Curve DAO agrees to $44m compensation for July hack victims

Liquidity providers impacted by the $61 million hack against DeFi exchange Curve Finance in July are about to be made whole — for the most part.

That’s because Curve DAO, the community behind the protocol, voted on Thursday to deploy $44 million worth of Curve’s CRV tokens as compensation for the LPs whose funds were depleted.

Liquidity providers, or LPs, supply crypto tokens to trading pools on exchanges like Curve so that other users can perform swaps on the platforms.

In exchange, the LPs are rewarded with token emissions, a share of the fees, or both.

Curve Finance suffered a major exploit in July that saw $61 million siphoned from multiple Ether trading pools.

Curve wasn’t the only victim as the attack also hit NFT lending protocol JPEG’d and DeFi lender Alchemix.

While a significant portion of the stolen funds were recovered, LPs remained severely impaired amid the activity of trading bots.

The hack caused panic that saw $1.5 billion withdrawn from several Curve pools, leaving LPs with huge shortfalls.

The $44 million in CRV compensation will vest linearly for one year.

That’s because the funds were drawn from the DAO’s Community Fund, whose contract is coded to enforce a minimum one-year vesting on CRV tokens withdrawn from the pool.

The one-year linear vesting will see 196,626.29 CRV tokens emitted per day. That’s the equivalent to about $121,000 in daily CRV emissions based on the token’s current spot price.

Since CRV is a volatile asset, LPs have no guarantee that they will be made fully whole at the end of vesting tenure, at least in dollar terms.

Conversely, their compensation may end up eclipsing initial losses if CRV experiences a price rally.

Disclaimer: The two co-founders of DL News were previously core contributors to the Curve protocol.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.