I believe the 2% XTK proposal above makes a lot of sense and strongly support it. I’m going to call it “option A”
Additionally, I wrote this draft below earlier based upon the conversations observed in the discord community. Several other members also provided feedback/edits to it, so I’m also including this alternative approach down below that proposes a slightly larger grant, vested over 2 years instead of 1 year. This provides more reparations to the affected LPs and drives longer-term loyalty, but has the disadvantage of being more complex. You can call this “option B” **
We propose that we invest 2.5% of the “Community Vesting” XTK reserves into reparations for the victims of the 5/12/2021 hack. This would have two vesting periods:
- 1.5% vesting over the first year
- 1% vesting over the 2nd year
What’s the ROI for xToken? Why is this a better use of the reserves than other options?
Members of the community appreciate the team’s response and handling of the situation so far, but many have voiced that the 1% is lower than expected or hoped for, given the size of the losses. We believe that 2.5% would feel more commiserate to the size of the losses for the LPs, which would help retain users, strengthen brand value/trust, and foster long-term community. While there’s a lot of appreciation potential for XTK and we fully expect XTK’s price to reach $2 or more in the future, that doesn’t account at all for the opportunity cost of the losses today (ETH, SNX, BNT) likely also being worth 2-3x more in 1 year. Which is why we believe 2.5% would be more appropriate.
By providing 2.5%, I think a lot more of us would walk away being stronger supporters and continued users of xtokens. We think of it as a long-term investment in community that’s higher ROI than saving an additional 1.5% of XTK for future community emissions programs. This is also a long-term investment in xtoken’s reputation in the Defi community, which is a small world and word travels fast.
Why 2.5%? Why over 2 years?
As covered in the table up above, before the hack, the FDV was ~$500m. The ~25m loss is ~5% of this. Splitting the difference (~2.5%) and vesting it over the long-term (2-years) is a more equitable approach to affected LPs, driving long term community engagement and loyalty.
What are the negative tradeoffs? Is it still worth doing this despite these risks?
Risk #1 - we are using up too much of the reserves
I think this is risk is mitigated by the fact that there is still a sufficiently large amount of XTK in reserves (e.g., Community Vesting portion started with 50% and likely has more than 35% available for future incentives). We believe the spirit and outcomes of providing this would align with the Community Vesting portion’s goals, and this still leaves the vast majority of emissions incentives untouched. So I believe this risk is minimal.
Risk #2 - this will negatively impact XTK price
Given that this is being gradually vested over 2 years, that should minimize most of any selling pressure by those that don’t believe in XTK. Of course this will still have some increased selling pressure, but we believe in the team’s ability to execute and by that point, XTK’s brand, market cap, and value will grown a lot, resulting in fewer sellers and more liquidity to absorb any selling. One way of mitigating this if needed is to add a 6-month cliff, so that the first investment doesn’t occur until after XTK has even more traction
We wanted to share this perspective on behalf of the community. We have seen that you always value the community’s perspective, so we hope that you may reconsider the 1% investment as you see this increased feedback from us.
Anyways, this was the draft proposal. Looking forward to people’s thoughts. I think either Option A or Option B would be a fair and high ROI investment for xToken to make in building loyalty/brand/trust with affected LPs and the larger DeFi community.