Euler Foundation debates on how to distribute recovered funds from recent attack

The Euler Foundation, alongside Euler Labs and some external advisors, have come up with a plan on how to distribute the funds it recovered from a recent attack to affected users.

Euler, a non-custodial protocol on Ethereum, fell victim to an exploit on March 13. A significant percentage of the funds held by the protocol were stolen and converted into ETH and DAI.

However, the Euler DAO Treasury address has received recovered funds amounting to 95,556.36059211764 ETH and 43,063,729.35 DAI through negotiations and other means.

The group is actively discussing how to distribute the recovered funds by simulating the repayment of all liabilities at the block when the protocol was disabled. Although the plan may be modified as the calculation progresses, a proposal has been put forward addressing the mechanism for redemption.

According to calculations, the on-chain oracle price of Uniswap or Chainlink will be used to determine the ETH value of the assets and liabilities while each sub-account’s assets, including non-collateral assets, will be used to repay the liability proportionally as long as there are no slippages.

The resulting assets in each sub-account will be used to compute the net asset value (NAV) of the account and each account’s NAV will be computed by summing up the NAVs of each sub-account. Any balance held by the Euler contract can be claimed by depositors as original tokens.

All account NAVs will be summed to get the total NAV, and each account will be able to claim the recovered ETH, DAI, and USDC in proportion to the total NAV. If at the time of the pre-announced redemption block the value of the recovered amounts exceeds the total NAV, the excess will be distributed proportionately to users.

To facilitate the redemption process, a smart contract containing the funds due to all externally owned accounts (EOAs) will be created. EOAs will need a Merkle proof of validity to claim information for the account, with a signed message and agreement confirming their agreement as stipulated by the Euler Foundation.

With 141 affected smart contract accounts, redemptions cannot necessarily be sent directly to these accounts, so representatives of the Euler Foundation will communicate with affected protocols and smart contract wallet holders on a case-by-case basis.

Multi-sig wallets can be included in the Merkle-based distribution contract or a separate contract with the help of a transaction to agree to the terms of redemption.

Additional deliberation will be required in relation to the utilization of insurance funds and the Euler treasury as supplementary measures. The intention is to allow users to redeem these funds at the earliest opportunity.