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Harmony Proposes Mining ONE Token to Reimburse Hack Victims
03 August 11:50
TL: DR
- It was reported in June that $100 million in assets had been stolen from the Harmony project.
- After the hack, Harmony (ONE-USD) plans to mint ONE tokens for reimbursing victims.
- The community has rejected two reimbursement proposals made by developers.
Keywords: Harmony, ONE, hack, reimburse, victim.
Background to the story
The Harmony blockchain, as well as Ethereum, Binance Smart Chain, and Bitcoin were hacked for almost $100 million in June 2022 due to a weakness of the multi-sig wallet governing Harmony's security. According to popular belief, the hack was from the Lazarus Group, a North Korean hacking collective that affects around 65,000 wallets and 14 asset types. However, it was all speculation. The company tried to make peace with the hacker by offering a bounty of $1 million for the hacker to return the funds, but the hacker didn't accept the deal.
Horizon Bridge's Plan
In response to the Horizon bridge hack, the Harmony protocol team announced a possible reimbursement plan that includes minting over 2 billion ONE tokens. The company put forward two reimbursement options:
- A full reimbursement, which would result in almost 5 billion ONE tokens being minted and distributed over the next three years, or,
- A 50% reimbursement would result in just under $2.5 billion tokens being minted and distributed.
The reason for these suggestions is because multiple entities borrowed ONE using de-pegged stablecoins as collateral without intending to repay it. As a result, ONE liquidity provider is unable to withdraw funds. Thus, 86 million ONE tokens will be minted over three years to reimburse DeFi protocols.
Horizon Bridge's working options for reimbursement
Harmony's team posted a blog asking for feedback on two options it suggested. According to the team, the first option entails minting 4.97 billion tokens for 3 years, or around USD 2.76 million, assuming a token price of $0.020 per token. Using the token price of USD 0.020, the second option shows minting ONE 2.48bn over three years, resulting in 69m tokens emitted each month, worth around USD 1.38m.
In a statement, the team said that the amount of ONE distributed will be determined based on the USD value of tokens lost across impacted wallets at the time of the hacker. They also said the distributions would be based on the number of ONE token pre-calculated going forward instead of their fiat currency value. As a result, affected users would receive a specific amount of ONE regardless of the token's price at the time of the hack.
As good as these suggestions are, users have argued that this doesn't make sense, arguing that the market value should determine the price.
A user (TrickLuhDaKidz 🦋) has this to say,
Many users criticized the team for its desire to "print money," stating that they would be driving prices down for other community members because "more supply usually means lower prices."
Another community member, Arpit Sharma, said that minting billions of new tokens could set the price of ONE back.
Another Twitter user, 0xDoc 🔥, said,
Conclusion
The voting on these proposals will begin on August 1, but investors are already voicing their opinions. With more tokens being minted, ONE coin prices are further threatened, as the total supply of 12 billion tokens is heavily diluted. Investors want ONE to use treasury funds to reimburse victims, feeling they shouldn't have to suffer any more losses.
Author: Gate.io Observer: M. Olatunji
Disclaimer:
* This article represents only the views of the observers and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
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