Compensation Proposal: Distribute COMP to Affected Users in the DAI Liquidations

[cryptoguy123]

Thank you for your input, @ekrenzke . It is great to have your involvement and I appreciate you keeping an open mind.

@ekrenzke

This proposal provides reimbursement before a clear path to fixing the issue has been established. We would like to see a little more clarity around potential solutions before finalizing any form of reimbursement.

This I agree with completely.

@ekrenzke

This proposal reimburses users even when the protocol worked as designed, and may encourage further systemic risk. We do not want to set the precedent that tail risk should be subsidized by the COMP governance process.

The protocol worked as designed, but the design was clearly flawed. The Coinbase oracle printed an off-market price and Compound accepted it. Legitimate users were unnecessarily liquidated.

@ekrenzke

This proposal suggests reimbursement denominated in COMP to a small group of users affected by the issue, despite displaying behaviors that are not aligned with the long-term interest of the protocol.

I am not sure why you make this statement. I was liquidated and all I had done was supplied ETH/WBTC and borrowed DAI to the 80% limit which was described as a “safe max”. I was not doing anything particularly unusual other than using the protocol to borrow DAI. How is that behavior not long term aligned? Is the protocol not meant to be used?

If your statement does not apply to the entire set of users that were liquidated, but rather only the subset of liquidated users that were doing loop-farming, then I do agree with you.

All that said, I personally do believe that we can come up with a better proposal. 8% across the board makes DAI-DAI famers completely whole, while leaving “legitimate” users with as little as ~25% reimbursement on their losses. Effort should be made to understand the losses in more detail.