In the past few weeks, while under tremendous pressure, we have been working on the decentralized bridge, SHA-GATE v2 and the draft specification has been released. (https://bitcoincashresearch.org/t/the-draft-specification-of-sha-gate-v2/862). We released SHA-Gate2 CashScript covenants for reviewing. (https://github.com/smartbch/cc-covenant). We also released SmartBCH v0.4.5 (https://github.com/smartbch/smartbch/releases/tag/v0.4.5).
Since we are focused on the development of decentralized bridge, for quite a few months from now on, the peg between sBCH and main chain BCH will be maintained with the help from donors by leveraging bcBCH, which was created and issued by Bridge Bolivar.
In the past two weeks, we have been working with some potential donors who want to buy more sBCH by paying bcBCH. We provided smart contract software, which helps to buy sBCH automatically when price falls under target price, 0.995 bcBCH/sBCH for example. This software has already been working and we have seen a more stabilized peg between bcBCH and sBCH. (https://www.marketcap.cash/token/BCBCH). As the smart contract has not been audited, so we don’t open source the code yet.
We also work with the developers from the community to develop concentrated liquidity providers that perform better service for the takers on smartBCH. On Ethereum, Curv and UniSwap V3 can provide very good experience in stable token trading.
We have identified a leading international law firm that is willing to work with us in dealing with the CoinFLEX issue. With their help, a special purpose vehicle (SPV) has been incorporated and the SPV has already started the negotiations with Liquidity Technologies Ltd.(the entity that operates Coinflex). The name of the SPV is SmartBCH Alliance Limited. As advised by its counsels, the SPV will in no way represent any sBCH holders. t will only raise donations to bail out smartBCH and finance legal actions against Coinflex. No sBCH holder’s right will be compromised by this SPV and each sBCH holder has litberty to take any legal action against Coinflex if they wish.
The SPV has formally demanded CoinFLEX to return all the treasury BCH to smartBCH protocol. The demand pointed out that many sBCH holders own sBCH through DeFi and have no direct relationship whatsoever with CoinFLEX. The bridge service that CoinFLEX provides to sBCH holders is also distinct from the normal depositary services it provides to its customers. CoinFLEX and its management may have committed tort of conversion as well as criminal embezzlement.
The target of the SPV is to permanently and irrevocably lock a certain amount of sBCH as a way of filling the hole created by CoinFLEX, by raising donations and claiming back assets from CoinFLEX. The fulfillment of bail out will need to be compatible with the Bail Out DAO plan eventually, for which we are still working on the white paper.
Without prejudice to any rights, claims, and remedies of the SPV and sBCH holders, if a reasonable compromise could be reached without years of legal proceedings which could have the support from the donors backing this SPV, we will be open to a settlement with CoinFLEX with the promise from donors to fill the hole, as a “compromise” means that there will be discrepancy between we should get and what we get indeed from CoinFLEX. If the SPV cannot get a reasonable settlement deal with CoinFLEX, no legal rights of sBCH owners will be damaged. The SPV will be funding those legal actions by itself .
Other creditors of CoinFLEX have been trying to work out a settlement without getting into a years-long forced administration/insolvency proceedings.
The hole for smartBCH protocol created by this incident may be less than 101K sBCH, as we get unaudited and unconfirmed information from CoinFLEX that they still hold 33K sBCH tokens. So the net obligation for CoinFLEX with regard to smartBCH bridge service may be around 68K sBCH.
We want to fully accomplish the bailout plan within a short period of time after the decentralized bridge is launched, which is likely to happen early next year. It will need us to make sure the bailout plan can work out successfully and timely according to smartBCH’s decentralized bridge development, testing and launching, but not subject to CoinFLEX related time consuming legal process. Even if there is a peaceful settlement between CoinFLEX, creditors and the SPV, we are not quite sure that the legal process can be ended within 6 months. The SPV got enough soft commitment but we can always use help and soft commitment from more kind hearted donors in the smartBCH community to make sure the bailout plan happens as we planed.
Cheaplightning resigned from his mod role. He has served the community for more than one year without any payment received from us. We are sincerely grateful for his contribution and respect his decision.