Beanstalk has launched a last-ditch effort to recoup the 77 million USD lost in April’s flashloan exploit.
Barn Raise kicks off with a 500% “interest rate”
In the first hour of the Beanstalk Barn Raise, 5.5 million USD have been collected. The Beanstalk community is willing to pay a hefty price in order to rescue their algorithmic stablecoin protocol. As such, early participation in the Barn Raise is rewarded with a 500% interest rate. There is however a caveat.
Since Beanstalk is a debt-based protocol, investors in the Barn Raise purchase “Fertilizer” (FERT) for each USDC deposited. FERT acts as a non-transferable bond token that gradually matures whenever the BEAN stablecoin trades above peg, allowing the protocol to mint more BEAN tokens.
As part of the rescue plan agreed upon by the Beanstalk community, one third of all BEAN minted this way will be used to repay FERT debts. Eventually, each FERT will mature into six BEAN tokens, under the assumption that the protocol stays healthy and demand for BEAN continues to grow.
While investing in the Barn Raise therefore technically offers an actual return rate of 500%, investors cannot be sure when, if ever, their FERT tokens mature. In their latest blog post, the pseudonymous Beanstalk dev team addresses these risks:
But the thing about a system like Beanstalk is that it works until it doesn’t. You can never actually know if it works, only that it has worked so far. So much uncertainty is scary, particularly without a clear definition of success. Perhaps we are foolish for trying. While nobody can answer the above questions at present, the beauty of a free market is that time will.
Beanstalk community dismisses haircut solution
During the exploit of April 17, the attacker drained Beanstalk’s liquidity pools completely, causing a damage of 77 million USD. Originally, the rescue plan was to have a fundraising period of three weeks and then resume the normal operation of the protocol. This would have meant that existing BEAN holders would have incurred a haircut, unless they would manage to recoup all 77 million USD.
Instead, the community passed a last-minute governance proposal that seeks to sell out all 77 million FERT tokens and places the pre-attack Beanstalk assets under a vesting schedule. This means that BEAN holders who wish to redeem their pre-attack stablecoins will incur a penalty based on the percentages of FERT sold and repaid. Once all FERT debt is repaid, pre-attack BEAN tokens can be redeemed for their face value.
At the current time, the Beanstalk protocol is still paused. An exact date to resume operations has not been set, but is estimated for early July. Prior to that, the protocol will undergo two independent security audits.