Literally even a crypto attorney is cautioning against this.
https://x.com/lex_node/status/1740998536697721079?s=46&t=vaxn5D934yrGU4i-RMv7zg
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This user swapped on a single pool directly, anyone in crypto who knows how DEXs work, which this person does, knows thatâs a terrible decision at size. If they used Osmosisâ frontend routing they wouldâve saved nearly 170k in slippage. This is directly against the notion that âcrosschain routing is hardâ as crosschain routing wasnât even attempted. The trade was made at a size, 80% of the current pools liquidity, we shouldnât reward negligence for something Osmosis itself canât even mitigate.
Routed: 
Single Pool:
Separately, the idea to use ProtoRev to pay this back is faulty for 2 reasons:
- Osmosis would need to sell the OSMO for USDC (no way we refund in OSMO right before a bull run)
- ProtoRev should be reimbursing every rethrough then, not just governance decided once if we are defining the situation as Osmosis profiting from bad execution
Selling ProtoRev capital to âincrease trade efficiencyâ wouldnât work to reduce slippage because you are essentially adding uncapped OSMO sell pressure to every block. Instead, we should use ProtoRev capital to acquire POL in our top pools, which would help âincrease trade efficiencyâ in a sustainable manner. (This is false bc ProtoRev is demand, not supply)
Finally, the idea that this is a âgreat time for Osmosis to make a standâ is rhetoric, there is nothing substantial behind that statement. We could convert that statement to say âits a great time for Osmosis to tell 3rd party integrators that weâll refund any of their mistakesâ. To be fair, in any other scenario this could be a one off situation but when it comes to decentralized governance, precedence is what keeps it sane.
For the user to go 3 layers deep to attempt to go through Osmosis to get a refund is insane. Not only has Skip profited from this but it was dydxâs user flow that led them astray. Donât forget dydx also profits from its userâs and is heavily funded.
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Just to reiterate what I said on X: https://x.com/bpiv400/status/1741124464924840343?s=46
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Reject or donât put this proposal on chain for now
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Create a separate signaling proposal to update protorev to atomically provide MEV rebates to swappers going forward (as a matter of policy) â if the community believes this is fair
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If that prop passes, consider âbackportingâ the policy to this user AFTER weâve decided thatâs the better policy
In short: Separate the decisions + update policy FIRST
Governance shouldnât be making 1 off decisions ad hoc. It should be a tool for collectively building fair decentralized systems. If this user gets refunded without a change in policy, itâs a failure.
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I sincerely hope the Osmosis community will not refund slippage fees due to a userâs error, as it could harm the systemâs integrity and negatively impact the value of OSMO, similar to the downfall of JUNO after the seizure of a userâs funds.
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So I have lost money two times by making a mistake; once on Somm ($25K) and once on Secret ($5K). In both cases I was told sorry nothing can be done, you need to be more careful. In both cases the interfaces were not very clear as to what was happeningâŚI made the wrong choice and paid the price. Now it is important to understand that I am simply a normie user and not connected to any one in the dev community, not a big player.
It is my opinion that this should go no where and you should withdraw your request. Definately sorry you made the mistake, cause it totally sucks to lose money like that. Nonetheless, it is the way it goes.
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Endorse Barryâs argument but also I donât think routing between two representation of the same asset, ETH USDC and Noble USDC is the same as a user trying to trade between two actually different assets.
Generally I think there is a large delta between " the user selected a bad trade" and " no correct system should have produced this trade"
I think this situation is the latter.
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I actually would like to echo Effort capital here:
https://x.com/effortcapital/status/1741095227597660288?s=46&t=vaxn5D934yrGU4i-RMv7zg
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So⌠IMO, this prop should be rejected, and it looks like it will be anyway.
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Conversations around protocol mishaps should be had, but I do not advocate for Barryâs number 2 that somewhat dictates what conversations should be had. The Osmosis community should be the ones to guide the conversation and narrow down on a policy, if any. Barryâs #2:
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The user should NOT be retro refunded. As that would still open the doors for more retro refund requests.
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We should use this as a learning opportunity for moving forward but for this case, we should stick to the current status quo, in the words of Shapiro, âas subjectively unfairâ as it may be.
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Glad I never went to dydx. Bad bad very bad. On the other end itâs totally user mistake 
he gotta check routes & liquidity availability before swaping huge amount.
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Iâve had similar mistakes (related to unclear UI) with smaller amounts on Somm ($25k) and Secret ($5K) and been told no both times. I sucked it up and understood that this tech is new and itâs the users risk/responsiblitlity at all timesâŚthis is a bad precedent to set and even tho I lost out, understood why it shouldnât happen.
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I appreciate how much you care about this topic and sharing all of your thoughts!
@bpiv400 is part of the Osmosis community as well. He is chiming in just like any other community member with his thoughts and possible solutions just like you did with your disagreement. These debates shouldnât turn into âyou vs meâ or else we run the risk of not collaborating to the most informed solution. This is not an easy decision and looks like the outcome will lead to some major new precedents either way, so the more contributors the better!
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I def didnât mean for it to come across as a me against him, literally hold nothing against him but understand tone can be misunderstood in writing.
My point is simply that, rather than start signalling about a specific policy, the community as a whole could be involved in determining what policy should be signalled. i.e. take one step further (back) from his recommendation to discuss the core issue, and as a community work towards a policy, if itâs decided that there needs to exist one.
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Besides the question if we want to refund the user or not I think this is not a topic Osmosis should deal with on itâs own.
The user was interacting with dydx and the routing path was generated through Squid. Everything Osmosis did was provide the tools to make the trade and there was no fault on the Osmosis side.
From what I read here Skip received 20% from that trade. I know they have a strict policy to not refund users but at this point it seems just weird to talk about refunding a user from the community pool while the involved actors who made the error are walking away and made profit out of this situation.
The community pool is not an insurance.
Get the Skip and Dydx team on this discussion and maybe we can find a solution together.
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This trade was routed by Squid (not Skip) and via Osmosis and Axelar.
A bad route generated excessive MEV which was then captured by ProtoRev.
Your post indicates a misunderstanding of the basic facts.
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Even if the situation is the latter, Osmosis isnât the system that produced this trade, it was Squid. Osmosis simply enabled the trade. Osmosisâ own frontend doesnât even trade on pools directly.
This is the a general discussion about liability for external frontends. If an external frontend/api/tool misuses the protocol, should the protocol be held responsible? No. I donât see how this situation is different.
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For anyone who says they want to refund without defining a policy for this, why shouldnât we refund everyone who has ever lost money due to slippage?
You help one user & anger every other user who has gone through the same thing, unless we refund them all. Its a worse outcome to refund a single user here.
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Obviously he meant Squid⌠both have been mentioned in this thread and at this point in the convo itâs perfectly understandable if names get mixed up.
Doesnât take away from his argument. Simply replace the wrong term with the right one.
With that said, protorev does seem to automatically pay Skip 20% so he actually hasnât misunderstood anything:
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I canât confirm but if Skip has a no refund policy then we are essentially arguing on this forum because we lack such a policy. Which is exactly why the precedent not to refund is the most important part of this discussion. Otherwise why arenât we asking Skip to fund this as well?
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Thank you for letting me know that it was Skip and not Squid. That was my bad indeed and I mixed them up. Let me clarify my point then.
Bary from Skip said it here and I think he is completely right. (this time itâs really skip)
We need a policy for this.
We should create a new thread about a proposal saying what happens in such cases and if/how we want to do refunds.
Once thatâs figured out we can apply the policy to this case and act accordingly.
Passing this proposal will open the door to any kind of refund proposals.
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yeah I forgot that Skip gets 20% of ProtoRev revenue.
and I am completely aligned with the idea of a policy here.
This is gonna happen again.
Skip and Squid are just for runners.
People try more and more non-atomic routing and bad things will happen.
The topology of blockchains will only grow more complex.
4 Likes
I would like to suggest building a breaker/warning into the UI to execute on transactions with significant slippage or price impact.