Harmony Strikes Discord With Plan to Mint Tokens in Response to $100M Hack
Users of Harmony, a Layer 1 blockchain, are fuming over its leaders’ proposed solution to last month’s $100M hack.
Harmony has proposed reimbursing users whose money was stolen with the blockchain’s native ONE token over a three year period. To create the ONE coin, though, Harmony has proposed adding newly minted tokens to the existing supply, a decision that has infuriated users who believe the move will dilute their ONE holdings.
Anticipating blowback, the Harmony team explained its logic in an online forum detailing the proposal.
“We decided against using the foundation treasury in the interest of the longevity and well being of the project,” Harmony wrote, “as reimbursing from the treasury would greatly hinder the foundation’s ability to support the growth of Harmony and its ecosystem.”
The proposal struck a discordant note among Harmony’s users.
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“This is a massive supply increase,” wrote Jimbo_JRC on the Harmony governance forum. “This will in no uncertain terms be paid for by those of us who hold large amounts of one by the value of the token absorbing the cost of the hack through dilution,” they wrote.
Given how much time has gone by, tokenholders say they were expecting a better deal. “Let me get this straight: no word for weeks,” wrote user CJL on Wednesday, ”and the proposal you come back with is a LUNA-style hard fork and a 3-year vest?
Harmony’s “Horizon bridge,” which allows users to send crypto between different blockchains, was hacked June 24. The attackers made off with $99M in digital assets “across approximately 65,000 wallets and 14 different asset types,” Harmony said.
Bridges have become popular targets for hackers, with blockchain-based videogame Axie Infinity losing more than $500M in a bridge hack this spring.
Frustration has brewed since. One user even took to Harmony’s governance forum to demand the resignation of co-founder Stephen Tse.
Those who supported his resignation cited a lack of clear and consistent communication post-hack.
Debating Harmony proposed solution this week, one user called for members of the leadership team to take a cut in their compensation as punishment for letting the hack happen on their watch. Others suggested a class-action lawsuit. But most just fumed about the tokenomics of the proposed solution.
“It boggles my mind that not only do we lose money, we also pay for the reimbursement ourselves via inflation. You guys have no shame to call this a ‘reimbursement proposal,’” wrote Dilutedtozero. “TL;DR The “community” loses their funds AND foots the bill to fix their shit.”
In the governance forum post detailing the proposal, Harmony said it would read and incorporate users’ comments. Co-founder Rongjian Lan did not immediately return a message seeking comment Wednesday.
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As written, the proposal would go before a vote Aug. 1, and users would have two options: To proceed with the plan and reimburse affected wallets with ONE equal to 100% of the stolen assets — minting 4.97B ONE in the process — or to reimburse wallets with ONE equal to 50% of the stolen assets, minting 2.48B ONE in the process.
If successful, the hard fork would occur at the end of August, with the first payouts hitting wallets Nov. 1.
Now comes the hard part — persuading irate users to accept the proposal.
“I am not at all happy with this given this is about 95% of my portfolio of which I put my investment money into in good faith,” said Jimbo_JRC. “I had zero exposure to bridged assets because I was faithful and determined to see Harmony succeed and held $one through the downturn, and yet if this passes I’ll be footing the bill. There’s gotta be a better way.”