Balancer To Refund $8M In Recovered Assets To Liquidity Providers After $128M Exploit
Decentralized finance (DeFi) protocol Balancer has outlined a framework to return millions of dollars in rescued assets to liquidity providers following an exploit that drained over $128 million from its V2 pools.
The proposal was published by two members of the protocol’s community and is now seeking community feedback on plans to distribute about $8 million in funds that were recovered through whitehat hackers and other “internal recovery efforts.”
Balancer Suffered One Of The Largest DeFi Exploits Of The Year
Earlier this month, the Balancer protocol was exploited, resulting in user funds being drained across five blockchain networks. This forced an emergency pause and prompted white-hat hackers to step in and try to recover some of the funds.
Approximately $28 million of the stolen funds have been recovered through a combination of methods.
The proposed framework will only cover the $8 million that was recovered directly from whitehat hackers and Balancer’s internal teams. StakeWise, the Ethereum-based liquid staking protocol, will separately return the remaining $19.7 million in osETH and osGNO to its own users through its governance process.
The proposal also takes a non-socialized approach when it comes to the reimbursement of funds. With this approach, each pool’s recovered funds will be distributed only to liquidity providers of that specific pool and network, instead of the losses being spread across all users.
Distributions will also be proportional to holdings at specific snapshot blocks that were taken just before the first exploit transaction was executed.
Whitehat Hackers Will Receive A 10% Bounty
For their help in recovering some of the lost funds, whitehat hackers will receive a 10% bounty after they complete legal ID disclosure, know-your-customer (KYC) checks, and sanctions screening, according to the proposal.
Bounties will be capped at $1 million per rescue operation.
The team identified six whitehat hackers who together recovered around $3.9 million across several networks at the time of the exploit.
That recovery was led by the anonymous whitehat “Anon#1,” who rescued $2.68 million on the Polygon network. The tokens recovered by this hacker include 8 million WPOL, 6.8 million MaticX, 2.9 million TruMATIC, and 72K stMATIC.
Funds that were recovered by Anon#1 (Source: Balancer forum)
Meanwhile Balancer’s own internal rescue operation that was coordinated with the security firm Certora recovered an additional $4.1 million from metastable pools across the Ethereum, Optimism, and Arbitrum networks. These pools were at risk, but were not yet exploited.
Claiming Mechanism Will Be Developed If Community Accepts Proposal
The proposal submitted by the two Balancer protocol community members also includes a claim mechanism that will require claimants to provide digital proof of consent of Balancer’s terms and conditions.
Claimants will be required to agree to release Balancer Labs, Balancer DAO, Balancer Foundation, and their affiliated parties from any liabilities related to the exploit. There will be a 180-day claim period.
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