1inch DAO Debates USDC Compensation Plan for Victims of October 2024 Supply Chain Exploit

The 1inch DAO is currently considering a proposal to reimburse users impacted by last year’s supply chain security breach, signaling a significant test of decentralized community support for hack victims. The proposal, introduced by the 1inch Foundation, could see over $768,000 in USDC distributed to affected wallet holders—if it passes an ongoing community vote.

Community Votes on Victim Compensation After Major Exploit

In the aftermath of the October 2024 supply chain exploit that targeted its decentralized application, the 1inch Foundation has put forward proposal 1IP-80 to its governance community. If approved, this plan would allocate $768,026 USDC from the DAO’s treasury to compensate users who suffered token losses due to a vulnerability in the Lottie Player animation library. The incident, which saw attackers exploit a third-party plugin, highlighted the risks DeFi protocols face from dependencies beyond their direct control.

Verification Process and Stringent Requirements for Compensation

The proposed reimbursement process sets strict conditions for claimants. Victims must prove their identity through Know Your Customer (KYC) checks, provide detailed documentation of their losses, file a law enforcement report, and formally agree to the terms of compensation. Moreover, those seeking repayment are required to waive future claims on any funds that might be recovered, assigning those rights back to the DAO. While 1inch does not currently mandate KYC for trading, the requirement in this case is positioned as a safeguard to prevent fraudulent claims and to satisfy regulatory scrutiny.

Key Stats & Figures

• Proposed Compensation Fund: $768,026 in USDC allocated from the DAO treasury
• Current Vote Distribution: 53.47% (3.8 million votes) in favor, 46.53% (3.3 million votes) against, as of publication
• Major Voters: One wallet holds all 3.3 million ‘no’ votes, while another controls 2.2 million of the 3.8 million ‘yes’ votes
• Voting Deadline: Ballot remains open until June 22, 2024

Debate Over DAO’s Role as Insurer Intensifies

The vote has sparked intense debate within the 1inch DAO community over whether the organization should act as an insurance fund for ecosystem incidents. The wallet casting all ‘no’ votes contends that offering reimbursement sets an unsustainable precedent, particularly in the absence of stable revenue streams to support such payouts. Critics warn that the DAO could face liability for similar exploits in the future, while supporters argue that reimbursement demonstrates responsibility and helps rebuild trust among users affected by technical vulnerabilities beyond their control.

Conclusion: What This Means for the Market

The outcome of the 1inch DAO’s ongoing vote will shape both the decentralized exchange’s reputation and broader norms around hack victim compensation in DeFi. As the community weighs support against concerns over sustainability, the final decision—expected by June 22—may set an important precedent for how DAOs respond to security breaches moving forward.