Onyx Community Rejects Proposal for Protocol Acquisition by Strike Finance

Yesterday, Alex, the community leader of the Onyx protocol for a decentralized cross-token liquidity market, announced an update on the voting process that will decide the strategy to help the project overcome the consequences of the November 1 hack, which resulted in the loss of 1,163.53 ETH worth nearly $2.1 million.

According to Alex, the community rejected the second DAO proposal, which suggested the acquisition of the Onyx protocol by the Strike Finance money market.

Read also: Onyx Community Is Against Protocol Acquisition by Strike Finance

"There will be a community treasury set up for compensation of those affected users to receive XCN in dollar value back funded by Strike through existing supply and not through the on-chain proposal to release an additional 3 billion XCN," Alex explained previously the mechanism behind the second proposal.

The community had already rejected the first proposal, which suggested employing the LDA Capital Facility and allocating funds for hack compensation from the DAO treasury. This proposal aimed to use the $40 million XCN token facility to sell XCN from the DAO treasury to compensate the Onyx Protocol directly for the hack.

Despite dissatisfaction with both proposals, some users preferred employing the LDA Capital Facility over the protocol’s acquisition by Strike. Currently, the Onyx community has the opportunity to participate in the voting related to the third proposal, which emerged from discussions within the community during an AMA on November 8.

The third proposal aims to reduce inflation, address staking rewards, wind down lending markets, and implement strategies for sustainable yields, ultimately leading to a reduction in XCN inflation. According to this option, the reimbursement process involves pausing all existing lending markets, initiating their wind-down process, taking a snapshot of user balances, and reimbursing users in a rolling manner using the accumulated protocol revenue based on their balances.

Read also: New V2 Money Market Protocol May Help Onyx Recover from Hack

Meanwhile, an active community member, Tristanman, has proposed their own recovery strategy, "Recovery Proposal 4: Taking the best of both proposal 1 and 3." In this approach, Tristanman suggests that the Onyx Protocol focuses on its XCN DAO to address the exploit while leveraging the Onyx Capital Facility.

The proposed strategy involves reducing staking rewards for the XCN token by over 20% to enhance competitiveness. It also suggests a modest reduction in APY for money markets at the v2 launch to ensure sustainable yields and lower XCN inflation.

Tristanman further recommends increasing reserve factors to accumulate protocol revenue, entirely directed towards XCN, and pausing and winding down current lending markets, with user balances snapshot in public posts.

According to this proposal, compensation to affected users, utilizing DAO Treasury and Onyx Capital Facility, could be distributed in installments over four months.

The adoption of this strategy into an official proposal depends on the voting outcome for proposal 3. "Soon, the DAO will initiate voting on proposal 3, and if the community rejects it, we will discuss things further," Alex responded to Tristanman’s suggestion.

So far, only eleven addresses have participated in the voting, with seven addresses voting for the third proposal and four addresses voting against it. In total, there have been 19.04 million votes for and 3.63 million votes against.