The 3rd option is also NOT optimal, in comparison to the LDA Captial Facility.
For starters, it makes no guarantee that any users will be made whole, nor does it promise that any users will be made whole in the future. This instills little trust and confidence in the process and protocol as a whole. I’ve seen this done in Qubit Finance, where they assumed that future revenue will pay out, but the V2 fared worse than the V1 because they lacked faith and confidence in the team and the protocol’s future. In their case, this meant terrible revenue in V2, incapable of making any users whole.
Second, while the APY reduction seems excellent in theory, it is detrimental to Onyx’s overall structure. Because of the substantial incentive structure, relatively new money markets like Onyx itself are generating income and attracting capital inflows. If the protocol’s already low incentive structure is reduced even further, there will be minimal liquidity coming onto the lending platform. As a result, less TVL will desire to invest in Onyx, resulting in lower income. Essentially, Less incentive → Less TVL → Less Revenue → Less protocol funds and recovery fees. Furthermore, this assumes that no new good incentive money markets will emerge during this bull market to gain market share from Onyx.
Third, I discussed how perception influences the value of cryptocurrencies. As a result, a cryptocurrency that generates revenue and uses that cash to support itself will have a far higher perception and worth than other cryptocurrencies. As a result, in the current situation, where protocol profits are being utilised to and fully fund XCN, XCN has a valuable perception among people and its users. However, if the protocol money is diverted to the recovery fund, the perceived value of XCN falls because it lacks revenue to support itself. Furthermore, becoming an ongoing cost for XCN holders which may prevent prospective buyers.
Some might argue that a partial revenue diversion is a viable approach. However, I believe it does not inspire future confidence because it appears to new users that we have not recovered from the hack, which would discourage new or existing users from joining the Onyx Protocol by supplying further liquidity or purchasing XCN which affects XCN’s value and holders.
In conclusion, the LDA Capital Facility remains the most viable option for XCN investors and users. It ensures that the majority of users will be nearly, if not completely, whole again. It instills confidence in Onyx Protocol’s ability to preserve and advance the protocol. Moving beyond and recovering from the hack, building trust in the team and increasing confidence in XCN. This makes it possible for XCN to generate income in the future which would be to maintain its own ecosystem. All of this considerably improves XCN’s perception, allowing XCN’s value to flourish the most in this ongoing bullrun, which is beneficial to all XCN holders and users.
