BeethovenX

Introduction:

Starting on the morning of 27 Aug 2023 Beethoven X experienced multiple attacks on both the Fantom and Optimism deployments, with a total loss of around $1.1M on Fantom and $320k on Optimism. There are always risks in DeFi, which can be mitigated by audits and due diligence, but never completely avoided. Multiple protocols have experienced exploits and there’s no one way to proceed if such an incident occurs. Balancer released a full technical postmortem report here: https://medium.com/balancer-protocol/rate-manipulation-in-balancer-boosted-pools-technical-postmortem-53db4b642492 and Beethoven’s perspective and time-line can be seen here: https://medium.com/beethoven-x/rate-manipulation-in-balancer-boosted-pools-a-beethoven-x-perspective-e419bbb66592.

The subject of this proposal is the Optimism deployment, Beethoven X DAO decided not to reimburse on Fantom as part of BIP-53.

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Motivation:

The Optimism deployment is set up as a partnership between Beethoven X and Balancer. Following the passing of BIP-445 on Balancer (https://forum.balancer.fi/t/bip-445-decide-on-direction-of-restitution-for-affected-lps-in-boosted-pool-incident/5187), a 90 day information collection period was held, where affected users could apply for reimbursement. During the 90 day period multiple reminders were sent out over various channels. The collected information is presented in the following google sheet: https://docs.google.com/spreadsheets/d/1oAAqh2fJnR4EwnHYiKzuJoWZfy1GxmOPTkDj2SAR71I/edit#gid=493935617, based on which the total reimbursement for the loss on Optimism would be $5861.27.

This proposal is to decide if and how to proceed with the reimbursement based on the information gathered. There has been mutual signaling with Balancer that if a reimbursement happens on Optimism, then both sides of the partnership would cover equal amounts of the value (similarly to how revenue is divided). If Beethoven X DAO decides against reimbursement, then Balancer has indicated they would cover the entire amount. Balancer has decided to reimburse in BAL tokens and has yet to decide whether they are planning to reimburse 75% or 100% of the value lost: https://forum.balancer.fi/t/rfc-linear-pool-hack-restitution/5504.

The Beethoven X contributors and Music Directors propose holding a Single choice vote with the following options: YES - Beethoven X DAO covers the reimbursement equally with Balancer NO - Beethoven X DAO is not willing to cover the reimbursement

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Impacts/Risk Assessment

The impact of the proposal depends on which option is chosen. Voting YES means Beethoven X will cover the reimbursement equally with Balancer. Since Balancer has not yet decided whether to reimburse 75% or 100% of the value lost, then Beethoven X would be covering approximately $2931 or $2198. We propose to cover the loss in USDC, since affected users were in stable pools and it will make reimbursement management straightforward.

Voting NO means Beethoven X DAO is not willing to reimburse on Optimism. While Balancer would then cover the loss completely from their side, this could potentially cause disagreements between the partners in the future.

For other purposes it is difficult to assess potential impacts/risks with such a decision, since the view would be subjective to every user. In any case the decision should be considered as a separate event and not be the basis for any other potential reimbursement discussions.

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Specification/Execution Plan

Beethoven X contributors have agreed to assist with the distribution of the reimbursement on Optimism, during which reimbursement would be airdropped to the wallets that applied for reimbursement.

With the passing of the BIP the following actions will be taken:

1. Balancer will send the amount they will cover to Beethoven X Ethereum treasury in BAL
2. Beethoven X will bridge BAL to Optimism
3. Beethoven X will airdrop BAL (from Balancer) and USDC (from Beethoven X) to the affected wallets. Since BAL is subject to price volatility, then all of the BAL bridged to Optimism will be airdropped to the wallets proportionally to the value lost.

The reimbursement will take place within a week after BAL has been received by Beethoven X.