Hackers have used a compromised wallet to steal $23.5m in cryptocurrency from Bancor, the world’s largest decentralized crypto exchange. The hack and the company’s response to it raised the question – is Bancor really decentralized?
In a statement on Twitter, the Israel-Switzerland company announced hackers used a compromised wallet to steal $10 million of Bancor Network Tokens (BNT), $1 million of Pundi X, and $12.5 million of ether. Once the theft was identified, Bancor was able to freeze the stolen BNT, limiting the damage to the Bancor ecosystem. The company was unable to freeze the other tokens.
Bancor believes a wallet used to upgrade some smart contracts was compromised. Following the hack, Bancor immediately took its exchange offline, as it carries out an investigation. The Bancor Network is however now back online, with the company announcing on Twitter it will be “gradually adding tokens back to the network beginning with the BNT/ETH converter.”
An earlier security breach warning
The hack follows a security breach warning to the Bancor Network made earlier this month. On July 9, the company announced it had halted operations due to a security breach. No user wallets were compromised at the time. Due to the decentralized nature of the Bancor exchange, the security breach on July 9, did not transpire into a total catastrophe for the company.
Is Bancor really decentralized?
However, the recent theft of $23.5m paints a different picture, with critics raising questions as to whether Bancor should claim to be a decentralized exchange network. Skeptics of the decentralization claims of Bancor question how the company can insist on being decentralized when it responded to the hack with strategies in line with a centralized system.
One such critic is Charlie Lee, founder of the peer-to-peer cryptocurrency, Litecoin. Lee tweeted:
“An exchange is not decentralized if it can lose customer funds OR if it can freeze customer funds. Bancor can do BOTH. It’s a false decentralization.”
With centralized systems being condemned for being focused, predominantly, on greed, with high-profile figures like Ethereum’s creator Vitalik Buterin, calling for centralized exchanges to “go burn in hell,” at a recent Techcrunch Blockchain event, it’s not difficult to understand why Bancor strives to be seen as a decentralized exchange. However, when devastating hacks like this one raise their head, the company’s response shows whether they are truly decentralized or not.
Gabrielle Pickard-Whitehead is a freelance journalist and copywriter based in the Peak District, UK. Since 2006, Gabrielle has followed her passion for writing and has sculptured a rewarding career out of her love for the written word. Gabrielle thrives on creating compelling content related to current affairs, politics, financial news and the latest advancements in technology and innovation. Gabrielle is excited about having the chance to write about the constantly-evolving world of crytocurrency and enabling people to learn more about this rapidly-advancing digital asset.