How A $600 Million Crypto Heist Is Making Us Ask Some Important Questions…

Hackers stole $600 million worth of cryptocurrencies. They gave some back too. But who should take the responsibility for it?

For the past two days, every news website and channel have been talking about one of the major crypto heists of all time. This one caught our attention because the hackers have returned some of the money they stole. We were intrigued by this incident, and wanted to write an article on it. So, here we go.

The Heist

On Tuesday, decentralized finance (DeFi) platform Poly Network said that hackers stole some $600 million in cryptocurrency from the site. This was said to be the largest theft in the cryptocurrency industry’s history. Poly Network said that a vulnerability in the side allowed the thief to steal the funds. According to the digital wallets of the hackers, the details of which were posted only by Poly Network, the assets stolen combined $270 million on Ethereum, $250 million on Binance Chain, and $84 million on the Polygon network.

Post the hack, Poly Network posted a series of tweets announcing the news. Poly Network also posted online addresses used by the hackers, which were long, multi-letter-and-number codes, and called on affected blockchain, and crypto exchanges to blacklist tokens coming from the addresses, in a bid to freeze out the hackers. Poly Network also pleaded with the hackers themselves to return the assets. The firm said, “…The money you stole are from tens of thousands of crypto community members… You should talk to us to work out a solution.”

Wait, What’s DeFi?

DeFi is short for “decentralized finance”, which is an umbrella term for a variety of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries. DeFi is distinct because it expands the use of blockchain from simple value transfer to more complex financial use cases. One of the major advantages is cutting out middlemen from all kinds of transactions.

Lending markets are one popular form of DeFi, which connects borrowers to lenders of cryptocurrencies. Stablecoin is another form of DeFi. “Prediction market” is one of the oldest DeFi applications living on Etherum. DeFi has the potential to augment interest in prediction markets, since they are traditionally disapproved by governments and often shut down when run in a centralized manner.

Returning The Money

Now, back to the story. According to the blockchain forensics firm Chainalysis, by noon, around $261 million had been returned. Elliptic and Chainalysis mentioned that the hackers said they perpetrated the heist “for fun”, and wanted to “expose the vulnerability” before others could exploit it. The attacker wrote, as mentioned by CNN, “I understood the risk of exposing myself even if I don’t do evil. So I used temporary email, IP or _so-called_ fingerprint, which were untraceable. I prefer to stay in the dark and save the world.” The hackers or hacker have not been identified yet, and we do not know whether it is an individual or a group.

Meanwhile, the hacker returning the money, and saying he did this to expose the vulnerability, makes it sound like they did this out of the goodness of their hearts. But is that what it was — an act of heroism? Experts say that they returned some of the money because laundering them would be a Herculean task. Tom Robinson, chief scientist of Elliptic, said via email to CNBC, “I think this demonstrates that even if you can steal crypto assets, laundering them and cashing out is extremely difficult, due to the transparency of the blockchain and the use of blockchain analytics.” He added, ““In this case the hacker concluded that the safest option was just to return the stolen assets.”

In The End

A lot of people are buying cryptocurrencies these days. Many are reading about the stories of how Bitcoin made some millionaires or even billionaires, and these stories are pushing them towards investing their money in cryptocurrencies. However, some people put all their money in crypto, and they don’t even think about putting it in other instruments such as savings back accounts, mutual funds among others. And, we feel that could be a dangerous financial move.

Since cryptocurrencies are not regulated by any institution, where will people go, if they lose their money. If millions of dollars worth of cryptocurrencies get stolen, who will take the responsibility? At present, the companies alone are responsible for the stolen money, but how will they be able to recover it, if they don’t know who stole it in the first place?

However, we feel that this massive heist might put more pressure on this sector for its lack of regulation. An article by DW News says that owners of digital assets in the UK, the EU and the US have far less protection than those who own assets with banks, traditional brokers or asset managers. Receiving protection from fraud and theft is a basic expectation of consumers and investors, and it is time that institutions deploy measures to offer that protection.

There is a high probability that DeFi is going to change the way finance has been working in this world. There are a lot of applications for it, and institutions as well as governments need to understand that. They need to enforce laws so that investors are able to get complete information about what’s going on, and also make sure that there are guidelines to help investors out when they have been victims of a scam or a theft.