Hey, thanks a lot for your post — I wanted to share my perspective on what happened. This is my personal opinion and does not represent the official views of Gnosis Ltd. or karpatkey.
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The root issue was correctly diagnosed: a misconfiguration in the oracle caused losses of around $400k. I discovered this around February and immediately flagged it to Balancer, asking them to issue a fix. However, doing so required a DAO vote and a transaction on Mainnet to grant permission to a Safe on Gnosis Chain. This whole process took about two months.
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At the time, I wrote a query to try to understand the problem. It’s far from perfect, but it clearly showed that something was off. After pushing Balancer to act quickly, it still took them almost two months to execute the necessary transactions — during which LPs lost an additional ~$100k. Unfortunately, this happened to coincide with the Trump tariffs market volatility.
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I also noticed that Balancer had earned around $100k in fees from this pool, which was a red flag indicating toxic flow.
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When we first discovered the issue, it was clear LPs were taking losses, but we didn’t believe there was a risk of full capital loss. Given how critical this pool was for Gnosis Pay, we decided to monitor the situation, wait for the fix, and then communicate transparently and let the DAO decide whether LPs should be compensated (personally, I think they should).
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The fix finally went through on April 7th. Two weeks later, I noticed some continued value leakage. I reviewed the pool settings and found that although the Chainlink feed should update with 0.1% price movements, in practice it was using longer heartbeats. That meant the 0.1% fee was too low, and LPs were still losing money. So, in early May, I asked Balancer to increase the pool fee to 0.25%.
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Shortly after, I saw NolanV’s report. The data matched my back-of-the-envelope calculations, so I thanked him and agreed we needed to issue comms and discuss possible compensation. I then asked Karpatkey to write a full report, since the issue had been correctly identified. Given Karpatkey’s role — managing liquidity, monitoring DAO positions, and ensuring deep liquidity on Gnosis Chain — it was within their mandate to investigate. However, they kept arguing the figures were wrong and that comparing to Binance spot prices was misleading. I disagree — the general direction of the analysis is sound, and a 10–20% margin of error is acceptable in this context and at these scales. These discussions dragged on for two months, and then NolanV rightfully decided to make the post.
What should happen now:
- LPs should be made whole. One option is to boost APY for LPs over a 3-months period so they recover their losses. Merkl has already developed a feature that would make only pre-existing LPs eligible (up to a specific cutoff). The DAO should vote on whether to reimburse users.
- I think we should also give away a bounty for NolanV. While we had already discovered the issue and issued the fix, he structured the analysis in a way from where we can take a lot of actionables - and that should be rewarded