Onyx Community Is Against Protocol Acquisition by Strike Finance

While some community members do not support the proposal to use the DAO treasury for hack compensation, the acquisition of the protocol by Strike Finance faced particular opposition.

Onyx stones
According to the second proposal for hack reimbursement, Strike Finance is ready to take over the Onyx protocol.

On November 8, Alex, the Onyx protocol community leader, conducted an AMA on the two reimbursement options available for the cross-token liquidity market to address the recent exploit. The security incident occurred on November 1, involving a flash loan attack that resulted in a loss of 1,163.53 ETH worth nearly $2.1 million.

The AMA, attended by over 400 members of the Onyx community, left many unsatisfied with the proposed solutions. The second one received especially little support.

Read also: Onyx Protocol May Be Acquired by Strike Finance

The first proposal suggests allocating funds for hack compensation from the DAO treasury. The official proposal states, "The Onyx DAO will utilize, for the first time, the $40 million XCN token facility it has, in part with LDA Capital and others, to sell XCN [Onyx cryptocurrency] from the DAO treasury through this facility to compensate the Onyx Protocol directly for the hack to ensure users receive funds that can become available."

Meanwhile, the second proposal offers the acquisition of the protocol by Strike Finance, a decentralized money market.

"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 proposal states.

If the second proposal passes, its functionality, including markets and staking features, will be stopped. Despite these changes, users will have an opportunity to withdraw their staked XCN and receive any accumulated rewards.

In the case of this proposal, Strike Finance will provide compensation. The proposal states, "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."

Strike Finance will introduce support for NFT markets, including CryptoPunks and Bored Ape Yacht Club (BAYC), to enhance NFT liquidity. This addition is intended to align Strike's decentralized protocol closely with Onyx Protocol's offerings.

Read also: October Web3 Exploits Lead to Over $32 Million Losses

Some community members find both solutions too drastic and unnecessarily severe, affecting everyone who uses the protocol. "The first proposal destroys the value of socialism, and the second proposal is truly a miserable proposal when trying to find a way to escape," one of the opinions was voiced by user Tonychain.

Even though the Onyx community is not particularly happy with either proposal, many users prefer employing the LDA Capital Facility over the protocol’s acquisition by Strike. According to these community representatives, such a move is necessary to support the future of XCN and can be "a huge confidence booster," since the LDA Capital Facility is "a fund that does not wish to sell their investments at a loss."

"If the LDA Capital Facility is available, the strike acquisition makes no sense. This is because the increased confidence in XCN makes it desirable for Onyx to be its own separate entity, allowing it and its users to benefit from the bull run," explained Onyx forum user Tristanman, adding that the acquisition of the protocol would waste the increased confidence.

Yet, other forum users strongly advised against selling XCN from the DAO treasury to cover the hack losses, explaining that this could drive the cryptocurrency towards zero, eroding investor confidence in the project. This, in turn, might intensify selling pressure, making it challenging to secure enough liquidity to recover the $2.1 million.

Some users also shared their own suggestions with the community, such as leveraging the $40 million from previous investors (assuming it was invested) to compensate for the hack and capitalize on the heightened interest from various parties post-incident to market the project robustly.

Onyxcoin announcement on CoinMarketCap
Source: Onyx, CoinMarketCap

The Onyx team has not provided specific details on the protocol’s vulnerability that allowed the malicious actor to perform the attack. So far, Alex mentioned that the exploit happened on the oPEPE market "due to a bug in the rounding implementation."

Some of the Onyx community members believe the recent security incidents and current proposals appear quite "sketchy."

"Why did Strike make an offer to acquire XCN just days after the exploit before the dust had even settled, and why are you, Alex, okay with it?" community member Covertone asked the leader on the Onyx forum platform. Covertone added that it is likely the exploiter knew ahead of time about the protocol’s plan to add Pepe and prepared for the attack earlier, committing the act in a way that makes it almost untraceable.

XCN 7-day graph CoinMarketCap
Source: XCN

At press time, XCN traded at $0.00088 according to the data from CoinMarketCap, which also reports a 16% increase in Onyxcoin’s value. Although the price slightly declined after the AMA, when it was around $0.00094, it still appears that the cryptocurrency has managed to grow its value despite the recent hack.