The community behind the Curve DAO (CRV) protocol has agreed to pay $44 million in compensation to victims of the July hack. Compensation will be in the form of Curve's CRV tokens.
DeFi exchange Curve Finance suffered a major attack in July, where $61 million was stolen from multiple Ethereum trading pools. The attack didn't just affect Curve; It also hit NFT lending protocol JPEG'd and DeFi lending platform Alchemix.
Although a significant portion of the stolen funds were recovered, liquidity providers (LPs) continued to suffer serious losses due to the activities of trading bots. The attack caused panic, causing $1.5 billion to be withdrawn from several Curve pools and leaving LPs facing significant shortfalls.
Liquidity providers play a very important role in exchanges like Curve. By supplying cryptocurrencies to trading pools, they enable other users to trade on the platforms. In return, LPs are rewarded with token emissions, a share of fees, or both.
In the first stage, the locked CRV compensation of $44 million will be gradually distributed to the victims on a linear basis over a year. This is because the funds were withdrawn from the DAO's Community Fund, whose contract imposes a vesting of at least one year on CRV tokens withdrawn from the pool.
Over the one-year linear vesting period, 196,626.29 CRV tokens will be issued per day, which will be equivalent to approximately $121,000 in daily CRV emissions based on the token's current spot price.
However, because CRV is a volatile asset, LPs have no guarantee that they will be fully compensated at the end of the vesting period, at least in dollars.
*This is not investment advice.