pBTC-on-BSC Compensation plan, Creditor Proposal

Creditor Proposal

This proposal is put forward as a possible way to proceed after the recent hack. The objective is to compensate all pBTC holders in their role as BTC creditors to the pNetwork.

Why is it important to fully compensate the creditors?

The creditors trusted the pNetwork to keep the collateral backing their pBTC tokens safe, but unfortunately it was stolen while in the custody of pNetwork, and it is the pNetwork and its stake holders that must bear the cost of that mistake. In the absence of any credible compensation plan, the creditors will simply have to seek legal recourse, and possibly force the pNetwork DAO, and the companies behind or associated with it, into legal bankruptcy, and thereby recover their original capital through the forced liquidation of assets. To prevent this from happening, creditors must be credibly reassured by the stakeholders that their interest in recovering capital is in the continued existence of the pNetwork rather than bankruptcy proceedings.

Terms

For the creditors to accept any proposal going forward, the following terms must be met:

  1. the debt must be repaid fully
  2. the debt must be repaid in the original currency it was issued in (BTC)

The only variable to be negotiated should be the time horizon, not the amount itself, nor the unit denominating the debt (BTC).

If those terms are met, then the creditors can agree to restructure the debt to prevent bankruptcy.

Debt Restructuring

The creditors will agree to not seek redemption of their pBTC through court proceedings if:

  1. 80% of all revenue must be redirected towards repurchasing the uncollateralized pBTC
  2. the uncollateralized pBTC must be burned by the DAO thereby reducing its overall amount
  3. this must continue until all uncollateralized pBTC is burnt

Once all uncollateralized pBTC is burnt, no creditor can have any claims on the pNetwork, as they will have all been made whole.

NFTs

If the above terms are met, the team behind the network can have wide latitude in how they choose to generate income - whether through the issuance of NFTs or any other measures they have control over. It is in the interest of the stakeholders to repay the debt as soon as possible, so that the revenue from those measures can then continue to accrue to them. The bondholders seek no upside, just to limit their downside.

pBTCv1 vs pBTCv2

Because the broken peg prevents the proper functioning of the BSC bridge, and thereby deprives the network of an additional sources of revenue, a new token can be issued (pBTCv2), and the original renamed to (pBTCv1). pBTCv2 will be pegged 1:1 from the start, and will be used on the BTC-on-BSC bridge. The creation of the pBTCv1 token shall in no way, shape, or form mean that pNetwork defaults on its obligation to restore the peg of the pBTCv2 token. The objective is simply not to deprive the network of the supplemental revenue to be generated from the BSC bridge.

Possible Scenarios

Two possible scenarios - one optimistic, one pessimistic.

The optimistic scenario is that the measures put forward by the team regarding the NFT or a sudden upsurge in the usage of pNetwork will lead to explosive growth in income, and the debt will be repaid much sooner than expected.

The pessimistic scenario is that the pNetwork will default on its obligation to the creditors because of lack of sufficient revenue, and the creditors will force pNetwork into bankruptcy, thereby pushing the price of PNT to 0.

Rogue Creditor

Not all creditors may agree to this proposal, and a rogue creditor may seek legal recourse despite the pNetwork meeting the terms outlined above. To prevent this from happening, the biggest creditors can band together, and commit to not apply downward pressure on the pBTCv1 price, and perhaps even inject BTC to restore the peg immediately. That would give any rogue creditor an exit option and render their legal case null and void. Additionally, such measures will limit the downside to smaller pBTCv1 holders, who will not have to needlessly suffer because of this hack.

5 Likes

I believe that this plan is great!

The NFT sale might be a fresh injection of the money to the ecosystem and used for repaying! Similar to Eidoo card perks!

The team behind the pNetwork can for sure come up with additional streams of revenue, similar to already mentioned by you v2 token which would open an additional revenue stream for BSC interactions.

Since this is a temporary measure (and strain) on PNT holders, the token itself will keep the value, instead of being tanked down by a legal action! a real win-win! This way the pNetwork will keep generating well-deserving DAO members a revenue stream for years to come!

Thank you Jay for being an active participant in the Telegram group, representing well our position, the position of pNetwork participants!

3 Likes

I agree, this is what everyone wants, and let it take even more than 10 months. At the same time, depending on the availability of the proceeds BTC from NFT and other methods of generating income, open a gate for exchange on ptokens.io and set the pBTCv1 to BTC rate depending on the collateral.

This working gate will be important as many will already be selling their pBTC at less than 1: 1.
And in fact, you will need less money for full compensation than you expect, because most of the victims will be satisfied with a smaller rate of 1 pBTC = (0.85 - 0.9) BTC.

2 Likes

Thank you DLC for your contribution! Some great ideas that you added.

The DAO members, the team, the network participants as well as liquidity providers - will all participate in a good marketing when it comes to NFTs. Stronger Together!

The only way to move on from this incident is to make it a whole, while assuring the network growth so in the future everybody can reap its benefits. DAO members can enrich themselves with bigger network after the temporary setback which will only bring more benefits in the future. Have faith!

1 Like

This proposal is funny. It’s basically saying “I’m not interested in how, just give me back my money. For example, you should destinate 80% of the revenues to this”. And then it leverage the menace of bankruptcy.
80% of today revenues means you’ll be reimbursed in 19years. If 80% of revenues is destinated to reimbursement, the network cannot have resources to grow.
This kind of proposal is an insult to all effort the team is putting to find out resources to reimburse people affected hack.
Then, you should also explain to the court why you didn’t review an open source contract you trusted so much. And you’ll probably end involving the auditor.

Good luck.
Please note I’m not part of the team.

1 Like

This is a terrible proposal. I’ve read all of Jays comments on Telegram - he simply does not listen to reason.

  1. “repaid fully” - you realise that for this to happen somebody else has to suffer? PNT holders, all the other TVL, etc. So you want to be at 100% by making everyone else 90%.

  2. “80% of all revenue” - what is this? pNetwork peg-in/peg-out fees? Team revenue (if they have any)? You have no idea do you. Thomas told you that with current peg-in/peg-out fees it would take 20 years to repay.

  3. What would you be going after with legal action? You seem to think that you’ll be able to go after the TVL - that belongs to users not the company, users like you were when you held pBTC - so you want to go after everyone else to make yourself whole? Again, as you were told on Telegram, if this started happening everyone would just withdraw their funds and you’d get diddly (and that’s if by some miracle you won in court). PNT value would also drop to near 0, so you have have all of that but what are you going to do with it?

  4. The DAO does not belong to the company - they have made promises for how the funds would be spent. They are proposing to cut those promises in half. What you are proposing is taking from everyone else to give to yourself.

I think you really need to look at the current team proposal again, and really think about each step, how it will impact prices of PNT and pBTC, and all of the reasoning that went into it.

You are playing with defi, you were going after 20% interest/returns or whatever it was. It’s not free money - you were being compensated for some risk. Unfortunately that risky scenario became a reality. The team is offering you more than 100%, all be in in a slightly different form. Stop with the pointless legal threats and fear mongering.

2 Likes

Hey! I have suffered from a hacker attack and I want to offer a solution that will suit many. My English is bad. I will try to speak simply and clearly.
The creditors compensation program is complex and incomprehensible. This provokes the indignation of creditors.

I ask you to look at my solution to the problem. This is a simple and straightforward strategy to recover losses from creditors. Just for the pNetwork community and BTC lenders.

Step 0
Reward for a hacker $ 1,500,000 convert to BTC (32BTC)

Step 2
Sell 1000 NFT on EthSC at $ 6900 (1000NFT * $ 6900 = $ 6,900,000 or 146BTC price $ 47,000)

146BTC + 32BTC = 178BTC

mr.Ef, [02.10.21 11:23]
Step 3
Deposit 178 BTC to pool elepsis.finance.
Pool pBTC / BTC ratio = 213pBTC / 218BCT

Step 4
Recover the remainder using step 2 in your compensation plan.

Conclusion: This is a simple and straightforward way for lenders and for the pNetwork community. Lenders are happy, the community will not take a loss. Please consider this compensation plan and bring it up for discussion.

That is just such nonsense. Thomas is currently managing 2,580 BTC of other people’s money on the ethereum blockchain. If he cannot properly recover from a 277 BTC hack, then he simply should not be in this line of business. We are talking about people’s life savings here, not some monopoly currency that you can lose without any consequences.

The legal action would go against the entities behind the project in the appropriate jurisdictions, as well as the exchanges that facilitate the trading of PNT. Any investor in PNT was investing in the PNETWORK project in order to gain exposure to the value of that project. The value is directly correlated to the quality of its code, and since there was a bug in that code that got exploited, it is only natural that PNT holders should suffer as a result.

Yes, as a pBTC holder I was fully aware that the principal could get lost in some improbable black swan event. But it never occurred to me that the project would so blatantly default on the pBTC peg while pumping up the value of the PNT token.

The major points of this proposal still stand even 23d after it was posted here. The PNETWORK project cannot meaningfully exist without restoring the pBTC peg. Even if by some miracle it survives any legal challenges, it will have irrevocably lost creditor trust - as one would have to be certifiably insane to put any money into pBTCv2-on-BSC after this.

  1. You didn’t respond to any of my points.

  2. Ok and what does the entity behind the project have to give to you even if you win a case?

  3. So you admit that you knew there was a risk. But not exactly for the event that happened? They wrote code, had it audited, and it was publicly visible for however many months before the hack happened… Didn’t you say you’re a developer? Why didn’t you patch it?

  4. Why exactly should PNT holders suffer? Where was it guaranteed that pegged asset losses would be backed by PNT?