Kujira, a decentralized finance (DeFi) platform, recently faced significant challenges after using operational funds to boost liquidity and activity within its ecosystem. This strategy, executed amidst various exploits and attacks, led to substantial market volatility and rapid sell-offs.
The Kujira team detailed their plan to address these issues in an official statement on July 31. They revealed that their attempts to leverage operational funds backfired, causing a 55% drop in the value of KUJI tokens within 24 hours. Wallets associated with the Kujira Foundation experienced automatic liquidations as their leveraged positions became undercollateralized due to market volatility, triggering a downward spiral of further liquidations and price drops.
Despite these challenges, the team clarified that the Kujira treasury still holds 14 million KUJI, worth approximately $5.5 million, which remains secure. However, the liquidations and subsequent price drops sparked panic among investors, further fueled by misinformation from some influencers on social media.
In response to the crisis, Kujira announced the creation of the Kujira Operational DAO. This decentralized autonomous organization will take control of the Kujira Treasury and core protocols, focusing primarily on reducing debt. The team plans to use Fuzion’s Bonds product to offer the community discounted KUJI with various maturities and vesting schedules, aiming to minimize long-term price impacts.
The new DAO will also manage the configuration of core Kujira Protocols. Kujira states the introduction of admin dashboards will enhance transparency and allow community members to propose and vote on changes.
Additionally, the Community Pool will be migrated to the Operational DAO, enabling longer and more thoughtful voting periods for grant requests. Over time, Foundation staking positions will be transferred to the DAO, providing a sustainable revenue source.
In a Telegram message, a Kujira team member explained their rationale: “As a team, we thought the best use of a portion of ops funds would be to leverage and deploy across the ecosystem to bootstrap liquidity and activity. We genuinely felt like this was the correct course of action.” However, they acknowledged that the timing coincided with various attacks, which exacerbated the situation.
The firm plans to deliver several upgrades in the coming months, including BOW v2, USK v2, GHOST v2, and Perps, with the Operational DAO overseeing these protocol enhancements.
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