On Monday (9 July 2018) morning (Central European Summer Time), the blockchain startup Bancor (BNT), which had one of the most successful ICOs of 2017 (with $153 million raised), discovered that it had been hacked.
First, Bancor sent out a tweet around 08:01 (UTC) to say that its website was down:
Bancor Web App is currently down for maintenance.— Bancor (@Bancor) July 9, 2018
Then, roughly three hours later, it used Twitter to make another announcement, this time with some details about why it had had to shut down its website:
This morning (CEST) Bancor experienced a security breach. No user wallets were compromised. To complete the investigation, we have moved to maintenance and will be releasing a more detailed report shortly. We look forward to being back online as soon as possible.— Bancor (@Bancor) July 9, 2018
Finally, around 20:35 (UTC), we got another tweet that provided a lot more detail about what had happened:
Here is the latest update on the recent security breach: pic.twitter.com/JroypFvBri— Bancor (@Bancor) July 9, 2018
Some people, such as Twitter user "@nic__carter", took this opportunity to criticize Bancor for the freezing of the stolen BNT tokens:
- "decentralized exchange" hacked— nic (@nic__carter) July 9, 2018
- freeze funds
- "ok guys could you please stop trading"
- discretionary control over all BNT tokens
- literally named after a keynesian concept
fantastic work guys 👌👌👌👌👌👌👌
Later, another critic, Charlie Lee, the creator of Litecoin, came forward to deliver his opinion via a tweet that said:
"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."
However, such criticisms seem a bit harsh since Bancor, despite what some people in the media have called it, is not a "decentralized exchange" and does not describe itself as such. Furthermore, it could be argued that although Bancor allows users of its network to buy and sell tokens, it is not an exchange (centralized or decentralized) in the traditional sense of the word. In fact, the Bancor Help Center has a page titled "How is Bancor different than an exchange?" that explains the main differences between Bancor and traditional exchanges.
With regards to the BNT tokens that were frozen, Bancor designed the smart contract for its BNT token with this "freeze" feature for emergency situations like this one. Does that make BNT less decentralized than Bitcoin or Litecoin? Sure, but less decentralized does not mean useless. Litecoin is a form of electronic cash, and so it makes sense that it behaves in a similar way to cash fiat in that you can't freeze a specific Litecoin wallet or all litecoins in the Litecoin network.
As of press time (22:20 UTC), Bancor's website is sill down.
It makes sense that user funds were not affected by this hack since, as Bancor has pointed out before, as a decentralized liquidity network, "Bancor neither holds nor has access to customer funds, making its network and its wallet more secure."
Bancor became famous in 2017 for having one of the most successful ICOs ever seen by raising $153 million (in ether) on 12 June 2017 in around three hours through the sale of its BNT tokens. One of the reasons for the high amount of interest was the involvement of legendary billionare tech investor Tim Draper as both an investor and advisor.
The Bancor Network is a decentralized liquidity network that allows holding any token and converting it to any other token in the Bancor Network, with no counter party, at an automatically calculated price, using Bancor's web or mobile wallet app. The Bancor Network Token (BNT) is the hub network token. Users can convert any token within the network to BNT and vice versa. In this way, BNT tokens can be used as to convert from any token to any other token. The Bancor Formula calculates the rate for these conversions. What the Bancor Protocol is aiming for is to be the main cross chain liquidity protocol in the crypto space.
At press time, according to CryptoCompare, BNT is trading around $2.80, down 15.5% during the past 24 hour period.