[BIP-431] USD+ Linear Pool Refund

PR with Payload


Due to a recent issue with the USD+ and DAI+ linear pool’s deployed by Overnight Finance on Arbitrum, the Maxis are proposing to refund affected user’s 15,158 USDC. The root cause of the issue is both linear pools being deployed with the swap fee of 6% as opposed to 0.06%. Overnight has returned 7527 USDC equivalent to the DAO, from this txn on Arbitrum, and the BIP-420. The remaining 7631 USDC will come from the DAO Treasury.


The way the fee works on linear pools, means every time the balances were out of the set targets, a fee would be awarded to arbitrageurs for pushing the balances back between the bounds. Rebalancing the pool per normal operations would usually be handled by the Maxis in order to wrap assets, but was not possible due to Overnight’s fee on wrapping. This is the only instance of a linear pool like this and was out of the norm. In the Optimism deployments, Overnight has a rebalancing bot set to maintain the custom circumstances and keep the pool within desired targets for users, but in this case it was not deployed until after the fact.

The Balancer Labs Data team was able to put together this dune dashboard to quantify the individual losses by wallet. Ultimately the Maxis feel the users should be fully compensated for the fees suffered due to the error. This is why I am proposing that the DAO covers the remaining amount. All funds will be airdropped to users who are listed on the dashboard if their owed amount is over 1 USDC.


The Balancer DAO multisig 0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f will interact with USDC 0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48 by writing transfer passing the LM Multisig 0xc38c5f97B34E175FFd35407fc91a937300E33860 as recipient and amount as 7631 USDC 7631000000.

The Maxi LM Multisig will bridge the 2500 USDC it already received, and 7631 USDC from above for a total of 10131 USDC to Arbitrum. The LM Multisig will execute this using WalletConnect via Gnosis Safe.

Once the bridge transaction is claimed by the LM Multisig on Arbitrum, the Multisig will deploy an airdrop to the addresses listed on the dune dashboard above, and their corresponding amounts.


Excellent initiative!

Is there a plan to act on the root cause to prevent a similar situation from happening again?

Hey James, thanks for asking the deeper question here of how to move forward with a lesson learned. The usual procedure would be for a partner to interact with the Maxis and have them make the linear pool from scratch. This tends to be more streamlined and would of been our way forward. It was the status quo, but given other linear pools were deployed successfully on Optimism, it was assumed it would be done properly. Two other key aspects of linear pools would be the process of wrapping and unwrapping must have 0 fee and no time restraint, because our pools need to have no economic spread and the ability to unwrap all tokens instantly, for obvious “yellow tape” reasons. Those two points would be met 100% of the time going forward.

That being said, a new version of linear pools is not being pursued now, since the exploit a few weeks ago, so an issue similar to this is not possible. No other pool type Balancer offers has a fee incentivizing arbitrageurs to push balances between a set of targets, so LPs are limited to the much more predictable math of weighted and stable pools.