$13.5 Million Hack Ignites Fresh Debate Over Crypto Project Bancor

Such was the case for crypto project Bancor this week, which saw its design decisions and strategy picked apart on social media as it sought to contain the damage from a multimillion-dollar hack.

Then on Tuesday morning, Bancor published details of the breach: a wallet used to upgrade smart contracts was compromised and used to steal 3.2 million of the platform's own BNT tokens, 25,000 ETH and 230 million NPXS tokens.

Perhaps most notably, Bancor said it had frozen BNT tokens to prevent their loss.

Some background: it was Bancor that raised a then-record-breaking $153 million in a token sale, which saw participation from investors like Tim Draper and the investment firm Blockchain Capital.

As an early mover in using the initial coin offering funding model, Bancor has long been a magnet for critiques.

Included in the Bancor code is a mechanism that allows the company the ability to freeze movements of the BNT token - something that critics quickly pounced on as the antithesis of the "Decentralization" mantra, by which a network wouldn't have one governing force.

On June 20 of last year, Wertheimer wrote in a Medium post that both Bancor's token and ICO contracts allow Bancor to arbitrarily issue, freeze and even destroy any BNT tokens whenever they want.

Wertheimer further argued that such "Backdoor" mechanisms that undermine the decentralization principles in Bancor could also cause the current breach, as the compromised wallet existed for the purpose of upgrading smart contracts - another feature allowing Bancor to manage the network in a more centralized manner.

One observer suggested that those criticizing Bancor might feel differently if it was their funds at risk following a hack.

Stressing once again that user funds weren't compromised, Bancor said that the funds were stolen out of a BNT's connector balance that served as a reserve, and smart contracts accessed by that wallet.