Decentralized Exchange Bancor’s $13.5 Million Hack Sparks Heated Crypto Discussions
On July 9, 2018, Bancor took to Twitter to share an inconvenience, where the cryptocurrency exchange was faced with a $13.5 million hack, which was split into $12.5 million value of ETH, $1 million value of NPXS and about $3.2 million value of its native token, BNT.
While user accounts/wallets were neither attacked nor comprised, many crypto investors took to several social media platforms to question Bancor’s decentralization. Why? Because, Bancor was supposedly capable of freezing BNT from being stolen.
Given the nature of cryptocurrencies, dubbed a decentralized system, many view Bancor’s ability to save their tokens from the hack, as a centralized act.
The Negative Outlooks On Bancor’s System
Here are some perspectives since the Bancor hack that needs to be brought to light – for both purposes of meeting the needs of cryptos and educating investors:
Dogecoin creator, Jackson Palmer took to Twitter to question Bancor’s ability to freeze, asking its followers,
“How many other ‘decentralized’ DApps have a built-in kill switch that’s centrally controlled?”
Litecoin creator, Charlie Lee, also expressed his view stating that Bancor was successful in bringing a “false sense of decentralization”, which was said due to Bancor’s ability to “lose or freeze customer funds”.
Another assumption on how things might have played out was offered by @udiWertheimer, who also shared a post he made on Bancor a year ago. In particular, he stated that the “Bancor hack was enabled by permissioned backdoors”, which supposedly has been embedded in its smart contracts.
According to the previous post, @udiWertheimer clearly wrote what he thought would be a risk, which focused on the backdoor, how it is centralized and if keys were not properly secured, much more prone to theft!
He was also quick to highlight the post shared by Bancor, which stated, “A wallet used to upgrade some smart contracts was compromised”. To @udiWertheimer, the backdoors that have been already embedded in Bancor’s smart contracts could have opened on its own, which in turn could have made it easy for hackers.
The Positive Outlooks On Bancor’s System
While several negative reactions spurred since Bancor’s hack, equivalent positive perspectives have been shared. Here’s a look at why some users might be congratulating, or even praising Bancor’s stance despite the amount lost:
BitcoinAgile (@bitcoinagile) seems to praise Bancor for trying to save what it could. Explicitly sharing that its role in,
“trying to automate Market Making with those compromised Liquidity asset pools, they failed but at least they tried.”
Another user, ~Creat_tive ~ Alby Einstein, seems to have made a valid point stating that investors would be quick to complain if their money was lost. Adding that, “Decentralized doesn’t have to be lawlessness”.
Ultimately, it seems that more investors are siding with Bancor’s ability only because their accounts were not compromised. This might be problematic, as such investors are not looking at the greater picture.
What Does Bancor Have To Say?
After seeing several posts made in regard to the Bancor System, the cryptocurrency exchange took charge and shared its viewpoint, along with some necessary clarifications to rid each and every investor of confusion, doubt, and the lack of confidence.
The first clarification revolved around the amount of cryptos hacked. The exchange believes that users don’t have a clear understanding of what Smart Tokens are and how they work. In particular, an elaboration was given which stressed that the “BNT has price discovery built into the smart contract”. Every time BNT tokens are purchased, new BNT tokens are issued and “stored in a connected balance”.
The second clarification involved Bancor’s 3-year pilot period, which was allegedly created to “protect our communities as we build new tech in an emerging ecosystem”. The decision for the pilot period was also due to previous incidents that occurred within the industry, which Bancor took as a futuristic and pre-cautionary step.
Lastly, Bancor’s ability to freeze accounts, to the crypto exchange, was solely a,
“preventative measure” and one that was necessary to protect the “network and token holders in a state of emergency”.
The debate has elevated to the point where the Co-Founder of Bancor, Guy Benartzi also had to share a post. It appears that he did not address the confusions in relation to whether or not the crypto exchange should be considered as “decentralized”, however, he did share the ongoing efforts that will be taken to increase protection.
“This incident […] will not divert us from our goals. If anything, we will now redouble our efforts and accelerate our roadmap so that criminals will not prevent Bancor and the industry from achieving […] mission to enable freedom of currency.”
Has your viewpoint changed since the exposure of others’ opinions? Are you siding with the cons or the pros of the Bancor hack?