Beanstalk: The Path Forward

Last updated July 1st, 2022.

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.

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 relaunch the protocol, with the following four primary goals in mind:

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

The latest version of this plan has been approved by the Beanstalk DAO here.

The Barn Raise

Overview

Beanstalk will host the Barn Raise — a fundraiser to restore approximately $77M in non-Bean liquidity stolen from the Silo – starting Monday, June 6 at 4:00pm UTC. Beanstalk will relaunch in July and the Barn Raise will continue until the fundraiser is complete.

During the Barn Raise, Beanstalk will borrow $77M from lenders in exchange for an interest rate. The interest rate will start at 500% and decrease down to 20% a few weeks after Beanstalk relaunches. Participants will receive a token known as Fertilizer that receives one-third of new Bean mints until the interest rate is paid back. 77M Fertilizer will sell for 1 USDC each.

Aligning Incentives

Funds raised will be used to recapitalize stolen funds pro rata to the Silo. Pre-exploit Beans, LP, Stalk and Seeds are subject to a vesting schedule such that the assets only vest as the Barn Raise proves to be successful (such that Barn Raise participants are not exit liquidity). If Silo Members claim their assets before they are fully vested, they will forfeit the unvested portion of their assets. New Beans earned by Silo Members as interest are not subject to this vesting schedule.

Check out A Farmer's Guide to the Barn Raise for a comprehensive overview of the Barn Raise mechanics.

Replanting Beanstalk

Governance

Shortly after the April 17 attack, Beanstalk was Paused and on-chain governance was removed. Once Unpaused and Replanted, 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. You can read more about the multisig and its processes here.

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 Replanting 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 Replant 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
Barn Raise begins June 6

July 2022

Halborn and Trail of Bits audits complete
Audits reports published
Replant Beanstalk (exact date to be voted on by the Beanstalk DAO)

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 Replanting Beanstalk after a successful fundraise is the best path to achieve that goal.

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

An enormous thanks is due to everyone who has supported Beanstalk since its inception, and in particular 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.

Check out A Farmer's Guide to the Barn Raise for a comprehensive overview of the Barn Raise mechanics.