Increase maxLossWithdraw and Decommission Aura Euler Fed

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Proposal to Increase maxLossWithdraw and Decommission Aura Euler Fed

Background

On March 13th, the Euler protocol was flash loan attacked, which resulted in a loss of over $195M. Despite the swift actions taken by DAO contributors, which mitigated the overall loss considerably, approximately 863K DOLA remained vulnerable due to exposure through the Aura Euler Fed (specifically, within the DOLA/bb-e-USD pool on Balancer). Post-event recovery efforts have been successful, with a significant majority of funds recouped from the offender and redirected to the impacted parties, including the Inverse Finance DAO, which is projected to recuperate beyond the initial ~863k of accrued bad debt.

Overview

In the wake of these events, a residual 8,408 DOLA remains within the DOLA/bb-e-USD pool on Balancer. Once operations resume post the stipulated ‘unpause’ date of June 8th, there lies an opportunity for the DAO to reclaim this remaining DOLA through a high-slippage fed contraction. To effectively execute this strategy, a modification in the maxLossWithdraw parameter is crucial, requiring an escalation from the existing 5% limit to 100%.

This proposal represents a highly specialized scenario where a substantial slippage contraction can be beneficially exploited by the DAO. To substantiate the viability of this approach, Proof-of-Concept (POC) simulations have been developed and executed, suggesting 8405 of the 8408 DOLA can be rescued if prompt action is taken.

In addition to increasing the maxLossWithdraw, this proposal seeks to remove the Aura Euler Fed as a DOLA minter. Due to the current state of the pool, there is no reason why fresh new DOLA being minted into the pool would benefit the DAO, so this proposal will disable this.

On-Chain Actions

  • Set maxLossWithdraw on Aura Euler Fed to 10,000 bps (100%).
  • Remove Aura Euler Fed as a DOLA minter
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It is important for the Inverse Finance DAO to recoup as much of the funds as possible following the Euler exploit. So far our recovery efforts have been very successful. This residual 8,408 DOLA within the DOLA/bb-e-USD pool on Balancer represents the final effort in this regard and should not be written off. By modifying the maxLossWithdraw parameter to 100%, the DAO can effectively execute this strategy and potentially rescue the majority of the remaining DOLA. The POC simulations conducted further support the viability of this approach. Therefore, I am in favor of this proposal.

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