Bancor Exchange Had $23,5 Million In Cryptocurrency Stolen By Hackers

Using a compromised wallet, hackers made their way into stealing $23 million spread among three Cryptocurrencies from Bancor – a Crypto Exchange – this Monday. Bancor had $12.5 million value in Ether (24,984 ETH), $1 million in Pundi X (229,235,645 NPXS), and finally, $10 million in its Network Tokens (3,200,000 BNT) stolen from the attack. Bancor managed to reduce the total damage at $13.5 million, part of which could be done by freezing the $10 million worth of BNT. However, that also led them into a debate about being a decentralized exchange or not.

How Did The Hack Occurred?

Bancor’s services included wallets with built-in exchange services. According to Banco, only one wallet was compromised; specifically, one used for the upgrade of smart contracts. No other wallet got compromised by this situation. Using this compromised wallet, they stole $23.5 million worth in three different Cryptocurrencies.

Bancor stated that $12.5 million worth in ETH (Around 24,984 Ether) were stolen from the connector balance used for BNT, which acts as a reserve. Other stolen coins were subtracted from the smart contracts used by the exchange which the wallet could access.

Smart Tokens Explanation

The previous statement by Bancor was a clarification for anyone who was afraid of losing any investment. Said clarification needs smart tokens knowledge in order to be understood. Being Bancor Network Tokens (BNT) smart tokens, their price discovery is built into a smart contract. When buying BNT (by sending smart contracts), new BNT coins will be issued, and the ETH will be kept inside a joint balance.

Once BNT gets sold by being sent to a smart contract once again, a proportional sum in ETH will be released from the balance used by the token and it’s sent back to who sold it; the BNT tokens are destroyed.

Bancor, A Decentralized Cryptocurrency Exchange?

When the theft happened, Bancor froze $10 million worth in BNT, stating that it was part of Bancor protocols to freeze funds. It’s built only for use in extreme cases, like recovering from a breach of security.

This protocol allowed Bancor to succeed in preventing the thief keeping all of the tokens he had stolen (even though they made it run away with a considerable amount of money on their pockets).

This ability to freeze tokens started a debate; is Bancor really what they claim? Are they a genuinely decentralized Crypto Exchange? Not only that but even the fact that the hackers used a that allowed people to steal tokens from the exchange’s smart contracts helped to create more tension in the discussion.

When the Litecoin creator, Charlie Lee, got aware of this issue, he stated that if an exchange can lose funds from its users, or if they have the capacity to freeze users’ coins, then they are not a decentralized exchange.

Charlie Lee says that Bancor gives a false feel for decentralization since they have already lost customer funds and froze them right after.