Thank you all for your comments and suggestions. Below a few additional points to reiterate your feedback and answer open questions.
In the opinion of the team, a main driver for defining any actions forward should keep into consideration the interests of all parties involved. The rationale being that a successful pNetwork project positively impacts the ability to recoup value for whoever was affected by the attack. PNT is one key asset for the project along with pNetwork’s open-source codebase and team member’s knowledge and skills in the specific field of operations of the project. Therefore, any compensation plan would (either directly, should the compensation be in PNT, or indirectly, should the compensation be in other assets) benefit from a strong and successful project.
The original proposal (that is not set in stone, but can be reiterated based on community feedback) is aimed at maintaining value within the project for DAO members and node operators while recouping value for pBTC-on-BSC holders.
Specifically: since its inception, the project has been committed to progressive decentralization. Hence, expanding the network of node operators and expanding the number of DAO members have always been two core goals of the pNetwork. The aim to convert pBTC-on-BSC holders into DAO members and/or node operators goes in that direction and, if successful, would contribute to a positive progress for the pNetwork ecosystem both reinforcing security/reliability and decentralization as well as creating a flywheel effect for which the more entities are involved with the project the more additional target audiences the project can reach.
The above reasoning is a preamble to further iterate the points raised by @gmork that any compensation plan should pay attention to not “widely damage” full (current) node operators as well as not require pBTC-on-BSC holders to be part of the DAO.
As for the former point (node operators), I agree that it is important to maintain value for full node operators for the project to continue growing. As per the initial plan, this was aimed to be achieved by leaving node operator rewards (from cross-chain fees) unaltered and with no direct intervention on them - the only modification being a potential increase in the number of pNetwork nodes via the new “NFT light node” feature. However, the introduction of “light nodes” (meaning the possibility to spin-up nodes with a lower entry barrier) had already been discussed and it goes in the direction of expanding the network of nodes that is an inherent goal of pNetwork. At the same time, the impact of this on current node profitability is balanced out by the fact that rewards would be distributed proportionally to the daoPNTs at stake. Even with the addition of new light nodes to the network, full node operators (with a number of 200,000 PNT to 400,000 PNT at stake) would benefit from the network proportionally more compared to light nodes (starting stake at 4,000 PNT). Should new NFT light nodes decide to expand their staking position, a tokenomics-based flywheel effect would enter into play therefore still creating a benefit for full node operators.
As for the suggestion to target the NFT sale to “anybody who might be really interested in the node” - I would be genuinely interested in understanding why you think the current proposed approach doesn’t do that? The current proposed approach is already meant to be open for anyone interested in running a pNetwork node, it is not just directed to pBTC-on-BSC holders who suffered the attack. Specifically, the means of payment for the 2 phases of the NFT sale would be defined in terms of pBTC-on-BSC and pBTC-on-ETH or ETH respectively. This would just be the means of payment and not the target audience of the NFT sale, that would (as @gmork suggests) be open to anyone who is interested to join. The rationale behind using pBTC-on-BSC as a means of payment for the NFT sale on BSC (phase 1) is directed to both rebalancing the pBTC/BTCB ratio and decreasing the amount of pBTC-on-BSC that need to be reimbursed. Similarly, the rationale behind using pBTC-on-ETH or ETH (to be then converted into BTC) as a means of payment for the NFT sale on Ethereum (phase 2) is directed to collect BTC that can be used to partially recoup value for pBTC-on-BSC.
That said, it seems like your (@gmork) perception on this is that currently the NFT sale would be targeted at a smaller/non-the-right-target audience - can you please expand on why you think this might be the case? What changes would you apply for the NFT sale to be accessible by “anybody who might be really interested in the node”?
Considering all of the above, I’d like to expand on some of the proposed alternative approaches the community has suggested (thank you all for positively contributing to the discussion!). The three main suggestions received here (plus, one from Telegram) are:
a) recoup value in BTC
b) recoup value in a USD stablecoin (considering the value of BTC at the time of the attack)
c) recoup value by getting an investment from VCs or Binance
d) recoup value by offering multiple NFTs, each one with a different configuration in terms of duration of the cashback
e) recoup value by diluting PNT
Going in order:
a) recouping value in BTC vs recouping value in non-BTC (suggested by various people, including @gmork @merivercap among others)
Recouping value in BTC is a possibility. The rationale behind the team not proposing this as the first option is that we could not find a straightforward path for doing so in a value-generating manner. Suggestions from the community on this subject, for now, have also shortcomings as for how this would work.
Specifically, as suggested by @gmork the BTC could come out of an additional 0.05% fee on cross-chain transactions. While this solution would not negatively impact the work of node operators, as he himself suggests, this would carry the problem of “uncertainty about the period required to fully cover the loss”. In its initial proposal, it was the intention of the team not to leave the compensation plan as open ended, but rather to give pBTC-on-BSC holders a predefined and achievable timeframe for the value to be recouped. The reason why this would be open-ended is that it would be dependent on the price of BTC (i.e. if the price of BTC continues to grow, the amount to be reimbursed would continue to grow).
Other community members have suggested similar approaches, where a large percentage of the rewards for the work of node operators is redirected to pBTC-on-BSC holders. This approach would have the same issues presented above, plus the additional downside of making it unattractive for additional entities to join as node operators, hence significantly slowing-down the growth and success of the project.
As a side note, since some discussions both on the forum and on Telegram suggest that recouping value in BTC would be a way for the compensation plan not to be dependant on the success of the project - I’d like to point out that, even in this case, recouping value in BTC as per the approaches suggested above would require for the project to be successful.
b) recouping value following the compensation plan proposed but in USD stablecoin, considering the USD countervalue of BTC at the time of the attack (proposal from Telegram)
This is a valuable suggestion and something we are evaluating internally in terms of feasibility. No additional questions on this suggestion on our side for now.
c) recoup value by getting an investment from VCs or Binance (suggested by various people, including @merivercap @avirap among others)
Recouping value via an external investment is a possibility. The rationale behind the team not proposing this as the first option is that fundraising tends to be a long process with no guarantees on it resulting in a positive outcome. Again, resulting in uncertainty about the timeframe required to recoup value.
Any kind of evaluation of a project in terms of investment from a VC requires production of a targeted business plan, team interviews, due diligence in terms of the project, the community and how the specific project aligns with the interest of the specific VC. Because of its nature, such an evaluation process is inherently long and therefore wouldn’t enable to get an immediate concrete answer in terms of recouping value for pBTC-on-BSC holders. Additionally, given the inherent nature of the VC business, the scope of the fundraising couldn’t exclusively be the compensation plan, but it would need to expand to the project as a whole.
I see some comments suggesting that the team “can’t be bothered to find a strategic investor that would buy the PNT constrained for 2-3 years”. To this, I would like to respond that the team is more inclined towards a solution that recoups value for pBTC-on-BSC holders via more precise steps rather than pressing the “hold on” button until potential investments are closed. That said, should the community prefer this option as opposed to alternative plans based on the initial proposal, work in this direction can be done.
d) recoup value by offering multiple NFTs, each one with a different configuration in terms of duration of the cashback (suggested by @aethen)
The tokenized access to a crypto card cashback is just one element of the bigger picture so I have some concerns as to make it even more complex. That said, this is an option that can be considered. Let’s see if someone else expresses interest for this point.
e) recoup value by diluting PNT (suggested by @avirap)
Recouping value by diluting PNT is a possibility. The rationale behind the team not proposing this as the first option is that we would prefer to maintain value in the project, since this is an important element that benefits all parties involved (as explained in the initial section of this reply).
As for the specific reference to incentives currently running “Strange that they don’t mind diluting PNT for Binance reward program and everyday LP incentives and 10.5% APY to PNT DAO”. Since you don’t seem familiar with the topic, I’d like to clarify that the external incentives mechanism for DAO members falls within the initial plan presented at the time of PNT inception as a way to boost the pNetwork ecosystem during its initial stages. Therefore, it is not strictly a dilution since it was already planned and presented when PNT was launched. Additionally, the percentage for the current period (second year of the DAO) was initially planned as a 21% APY - the proposal for reducing it to 10.5% was not initially planned, but an element that would be introduced by the compensation plan should it be approved. Hence, part of the inflation initially planned for DAO members would already be directed and create a benefit for pBTC-on-BSC holders. As per LP incentives, this is again not additional dilution but the same inflation presented at PNT launch. Similarly to other DAO members, daoPNT tokens at stake in the DAO coming from the team generate an incentive - such an incentive generated on daoPNT tokens of the team is used to expand the pNetwork ecosystem, for example in the form of LP incentives (this has helped in achieving organic growth of pNetwork’s TVL over the past months). Finally, marketing activities with Binance are covered by the team funds.
A final note on the decision to involve the pNetwork community in defining the compensation plan. Specifically addressing a comment from @avirap “It seems this desire to pass everything by a DAO vote is what is causing the great fear in causing a bit of short term pain to PNT holders. Bitfinex didn’t make a vote before it socialized the BTC 72’000 it lost in a hack and then compensated fully to the last dollar (and much more because the debt-token was convertible to equity in Bitfinex).”. Firstly, I would just like to point out that Bitfinex was in a very different situation compared to pNetwork’s as at the time of their hack the exchange was among the top 5 biggest cryptocurrencies platforms and generating Millions in fees. Potentially, pNetwork could follow a similar approach to recoup funds, however it would take a much longer timeframe compared to the timeframe proposed by the initial proposal.
Being inclusive of the community for defining a compensation plan seemed like a good idea that goes in the direction of decentralization and is in line with the pillars of the DAO-ecosystem. In this ecosystem, we envision DAOs as an innovation towards how companies and communities are organized - achieving this resolution via a decentralized governance process would be a great step forward for pNetwork as well as one of the very first examples of serious controversies solved in a decentralized fashion. That said, if the community prefers not to be involved and to just have a decision imposed upon them, so be it - let us know.