KVORUM
compoundSource: Compound governor bravo · #59

Distribute DAI to Users Affected in the DAI Liquidations

executedSep 14, 2021, 09:09 PM UTCbyC70xc77e…44ba

01Summary

AISummary by Kvorumclaude-haiku-4-5

Distribute 6,817,798 DAI to users affected by the November 26, 2020 DAI liquidation event where the price spiked to $1.30, compensating for the 8% liquidation penalty. Distribution will be automated via merkle distributor with no action required from users.

Type
treasury allocation
Funding
$6817798

Key changes

  • Reduce cDAI reserve by 6,817,797.96 DAI to fund compensation(high)
  • Approve merkle distributor to spend DAI from treasury(high)
  • Activate merkle distributor to automatically distribute DAI to affected addresses without requiring user claims(high)

Notable concerns

  • Compensation is drawn from the 16.4 million DAI market reserve
  • Affected addresses were identified from on-chain data within specific block bounds (11332733 to 11335286)
  • Merkle tree reconciliation relied on historical block analysis for accuracy
Contracts0x5d3a536e4d6dbd6114cc1ead35777bab948e36430x6b175474e89094c44da98b954eedeac495271d0f0x0634ca1d878a050eb525ed08852cc3bad7f5a1dc
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Read the description ↗

02Description

210 words

Distribute DAI to Users Affected in the DAI Liquidations

Background
This proposal seeks to compensate users affected by the unexpected increase in the DAI price to $1.30 on Coinbase Pro on November 26th, 2020. A total of 85,222,475 DAI was repaid on 11/26/20. Applying the 8% liquidation penalty, this proposal would pay out a total of 6,817,798 DAI from the 16.4 million DAI in the market reserve.

Thank you to the Compound community and investors for the weeks of feedback, iteration and discussions that have helped craft this proposal.

Code Mechanics
This proposal utilizes a slightly modified version of the merkle distributor used for the airdrop of Uniswap’s UNI token. The merkle tree contains the addresses of those affected by the liquidation event, and was reconciled and analyzed against on-chain data from around the time of the liquidation event (block bounds 11332733 to 11335286).

A relayer will claim the merkle drop for each wallet according to the distributor and distribute the DAI to user’s wallets. Users do not need to interact with any contract to claim this DAI.

@arr00/arr00 is the core contributor to the code.

Next steps: If you support this proposal, you can delegate COMP to this autonomous proposal.

To view the full forum post, see here.

03Mismatch analysis

AIMismatch analysis by Kvorum

A calldata-vs-description analysis is not generated yet. Review the decoded actions →

04Actions

3 total
#0_reduceReserves(uint256)chain 0x1
Target
0x5d3a…3643
Value
0 wei
Function
_reduceReserves(uint256)
Arguments
{
  "0": "6817797961061626144874170"
}
Calldata
#1approve(address,uint256)chain 0x1
Target
0x6b17…1d0f
Value
0 wei
Function
approve(address,uint256)
Arguments
{
  "0": "0x0634ca1D878a050eB525ed08852Cc3BaD7f5a1DC",
  "1": "6817797961061626144874170"
}
Calldata
#2fund()chain 0x1
Target
0x0634…a1dc
Value
0 wei
Function
fund()
Arguments
{}
Calldata

05Tally

Summed from votes

Voters31
VP participating1.8M
Outcome (current)For
Current support94.2%

06Voters

31 total

No votes recorded yet.

07Forum

AIForum synthesis by Kvorumclaude-sonnet-5
sentiment · favorablethread · constructive

Arguments for

  • The key issues from the failed Proposal 32 have now been resolved: the oracle bug is fixed, so compensation is retroactive rather than for an unresolved issue, and payment is now in DAI from reserves rather than COMP.— kybx86, arr00, JacobPPhillips, justingregorius, rleshner
  • Users suffered losses because the protocol's oracle diverged significantly from real market prices, which was a flaw in the protocol's design, so the community should make affected users whole.— tob, justingregorius, dabar90, arr00
  • DAI reserves are now sufficient (15.1M) to fully cover the ~6.8M DAI compensation based on the 8% liquidation penalty, making this financially feasible without new issuance.— kybx86, rleshner
  • The technical implementation (merkle distributor fork of Uniswap's airdrop code) has been thoroughly tested via unit tests, forking simulation, and testnet runs, giving confidence it will work correctly.— kybx86, justingregorius, arr00
  • Compensation should be uniform and not manually adjusted for specific wallets, since introducing subjective judgments about which users 'deserve' compensation is impractical and inconsistent with systematic governance.— kybx86, arr00, inkymaze, monet-supply
  • This proposal demonstrates that Compound governance and reserves can be responsibly used to protect users in rare adverse events, sending a positive signal to current and future users.— rleshner, kybx86, justingregorius
  • Paying in DAI rather than COMP sets a good precedent and avoids further diluting or misusing the COMP treasury for compensation purposes.— JacobPPhillips, inkymaze, tob

Arguments against

  • A large share of the payout (over 74%) goes to just two accounts, including one that was recursively farming COMP via risky borrowing, which seems unfair to reward with reserve funds.— monet-supply, pyggie
  • Compensation amounts for large 'industrial-scale' farming accounts should be curtailed or capped, since these users already profited enormously from COMP farming and are not representative of average protocol users.— monet-supply, getty, tob
  • The largest liquidated account exploited protocol design flaws (recursive borrowing beyond safe limits, bypassing UI protections) to farm COMP profitably, so it should not be further rewarded with reserve compensation.— pyggie
  • Compensation should be paid in COMP valued at the time of liquidation rather than DAI, to properly account for the opportunity cost of missed price appreciation.— tob, 4D_compound, getty
  • The compensation formula (8% liquidation penalty) does not account for the massive appreciation of liquidated collateral assets (e.g., ETH), so affected users are still left significantly worse off than if the liquidation had not occurred.— dabar90, tob

Unresolved concerns

  • Whether and how to curtail or reduce compensation for the largest 'whale' or farming accounts was debated extensively but never resolved; the final proposal proceeded without any caps.— monet-supply, getty, pyggie
  • No clear, agreed-upon framework was established for what 'acting responsibly' means or how to fairly distinguish deserving versus undeserving affected users.— dabar90, getty, arr00
  • The proposal does not define or add structure around what future situations (if any) would merit similar reimbursement from reserves going forward.— JacobPPhillips
  • Confusion from at least one user about eligibility criteria (whether general DAI suppliers, not just those liquidated, would be compensated) was not fully clarified in the thread.— Theo
  • Whether compensation should account for the opportunity cost of asset price appreciation (e.g., paying in COMP value at time of liquidation) was raised as worth considering but left as a non-blocking, unresolved issue.— tob, 4D_compound

Notable participants

  • kybx86Proposal author who drafted the proposal, incorporated community feedback, deployed the CAP, and shepherded it through to a passed on-chain vote.
  • arr00Core technical contributor who built and tested the merkle distributor code and executed the final distribution.
  • monet-supplyRaised concerns about disproportionate payouts to top accounts and provided a spreadsheet tool to model compensation reduction options.
  • pyggieVoted against the proposal and provided detailed on-chain evidence that a large farming account exploited protocol design flaws.
  • rleshnerOriginal liquidation data provider and later voiced support for the proposal, framing it as a rare reserve-worthy event.
  • tobAffected user who argued for full reimbursement without arbitrary reductions and proposed compensating based on COMP value at liquidation time.
  • gettyProposed specific reduction threshold/ratio parameters and argued larger users should bear more responsibility, also advocated for COMP-based payment.
  • justingregoriusRepresented a16z's supportive vote and articulated reasoning about protocol expectations and non-precedent-setting.
  • inkymazeRepresented Gauntlet, endorsing DAI over COMP and cautioning against subjective compensation caps, voted in favor.
  • dabar90Affected user who challenged the 'acting responsibly' framing and highlighted losses from asset price appreciation not covered by the payout.
Generated by Kvorum
model: claude-sonnet-5
provider: anthropic
profile: anthropic-strong-v1
prompt: v1.0
generated: 2mo ago
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