Beanstalk Farms · May 14th, 2022

Beanstalk: The Path Forward

Announcing The Barn Raise, a public fundraiser to recapitalize Beanstalk starting on June 6.

This document will be updated as new information relevant to Beanstalk’s recapitalization and Unpause becomes available.

Beanstalk is a decentralized and transparent solution to DeFi's endemic stablecoin supply shortage. It was designed from first principles to be a paradigm-shifting DeFi primitive that makes decentralized, cost-efficient stablecoins available to anyone with an internet connection.

Beanstalk was initially launched in August 2021 with just 100 Beans and has never taken traditional funding. Over the last eight months, Beanstalk organically grew to $100M in market cap, attracting $144M in long term-incentivized liquidity.

Until the on-chain governance attack on April 17, Beanstalk's model was working exactly as designed. During the two weeks prior to the attack, the protocol:

  • Paid ~$25M back to creditors, reaching a total of ~$50M paid back since Beanstalk's inception;
  • Distributed ~$25M in interest to Depositors in the Silo;
  • Attracted ~$110M in new liquidity across three liquidity pools; and
  • Reduced the protocol debt ratio by more than 50%.

From Day 1, the protocol has been owned solely by members of the Beanstalk DAO via a decentralized, on-chain governance structure. Unfortunately, a bad actor exploited that very structure to steal all Silo assets, including ~$77M in non-Bean liquidity. This was an attack on Beanstalk's governance model, not its economic design.

Despite this hurdle, the Beanstalk community has emerged stronger than ever and contributors are working around the clock and without pay to get the protocol back online. The Beanstalk Farms team has always said that if Bean is at peg, it's a good day. The community is ready to have a great day.

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The Plan

The Beanstalk community has discussed a number of possible paths forward for Beanstalk. Below, Beanstalk Farms outlines what it views as the optimal mechanism to safely Unpause the protocol, with the following four primary goals in mind:

  1. Securing the enduring success of Beanstalk's economic model;
  2. Attracting sufficient capital to restart Beanstalk;
  3. Preserving as much of each Farmers' Stalk, Seed and Pod positions as possible; and
  4. Aligning new capital with previous Stalk and Pod holders.

This plan is subject to change as conversations with the community and various sources of capital continue. The latest version has been approved by the Beanstalk DAO in the Snapshot proposal here.

The Barn Raise

Overview

Since the exploit, Beanstalk Farms, Bean Sprout and Publius have had many conversations with capital sources interested in supporting Beanstalk’s recapitalization effort. The initial plan was to hold the Barn Raise shortly after the exploit, but conversations with larger sources of capital indicated the need for a more straightforward investment structure as well as a bit more time. The Beanstalk community also expressed strong interest in participating.

As such, Beanstalk will host the Barn Raise – a fundraiser to restore up to $77M in non-Bean liquidity stolen from the Silo – beginning on Monday, June 6 at 4:00pm UTC and ending on Monday June 27 at 4:00pm UTC.

During the Barn Raise, Beanstalk will borrow up to $77M from lenders in exchange for debt at 500% Weather (the interest rate on debt). To facilitate this, Beanstalk will launch the Barn Raise Collection, an NFT collection with 15,400 items that sell for 5000 USDC each during the Barn Raise, raising up to $77M. Each NFT holder will receive a pro rata share of one-third of new Bean mints until the debt to NFT holders has been fully repaid.

To commemorate the Barn Raise, each NFT in the Barn Raise Collection will have a unique piece of artwork with attributes of varying rarities. To meet the launch timeline of June 6, each NFT will mint with a placeholder image, to be updated near the time of Unpause with custom artwork.

NFT rarity will increase with earlier participation in the Barn Raise period. There will also be a rarity boost for BeaNFT holders and participants who have previously interacted with Beanstalk.

Note that the artwork is commemorative; rarity does not affect a NFT's pro-rata share of new Bean mints. More details on the art and rarity will come over the next couple weeks.

Conversations with larger capital sources for OTC participation in Beanstalk's recapitalization are still happening between now and the Barn Raise. Large participants who make OTC commitments prior to the official Barn Raise launch will not receive preferential access to rare NFT traits. In the instance that an OTC commitment has been formally made, but on-chain participation is difficult in a timely manner, Beanstalk Farms will allocate the appropriate amount of NFTs to prevent the sale from being oversubscribed.

Currently, in advance of the Barn Raise, there are confirmed OTC commitments for ~20% of the $77M.

Aligning Incentives

Funds raised will be used to recapitalize stolen funds pro rata to Bean and LP holders. The protocol will scale its obligations based on the amount of capital raised. This means that if X% of the $77M is raised, participants will receive a haircut down to X% of their pre-exploit Beans, Stalk, Seeds, BDV in the Silo (like LP tokens) and Pods.

Recapitalized assets will be placed under a vesting schedule based on the percentage of debt paid back to NFT holders. If Farmers choose to Claim before that debt has been fully repaid, they will forfeit a portion of their assets based on the amount of debt repaid. For example, if a Farmer decides to Claim all of their recapitalized assets from the Silo and 50% of the debt has been repaid, they will forfeit 50% of those assets.

Unpausing Beanstalk

Governance

Shortly after the April 17 attack, Beanstalk was Paused and on-chain governance was removed. Once Unpaused, Beanstalk will be governed via a new community-run multisig wallet custodied by a group of nine Beanstalk community members and contributors. This will serve as a temporary security measure until a secure and fully-decentralized governance mechanism has been developed and sufficiently audited. BIPs will be voted on via Snapshot until then.

Beanstalk Farms continues to be excited about the potential of on-chain governance within DeFi. However, the team recognizes the current implementation challenges of safe on-chain governance and takes the position that an adequate mechanism should be reinstated only with great caution.

Security

Security is paramount to Beanstalk's success and a core focus for Beanstalk Farms. Moving forward, Beanstalk Farms will implement a number of security changes and engage top security audit firms to ensure that Beanstalk remains healthy and safe.

Beanstalk security measures:

  • Beanstalk governance will move off-chain to a Gnosis multisig wallet custodied by Beanstalk Farms and Beanstalk community members;
  • Over the short term, the development team will focus its energy on safely Unpausing Beanstalk and ensuring the integrity of Beanstalk's core functionality. Once complete, Beanstalk Farms will explore a more resilient decentralized governance structure;
  • Starting May 9, Beanstalk will undergo an end-to-end audit with Halborn;
  • Starting June 6, Beanstalk will undergo an end-to-end audit with Trail of Bits;
  • Beanstalk Farms will launch an ongoing bug bounty program with Immunefi and other leading bug bounty platforms; and
  • Beanstalk Farms is doubling down on its efforts to attract and retain experienced security engineers who specialize in smart contract development.

A Rough Timeline

The following timeline is intended to provide a rough timeline of steps in the critical path to Unpause Beanstalk. This timeline is subject to change.

May 2022

  • Halborn audit begins May 9
  • Hold OTC negotiations to recapitalize Beanstalk

June 2022

  • Finalize OTC negotiations to recapitalize Beanstalk
  • Trail of Bits audit begins June 6
  • Hold the Barn Raise from June 6 to June 27
  • Both Halborn and Trail of Bits audits complete by end of month

July 2022

  • Unpause Beanstalk at the beginning of the month

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The Path Forward

Beanstalk has always been an experiment. Contributors recognize a need within DeFi for a capital-efficient, decentralized stablecoin and set out to build it together. Beanstalk's innovative credit facility and incentive mechanisms are responsible for the protocol's growth to $100M in market cap in just eight months.

Unlike every other decentralized credit based stablecoin in history, Beanstalk's economic model has not failed. The Beanstalk Farms team is committed to carrying the torch for Beanstalk's mission in lockstep with the Beanstalk community. We believe that Unpausing Beanstalk after a successful fundraise is the best path to achieve that goal.

The Snapshot proposal of this plan has been approved by Silo Members here.

An enormous thanks is due to everyone who has supported Beanstalk since its inception, and in particular over during the time since the attack. The outstanding community of thoughtful and cooperative Farmers are responsible for instilling light in the protocol during its darkest day and played a central role in the development of this proposal.

For additional information on The Path Forward, please refer to the FAQ here.


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