The Onyx protocol is looking for ways to mitigate the consequences of the November 1st incident when the cross-token liquidity market and the issuer of Onyxcoin (XCN) lost 1,163.53 ETH worth nearly $2.1 million to a flash loan attack.
Head of Onyx DAO, Alex, posted a summary of the event on the project’s community website today, explaining that the protocol "suffered an exploit on its oPEPE market due to a bug in the rounding implementation," and that the funds were lost to the lending markets of the protocol.
Alex claims that "XCN Staking and Uniswap liquidity pools remain unaffected," and "The DAO is working with security partners to track down the hacker and then report the hacker to law enforcement." Notably, Hexagon, the company specializing in mitigating financial and cyber threats in the Web3 space, is one of the organizations currently assisting Onyx in overcoming the crisis.
Mainly, the team behind Onyx is currently working on the reimbursement plan. While it appears that the team genuinely wants to compensate the losses of the Onyx users, its proposal caused certain controversy in the community.
The Onyx DAO plans to use its $40 million XCN token facility, in collaboration with LDA Capital and others, to sell XCN tokens from the DAO treasury to ensure that affected users receive their funds.
Initially, the Onyx DAO avoided tapping into this $40 million XCN token facility, but now the team believes this would be a feasible decision.
Alex also promised the Onyx community to halt all the salaries of the project’s developers for the time being.
The Onyx community is now worried about the possible negative impact of allocating funds from the DAO treasury. At the same time, some XCN holders are concerned about the insufficient amount of tokens for adequate compensation as well as the declining value of the protocol.
Since the proposal to allocate money for compensation from the DAO treasury was not viewed positively by some of the community members, the team made an alternative proposal to allow Strike Finance, the DeFi-based money market, to acquire Onyx.
"The Onyx DAO has reached an in/principal agreement with Strike Finance DAO for Onyx Protocol to be acquired by Strike pending multiple on-chain governance votes and approvals by the community on both protocols," the alternative proposal says.
According to the proposal, Strike will be acquiring Onyx, with a specific acquisition roadmap in place to minimize losses for Onyx Protocol users, while Onyx Protocol will vote to cease and stop its markets, including staking features. The protocol team claims that staked XCN tokens and accumulated rewards will be safely withdrawn by users, whereas the remaining un-circulating XCN tokens will be burned and "swapped for STRK at a ratio of 20,000 per 1 STRK token."
"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 nearly 3 billion XCN," the team also explains.
This process is supposed to get support from exchanges to facilitate the transition, whereas Strike will add features for NFT markets, including "CryptoPunks and BAYC for NFT liquidity."
This proposal also appeared to the Onyx community as a rather drastic solution. Some investors and Onyx users believe that the value of XCN is much higher than it used to be, and the decision to move to such a takeover scheme may not be required.
At press time, according to CoinMarketCap, the value of Onyxcoin experienced a loss of almost 2% of its value within a day, reaching the price of $0.0007622. Its highest recent price was noted on October 31 when it traded at $0.0007813, whereas on the day of the exploit, the price briefly dropped to $0.000744. Despite these minor changes in its value, XCN still manages to maintain its price amidst the crisis affecting the Onyx protocol.