JPEG’d, an NFT-backed lending platform, faced a significant setback when it lost nearly $12 million in a recent exploit on Curve, a renowned trading protocol on Ethereum. While JPEG’d managed to salvage most by paying a hefty bounty, the aftermath presents a challenging decision on who bears the remaining losses.
The Attraction of pETH
JPEG’d offers its users a derivative of ETH named pETH through its unique lending model. Eager for enhanced returns, users transferred their pETH into a recommended liquidity pool on Curve. This move, however, turned sour in August when an exploiter tapped into the pool.
In response to the exploit, JPEG’d acted swiftly, agreeing to pay the exploiter a bounty of 611 ETH. This decisive action ensured the return of 90% of the drained assets, preserving the protocol’s integrity and safeguarding the customers’ positions.
As the dust settles, a pressing question remains: Who shoulders the burden of the 611 ETH? The JPEG’d DAO, the governing entity, is currently amid a vote, deliberating over six potential solutions. The leading proposal, known as Option D, suggests a shared responsibility model between non-paying JPEG’d customers and the DAO itself.
Details of Option D for JPEG’d Users
Under Option D, pETH holders who avoided using JPEG’d’s Citadel service for depositing into Curve might not recover their full investments. On the other hand, pETH users who used Citadel after paying a fee will be fully compensated. Should this proposal pass, the DAO would face a loss totaling 484 ETH (equivalent to approximately $802,000) and 861 million JPEG tokens (valued at about $450,000). Moreover, there’s a unanimous decision to introduce a new derivative token, replacing pETH, which will be airdropped to all holders.
0xtutti, an anonymous UX developer associated with JPEG’d, views Option D as a balanced remedy. Irrespective of which option gains approval, all stakeholders will receive a portion of the recovered assets. He adds, “The community’s primary concern is ensuring the maximum protection for paying customers.”
