Algorithmic stablecoin protocol Malt Protocol has unveiled a plan to reimburse investors affected by bugs that hampered its launch and locked in liquidity providers.
In an announcement on June 22, Malt Protocol stated that it has calculated the cost basis of everyone directly affected by the bugs in Malt v1.
The protocol was launched on June 9 on Polygon to offer an elastic supply algorithmic stablecoin, but not all went to plan. Participants and liquidity providers were required to purchase DAI and swap it for MALT to bid in a dutch auction type setup that was designed to push the token towards its peg.
Essentially it didn’t work due to “unbonding bugs” and many investors were stuck when the token lost its peg, finding themselves unable to exit their positions. Liquidity providers were locked into their positions and the protocol had to come up with a solution to its failed monetary experiment.
Malt v2 and recompense
The Malt team stated that the total cost basis of everyone affected was $17.9 million but the total funds available to them were just $13.8 million. Quite a shortfall.
“Unfortunately, as you can see from the numbers above, we do not have enough available to cover 100% of everyone’s cost basis.”
The team has created a list of accounts eligible for reimbursement and stated that it will transfer approximately 74% of the cost basis in DAI on June 24.
Everyone that receives a reimbursement under this plan will be automatically added to a v2 whitelist, it added. The calculations on exact figures for recompense are detailed in the blog post.
Malt Protocol intends to relaunch with a version 2 at a later date to address the issues that caused its algorithmic stablecoin to fail in the first place.
Something similar happened to the Fei Protocol which also attempted a bonded algorithmic stablecoin experiment in early April. FEI fell from its dollar peg leaving a lot of liquidity providers penalized for withdrawing as designed.
MALT minus the peg
The MALT stablecoin only managed to stay true to its dollar peg for about a day after launch on June 10. By June 13, the system had collapsed and the monetary experiment had failed epically.
MALT is currently valued at $0.178 according to CoinGecko. TVL has topped $60 million within the first few hours after launch but it was now down to $12.8 million according to DeFi Llama.
“We already have some very exciting ideas for V2 and we can’t wait to share them with everyone once we have closed this final chapter of V1,” the protocol team concluded.