Gearbox DAO

Author: amplice

Summary

Update: Due to incorrect information in the previous spreadsheet included in GIP-127, voters were encouraged to reject the previous proposal in favor of a new one with corrected numbers.

In addition to this, there was some discussion in discord about what the DAO should do here - compensate all users who were liquidated, or focus only on those who were liquidated after the emergency pause, as well as some discussion about the method of distribution. Therefore we will use approval voting (where you can vote for multiple options) to see the DAO’s preference whilst still reaching quorum. A reminder to DAO participants - the winning option must have at least 200m GEAR votes.

Motivation

In order to get the full context of this proposal, we recommend all DAO participants first read GIP-127.

This proposal is an amendment of GIP-127. The intent is the same - to partially compensate users affected by the liquidations caused by ezETH depeg event.

The original proposal was focused on users who were liquidated during the emergency pause, however some of the data included in the proposal was incorrect. Thus this amended proposal is necessary.

Furthermore, since there is some contention within the governance discord about exactly which users should be compensated and how the distributions should work, Gearbox DAO as a whole will decide the best way to proceed here by offering multiple choices using approval voting methodology.

First of all, the final proper calculation of the emergency pause liquidator fees is 156.68 + 81.96 - 25.77 = 212.87 ETH. The other 22.48 ETH were made from liquidations that were outside of the emergency pause scope, so technically, those do not have to be distributed. However, the idea is not to cheap out on users but instead use the profits to cover the scope. Again, there is no requirement to do it, but caring about users is a good idea. As a result, 235.35 ETH was voted on for distribution.

Have to note that those who were liquidated before the pause (meaning they could have topped up their positions with more collateral or closed themselves) are not in the scope of this proposal and the distribution, as has been communicated at all times. Given that some disagree, the vote below can include these users, too.

Proposal Specification

The spreadsheet with new data is here. In the spreadsheet, the amounts in the column displaying “Option 1” corresponds to 1) below. The amounts in the column displaying “Option 2” corresponds to 2) below. The spreadsheet shared in GIP-127 corresponds to 3) below.

1. Approve, socialize losses: 235.35 ETH is distributed pro rata to user losses. Losses in this case are computed as: how much a user would have had left if they closed the account on their own one block before liquidation. Only for users liquidated during pause.

2. Approve, don’t socialize losses: 235.35 ETH is distributed proportional to liquidation premium. The users will get exactly the liquidator’s profit on their liquidation, scaled up so that the total sum is still 235.35. Only for users liquidated during pause.

3. Approve spreadsheet included in [GIP-127]: compensate every liquidated user that night regardless of whether it was during the pause or not, pro rata based on user losses.

4. Reject any compensation

Rationale

The first version of this proposal included some incorrect data so DAO participants were broadly encouraged to reject it in favor of an amended proposal (this one).

At the same time, there was some discussion in the discord about whether this proposal should only cover users who were liquidated during the emergency pause, or whether it should include all users who were liquidated due to this depeg event, as well as some discussion about the exact method of distribution (pro rata based on losses or based on actual liquidation premium profit earned on specific credit accounts). Therefore, this proposal includes multiple options.

Implementation

Funds will be sent directly to affected wallets.