the Snapshot associated with the remuneration plan to be approved by the time the vote concludes on 4/27. If approved, the remuneration plan will be implemented shortly thereafter.
Community members pitch in to figure out remuneration
While the Engineering team was shoring up security after the hack, the Saddle community was actively engaged in discussing possible remuneration options.
On 5/2, we posted the precursor to SIP-16 on the community forum. This SIP sought to remunerate BlockSec for the funds secured during their whitehack operation. The SIP passed, and the community agreed to pay BlockSec a 1,323,340 SDL bounty from the treasury. This amount was intended to be roughly equal to 10% of the amount BlockSec secured from the vulnerable pool – with SDL as priced by the community in SIP-13. Recovered funds were distributed to affected LPs pro-rata.
A second SIP was put forth seeking to remunerate LP’s for the losses they suffered in the attack, and establish a security fund to mitigate the likelihood of future exploits. This SIP was hotly debated by the Saddle community both in Discord and on the forum. The community made some excellent and well reasoned arguments. Concerns were raised with regard to SDL making up 100% of the proposed repayment.
A number of solutions to this were presented and the Saddle team carefully considered each of them. This led to a consensus between team and community suggesting that the healthiest course of action would be payments received in some combination of SDL and stablecoins.
Shout out to community members Audrey, jiong, Fart Breath, SumWin, and many others in the community for their engagement in the process which ultimately strengthened the remuneration plan.
Community, team, and partners agree on a remuneration plan
These discussions among the Saddle community led directly to the remuneration plan's current iteration, SIP-21. Notably, this SIP includes both the addition of 3m $FRAX, to be distributed to affected LP’s pro-rata, and a reduction to the amount of $SDL headed to the aforementioned security fund, in favor of LP’s (from 20%, to 10%).
More granularly, SIP-21 notes the following specifications for the deal:
In order to secure the 3m FRAX for distribution to affected users, Saddle will enter a deal with Frax, the terms of which are as follows:
- Frax will use 3m FRAX to purchase SDL from the Saddle treasury
- The SDL will be purchased at an FDV of $150M [a 50% discount to SIP-13]
- Frax will permanently lock their SDL as $veSDL
- Saddle will distribute the 3m FRAX to affect LP’s pro-rata
In addition to the FRAX– 37,465,830.6 SDL will be set aside for affected LP’s, division of said SDL is proposed as follows:
- 10% set aside for a protocol security fund
- 50% of this to be offered as a bribe to the exploiter for returning the funds [SDL will be returned to the security fund if no agreement can be established with the exploiter]
- 90% to be distributed to affected LP’s pro-rata
- 20% of which would be claimable immediately
- The remaining 80% vesting linearly over 12 months
The original plan was good, but not great, and the community saw a better way forward. Any emergency response is a delicate balancing act. The community's desires, swiftly tightening deadlines, and industry standards must all be weighed and balanced with careful hands.
The remuneration plan we have now represents the culmination of that effort: The SIP in its current state stands not only to remunerate LP's and improve the future security of the protocol, but also to strengthen our relationship with Frax and lower sell pressure on SDL via permalock.
Saddle is safer and more secure
The experience has underlined to us that safety includes more than the technical security of the protocol. It also includes broader aspects like: Is there transparency? Do community members have an authentic voice and choices in deciding what happens to the project? When something goes wrong with the protocol that affects users, is the project overall making a good-faith effort to look out for the community members and users who were affected?
As crypto-natives ourselves, we understand that DeFi is risky, and we have been on the receiving end of exploits and hacks that affected our funds on other protocols – and we’ve seen the good and the bad in terms of responses and compensation to users.
At Saddle we believe in leveraging resources to give more information and choices to community members. Saddle’s commitment to issuing a remuneration plan – as well as the way that plan was conceived with inputs and feedback from the community – reflected our commitment to making Saddle as safe as possible if not safer than peer protocols.
You may still have found yourself using our contracts everyday following the hack – Saddle is the most distributed open-source stableswap implementation. Our contracts are used across the ecosystem to support low-slippage swaps between pegged value crypto assets.
At Saddle we aren't just providing our contracts to our users. We're collaborating to build out the foundational lego blocks of DeFi.
Saddle is building
In the wake of the hack, Saddle continues full-steam ahead toward building out its tokenomics roadmap. As we move closer to token unlock, you can expect more exciting features to dot the Saddle horizon. Our vote escrow model is all lined up to kick off the reward guages for your favorite protocols. With upcoming features like LP collateralized loans making it possible to leverage up with a few simple clicks, it’s never been easier to adjust Saddle to your own personal risk tolerance.
Your Saddle LP positions should be easily trackable with our new Zapper integration – which was built by a bandit just like you, through our Bounties for Bandits (b4b) program. With our commitment to a multichain presence, diverse community, and a highly responsive governance process, you can expect your voice to be heard while hodling SDL.