The JPEG’d NFT-backed loans protocol is at a crossroads as it struggles with a significant financial setback as a result of a recent Curve platform exploit that caused the loss of around $12 million in cryptocurrency. By paying a $1 million bounty to the exploiter, the protocol was able to recover a sizeable chunk of the stolen money, but there is still a shortfall of 611 ETH (about $1 million) that needs to be covered.
As an NFT-collateralized cryptocurrency lending platform, JPEG’d provides consumers with pETH, an Ethereum derivative that is tied to their loans. Many users have put their pETH into a liquidity pool on Curve, a well-known trading protocol on the Ethereum blockchain that is supported by JPEG’d, in an effort to earn more interest.
Unfortunately, an exploiter draining this pool among others in early August hurt their yield-generating plan. JPEG chose to pay the exploiter a 611 ETH bounty to recover 5,495 ETH in an effort to salvage the situation, effectively recovering 90% of the stolen assets. This action not only assisted in stabilizing the protocol but also shielded its clients from total position losses.
The crucial issue that now has to be resolved is who should be responsible for paying the 611 ETH that are missing. The JPEG’d DAO (Decentralized Autonomous Organization) is now conducting a vote among its investors. The voting is scheduled to end on Saturday. They must select one of six options, each of which suggests a different party to bear the losses.
The most popular choice, option D, proposes that the burden be split between the DAO itself and JPEG’d’s non-paying users. This indicates that most, but not all, of the pETH investors and yield farmers who did not put their money into the Curve pool using JPEG’d’s internal service called Citadel will receive their money back. In contrast, Citadel would completely refund paying users who coined pETH and paid a nominal price to get interest in a Curve pool.
This strategy would result in a net loss for the DAO of 484 ETH (or about $802,000) and 861 million JPEG tokens (or roughly $450,000). In addition, the DAO plans to replace pETH with a new derivative token that will be airdropped to all token holders regardless of the option selected.
Option D is a compromise that guarantees that all parties involved will receive a share of the recovered assets, regardless of how the vote is ultimately decided, in the difficult decision-making process for JPEG’d.