In April, a lending and borrowing protocol called Rari was hacked for around $80 million across seven different pools.
Called Fuse pools, they essentially allow anyone to create a lending market for any asset and “create their own compound.” according to Jai Bhavani, the former CEO of Rari. Compound Finance was one of the very first crypto lending and borrowing marketplaces.
It was a novel idea, but very clearly fraught with risk.
Following the $80 million exploit, the communities involved came together to craft a response. The three options that emerged revolved around whether to make affected users whole, not make users whole, or offer an alternative.
The question was put to a vote on the DAO Snapshot voting platform.
After the polls closed on May 16, the community had voted overwhelmingly in favor of refunding affected users, with around 34 million votes cast.
With the wishes of the community expressed and a direction established, the next steps were pretty clear, right?
A second vote on June 12 vetoed the original proposal to refund the hacked funds.
Rari member and key Tribe DAO contributor Jack Longarzo argued that May’s initial vote was unclear “about how this refund would be implemented.” (Tribe DAO is the result of the merger of the Rari and Fei protocols in December.)
About a week later, a third vote took place, asking essentially the same question: should the community reimburse victims of the Fuse hack? This time around, the community strongly voted against the idea.
Naturally, the revote drew heavy criticism with so much money on the table.
“There is some dramatic CeFi stuff, but this is a new low for DeFi,” tweeted Sam Kazemian, founder of Frax Finance. Frax was an early backer of Fei and Rari, and also lost an estimated $13 million in the hack.
Also, it looks like there was plenty of money to give the victims full payment. Kazemian cited additional data referenced during the discussions that showed the project would have plenty of money (and even more) to fully reimburse victims.
It is certainly complicated. But drama aside, there’s another obvious casualty here: DAO governance.
In reversing the original will of the community in that first May vote, Tribe DAO management essentially said “your first votes don’t count, because you didn’t vote for the outcome we want.”
And other than the damage to the reputation of those in leadership positions—which admittedly is worth its weight in digital gold in this industry—there is very little recourse for community members.
What can you do when you find out your vote doesn’t count?
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