VIP 10: MultiStables Vault Exploit Post-mortem


Following the MultiStables Vault Exploit Post-mortem, we will create a compensation fund which will be funded by a combination of the dev fund, insurance fund and a portion of fees that are currently generated by the protocol.


We propose some changes to the fee structure as follows:

Increase vault performance fees to 20% and receipt from swap fees to 50% (previously was 14% and 30%)

Then, we consider two options on how the fees go to the compensation fund:

1) 30% of all profits (with the new above fees) go to the compensation fund (exactly 6% of performance fee and 15% cut from swap fee). That means governance vault stakers will receive 14% of performance fee and 35% cut from swap fees (which is same performance fee as before and 5% more fee from cut)

2) 50% of all profits go to the compensation fund (that means 10% performance fee and 25% cut from swap fee). Governance vault stakers will receive 10% performance fee and 25% cut from swap fee (a bit lower)

To make the accounting part for affected users as seamless as possible, an IOU token named $VBOND will be created at a 1:1 ratio for every dollar lost by affected farmers at the MultiStables vault with some enhancements.

6110772.30995$ was lost in the incident, so 6110772.30995 $VBOND will be created. The two addresses which received 45K DAI and 50K DAI respectively from the exploiter will see their $VBOND claimed amount less than 45K $VBOND and 50K $VBOND respectively to ensure fairness.

It will auto accrue 10% APY using rebase tech every week. That means if you hold 1 $VBOND, next week you will have approximately 1.00183 $VBOND automatically. The compensation fund will be used to buy back all $VBOND to remain the peg of 1$ and burn all the bought $VBOND and until such a time when the compensation fund exceeds the remaining outstanding $VBOND. The rebasing factor is fixed as 0.183% every week . So basically we have a contract to store the buyback fund. If at any time the contract has a greater value than the supply of $VBOND, then we will stop the rebasing and anyone would be able to trade their $VBOND and receive 1 USDC in return (1:1).

$VBOND has built-in inflation and this is designed to compensate impacted users for not being able to access their capital. This will also allow the market to possibly buy and sell the IOUs; giving those depositors the ability to exit early if desired, possibly at a gross profit or at a discount. If the price is too high, then speculators will absorb losses.

Incentive reward for VBOND/VALUE liquidity providers

Using the 95K $VBOND from above, the Value DeFi team will provide an initial liquidity of $95K x 2 = $190K for a VBOND/VALUE FaaS pool on Value Liquid.

We have received many requests from the community to create extra incentive for liquidity providers on that pool. Because the emission of VALUE is almost running-out, and through the community multisigners who are in possession of the vUSD key, we will be proposing the following pool parameters:

That means we will give 0.5 vUSD/block to LPs of the pool, 3250 vUSD/day. The incentive should last at least 6 months first, subjected to change depends on the situation.


The community will vote to decide how the fees for the compensation fund will be defined.

VOTE #1:

30% option: 30% of all profits (with the new above fees) will go to the compensation fund (exactly 6% of performance fee and 15% cut from swap fee)

50% option: 50% of all profits will go to the compensation fund (that means 10% performance fee and 25% cut from swap fee).

VOTE #2:

vUSD incentive reward for VBOND/VALUE pool:

For: give 0.5 vUSD/block to the LPs of VBOND/VALUE pool

Against: No vUSD incentive reward

VIP 10 Voting will start from Friday, Dec 11th, 2020 05:00:00 GMT+0 and end by Sunday, Dec 13th, 2020 14:00:00 GMT+0. The implementation will be planned and announced after voting ends.

VIP 10 Voting will not cost gas. All VALUE stakers in Governance Vault will be able to vote. You may also re-vote before voting ends. To avoid spam, each voter can only re-vote after a 1 hour cooldown period.