The KuCoin hacking incident let people see what are the real "decentralized" DeFi projects
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Translated by: Lu Jiangfei
Content overview:
Written by: Ashwath Balakrishnan for Crypto Briefing
Translated by: Lu Jiangfei
Content overview:
Tether’s decision to freeze funds is not surprising, but projects that claim to be “decentralized” have done the same;
Ocean Protocol also decided to implement a hard fork from the block before the hack, just like Ethereum (Ethereum) had done in the past, while Ampleforth blocked the address of the stolen funds directly from its smart contract.
From this sequence of events, DeFi investors may now be able to discern which are truly decentralized protocols and which are not.
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The KuCoin hacking incident exposed the false "decentralization" status quo of the DeFi industry
Last week, Paolo Ardoino, chief technology officer of Tether, a stablecoin operator, said on Twitter that Tether is not Bitcoin but a centralized stablecoin, which can be used as Better, faster transport layer for on-chain fiat currencies, and those who complain about centralized stablecoins freezing stolen funds simply because they weren’t stolen.
According to Paolo Ardoino, Tether can decide whether to freeze funds at its own discretion in two situations:
Law enforcement or regulatory requirements;
Funds were sent to unrecoverable addresses.
If it turns out that KuCoin victims’ funds were indeed locked in smart contracts and never accessed, Tether would help users recover their lost funds. In fact, there is nothing wrong with Tether doing this, because the stablecoin has never been advertised as a decentralized cryptocurrency, so it will not be labeled as such.
When KuCoin was hacked and $150 million in user funds were affected, Tether froze the hacker’s USDT “hideout” again, which was apparently the company’s expected action. But this time, some so-called decentralized projects want to learn from Tether and use some "centralization" methods to prevent hackers from plundering.
Ampleforth and Ocean Protocol are two decentralized projects that took action to stop the KuCoin hack:
Ocean Protocol decided to perform a hard fork, in a way that emulates the measures taken by Ethereum when it was hacked by "The DAO". After the hacking of Ethereum, it decided to perform a hard fork from a few blocks before the hacking, and use the new chain as the main chain;
Ampleforth took another approach, upgrading their smart contracts to specifically prevent hacker addresses from transferring AMPL tokens.
For now, the measures taken by Ocean Protocol have not caused much controversy in the community, because this method will not affect the integrity of the smart contract. They forked the original agreement and stated that the new smart contract will be a smart contract that they will continue to update in the future, and will deploy the majority consensus on the new smart contract. The stolen tokens have been transferred to a certain address, and hackers Users who suffered losses due to attacks will also be compensated with new tokens.
However, Ampleforth's approach does not seem to be meticulous enough, because the encryption community believes that this approach opens the door to "audit".
As far as Ocean Protocol is concerned, if the protocol has been fully developed, the community can choose to keep the old smart contracts. After all, Ocean Protocol did not set a precedent for perpetual tolerance of censorship before developers forked the protocol.
However, Ampleforth took an approach that surprised the crypto community. According to an article published by Ampleforth on Medium in June 2019, the agreement cannot freeze specific funds, and the worst case is to suspend smart contracts:
In the absolute worst case, setTokenPaused will pause all transactions on the chain. This is to maintain balance and prevent other unexpected issues with the token itself. In addition, this is also a defensive measure that is activated before going public.
Both emergency measures setRebasePaused and setTokenPaused are to be considered as Ampleforth's last resort, but hopefully will never have to be enabled as we feel there is a huge responsibility to enable these features, especially now that the system is relatively new and in a competitive market environment early stages of proving its worth.
However, Ampleforth did not give the community a chance to choose, and its team eventually upgraded the smart contract "as appropriate". It is well known that the Ampleforth team owns the management keys and can make these decisions, but this practice sets a bad precedent for the future of decentralized projects.
Since the new smart contract has censorship addresses, it means that it is almost impossible for AMPL to achieve its ultimate goal of becoming a censorship-resistant foundational currency.
In fact, in addition to Ampleforth and Ocean Protocol in this chaos, Kardiachain, Orion Protocol and Aleph also performed similar actions.
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bright side
Although the measures of Ampleforth and Ocean Protocol have caused a lot of controversy, it is not that there is no hope for the decentralized DeFi industry.
On the one hand, the $150 million stolen by the KuCoin hack has exposed that some projects are not truly “decentralized,” claiming that their smart contracts are immutable and censorship-resistant, but they are not. On the other hand, this incident at least made people see what are truly "decentralized" projects.
In addition to Ampleforth and Ocean Protocol, hackers actually attacked Synthetix (SNX), Kyber Network (KNC), Maker (MKR) and Chainlink (LINK), but none of these projects forked contracts or frozen certain wallets.
Using a Decentralized Autonomous Organization (DAO), or distributing decision-making power outside a core team of only 10-20 people, has proven useful for maintaining protocol integrity.
Synthetix founder Kain Warwick addressed the situation on Twitter, saying:
