On Friday, the Origin Finance stablecoin decentralized finance (DeFi) project announced a plan to compensate users affected by a $ 7 million exploit in November. This is part of a broader trend from developers, users, and vendors where players across the DeFi space are turning to insurance products and other exploit backstops.
On November 17, Origin Dollar announced that its high-income stablecoin project had been the victim of a $ 7 million flash credit attack. While the attack is just another example of a brutal summer and fall of DeFi protocols exposed to hacks and exploits, the response from the Origin Dollar team is characterized by an attempt to fully compensate users.
In a blog post on Friday, Origin Dollar’s product manager, Micah Alcorn, presented a tiered plan that would see 75% of users repay their lost funds immediately in the stable OUSD “checked and restarted with new security measures.”
However, for larger depositors, payments would be a more complicated process that would include a 1 year timeout of the Token OGN e-commerce utility. Thus, whether or not these larger depositors are fully compensated for their loss depends on the performance of the OGN token.
Even with the timeout, Alan, a semi-anonymous core developer of the insurance-related “coverage” protocol Cover, says Origin’s efforts could help attract new users to the space.
“I believe protocols (and their reviewers) need to start taking responsibility for the code they put out,” he said. “Whether they provide coverage or reimburse funds themselves, this type of behavior sets strong precedent and allows users to feel more secure in the platforms they use, which helps increase TVL and is therefore a win- Represents win situation. “
In the past, DeFi protocols offered little more to users than a “don’t risk more than you can afford to lose” disclaimer, but market movements seem to be leaning towards better protection.
According to Alan, Cover has nearly tripled its total banned value since its users decided to cover the Pickle Finance hack, rising to $ 39 million.
Likewise, Nsure Network – another test network coverage protocol slated to launch in Q1 2021 – has suffered a rift and is up nearly 60% over the month.
As these coverage tools evolve, Alan recommends that developers seriously investigate starting out with coverage plans and include clear exploit contingencies as a core feature of the DeFi protocols.
“DeFi needs to set a precedent that the protocol itself must be held accountable if they are hacked. From what I’ve seen in recent exploits, hacking just means “Oops, we’re going to fix this bug and do better next time”. […] An “insurance fund” really comforts users knowing their deposits will be covered if the log they are depositing into is hacked. “
Furthermore, such safeguards could be a requirement, not just a luxury, for hideous depositors if DeFi ever really went against the mainstream.
“A cover / protection fund is the way forward if DeFi really wants to achieve mass adoption.”