Resupply Proposes 15.5% Insurance Pool Burn to Address 10 Million reUSD Hack Loss

Resupply, a prominent player in the decentralized finance (DeFi) space, has proposed a $6 million insurance plan to address significant losses incurred following a recent hack. The plan involves the destruction of 6 million reUSD from the insurance pool to manage non-performant debt, accounting for 15.5% of the total insurance pool, which currently holds 38.7 million reUSD. This move aims to reduce the overall debt burden and stabilize the financial health of the protocol.

The proposal outlines a multi-faceted approach to tackle the debt issue. The destruction of 6 million reUSD is part of a broader strategy to ensure the sustainability and resilience of the platform. The insurance pool, serving as a safety net for users, will play a crucial role in this recovery process. Additionally, the plan includes using future revenues to address remaining debts and retention rewards for affected users.

Resupply's decision to use insurance funds for protocol-related issues has sparked debates within the ecosystem. Michael Egorov, co-founder of Curve, noted the complexity of identifying the exploit early, arguing that the insurance pool is specifically designed to cover exploit losses. However, key figures like Wang Yishi opposed the insurance fund's usage, citing a lack of precedent for such coverage. The financial impacts of the incident were profound, with $10 million reUSD becoming bad debt within the protocol.

The decision affects both the DeFi sector and related token ecosystems, especially those linked to the Curve platform. The compromise plan includes expedited governance voting, ensuring quick resolution and compensation pending community approval. Due to the unprecedented use of insurance reserves for handling protocol failures, the decision could have long-term impacts on protocol governance and insurance standards.

Critics have raised concerns about the handling of the reUSD losses, arguing that the proposed plan may not adequately address the root causes of the hack and the subsequent financial losses. Despite the criticism, Resupply remains committed to its recovery plan, emphasizing the importance of transparency and accountability in the process. The recovery plan also includes an initial treasury payment of approximately $640,000, which has already been made towards the $9.8 million loss. As of June 27th, a total of $2.85 million has been repaid, demonstrating Resupply's proactive approach to mitigating the financial impact of the hack.

The protocol's efforts to address the losses and restore user confidence are ongoing, with a focus on implementing robust security measures to prevent future incidents. In summary, Resupply's proposal to burn 6 million reUSD from the insurance pool is a significant step in managing the non-performant debt resulting from the recent hack. While the plan has faced criticism, it underscores the protocol's commitment to financial stability and user protection. The ongoing efforts to repay the losses and enhance security measures reflect Resupply's dedication to rebuilding trust and ensuring the long-term success of the platform.