Bancor Urges Industry Players to Collaborate After $23.5 Million Hack

On July 9, the decentralized crypto platform Bancor was compromised.

While the Bancor team is collaborating with other industry players to track the stolen funds, the recent security breach shows how decentralized platforms deal with security breaches, even though some community members have started to question whether Bancor can be considered a decentralized service at all.

Bancor was launched in June 2017 after one of the most successful Initial Coin Offerings in history: It gathered around $153 million in Ethereum in just three hours during the crowdfunding stage backed by renown investor Tim Draper, among others.

Named after a supranational currency conceptualized by economists John Maynard Keynes and E. F. Schumacher aimed to be used for international trade after World War II, the Tel Aviv-based Bancor is a decentralized cryptocurrency platform that essentially allows users to launch their own tokens.

In more detail, the Bancor protocol enables users to issue so-called "Smart tokens," which can hold one or more tokens in reserve and convert them into other tokens with no counterparty.

Bancor integrates its own self-titled token, which can be traded for any of the other tokens supported by the network, and vice versa.

On July 9, it became subject to a heist, during which the hackers managed to steal roughly $23.5 million worth of crypto - 3,200,000 BNT, 24,984 ETH and 229,356,645 NPXS. The Bancor team confirmed the theft on its Twitter and swiftly froze the stolen BNT tokens, as such an ability was built into the Bancor protocol "To be used in an extreme situation to recover from a security breach," limiting the total damage to approximately $13.5 million.

As to what caused the attack to be so successful, Bancor team reported the morning of July 9 that "a wallet used to upgrade some smart contracts was compromised." All operations were halted, and the platform went offline - Bancor representatives assured Cointelegraph that the service will be up within 24 hours, around 10 hours ago.

"A Bancor wallet got hacked and that wallet has the ability to steal coins out of their own smart contracts. 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 sense of decentralization."

"Afterward, the tokens were frozen by the Bancor Foundation in our contract. Now we are helping track the stolen funds."