The NFT-backed loans protocol must now choose how to close the gap after losing about $12 million in cryptocurrency during the recent Curve exploit (and subsequently paying a $1 million bounty to recover the majority of the funds).Customers receive a pETH derivative of ETH from JPEG’d, an NFT-collateralized cryptocurrency lending platform, which is linked to their loans.Many of those users put their pETH in a protocol-endorsed liquidity pool on Curve, the well-liked trading protocol on the Ethereum blockchain, in an effort to increase their interest rates.
Early in August, an exploiter drained that pool and several others, ruining their yield bet.JPEG has, however, agreed to pay the exploiter a 611 ETH prize in exchange for 5,495 ETH (90%) being returned.The decision prevented both the protocol’s consumers and its financial situation from being completely destroyed.However, 611 ETH must be consumed by someone.Investors in the JPEG’d DAO are voting until this coming Saturday on six proposals that would each shift that responsibility to a different party.JPEG’d’s unpaid clients and the DAO itself will both suffer under the alternative that is currently overwhelmingly in the lead.
Option D would see most, but not all, of the pETH price speculators’ and yield farmers’ investments returned. These individuals did not deposit into Curve via JPEG’s internal facility, called Citadel.pETH miners who paid a nominal price to participate in a Curve pool through Citadel were paying clients, in contrast, who received interest.All of their needs are met.In accordance with this strategy, the DAO will suffer a net loss of 484 ETH (or approximately $802,000) and 861 million JPEG tokens (or about $450,000).Additionally, it intends to do away with pETH in favor of a new derivative token that it would airdrop to all holders, although this will take occurring regardless of the outcome.
Option D, according to an anonymous user experience (UX) developer for JPEG’d who goes by the screen moniker 0xtutti, is a “in-between” solution to the problematic issue. Whatever choice prevails, “everyone gets a share of the recovered assets” anyway.“Generally the community cared about protecting paying customers as much as possible,” 0xtutti said.