Curve Crisis Averted, NFT Loans Protocol Now Votes on Next Steps

JPEG’d DAO voters are deciding how to account for a $1 million bounty.

AccessTimeIconAug 18, 2023 at 7:29 p.m. UTC

The NFT-backed loans protocol that lost nearly $12 million in crypto during the recent Curve exploit (and then paid a $1 million bounty to get most back) now has to decide how to fill the hole.

JPEG’d is a NFT-collateralized crypto lending app that issues customers a derivative of ETH, called pETH, that’s tied to their loans. Hungry to earn extra interest, many of those customers parked their pETH in a protocol-endorsed liquidity pool on Curve, the popular trading protocol on the Ethereum blockchain.

Their yield bet went bad when in early August exploiter drained that pool and others. But JPEG’d agreed to pay the exploiter a 611 ETH bounty to get 5,495 ETH (90%) back. The move saved the protocol from financial uncertainty and its customers from complete decimation on their positions.

But someone has to eat the missing 611 ETH. In a vote running until Saturday, investors governing the JPEG’d DAO are choosing between six proposals that each place that burden on a slightly different party. The option that’s overwhelmingly in the lead splits the pain between non-paying customers of JPEG’d and the DAO itself.

Called option D, it would see pETH price speculators and yield farmers who did not deposit into Curve via JPEG’d in-house service, called Citadel, get most of their money back, but not all. That’s in contrast to paying customers: pETH minters who paid a small fee to earn interest in a Curve pool through Citadel. They get made entirely whole.

The DAO will incur a net loss of 484 ETH (about $802,000) and 861 million JPEG tokens (about $450,000) under this plan. It also plans to replace pETH with a new derivative token that it will airdrop to all holders, but that will happen no matter what option wins.

A pseudonymous user experience, or UX, developer for JPEG’d who goes by the screen name 0xtutti said option D is an “in-between” solution to the sticky problem. But “everyone gets a share of the recovered assets” no matter which option wins out.

“Generally the community cared about protecting paying customers as much as possible,” 0xtutti said.

Edited by Nick Baker.


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Danny Nelson

Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.