KucoinHack: Are we really safe if teams can freeze our tokens? Or is this a necessary evil?
“Not your keys, not your coins” – a very popular old adage that rings in the mind of every experienced crypto user. Or not so anymore?
It turns out BTC is the only perfect definition of decentralization. Binance CEO, CZ once stated that decentralization is not "binary black or white," but that the reality is "usually a bit more grey."
In his words on Binance blog released in February 2019: Many people think of decentralization as absolute; you are either decentralized or not. I think that in reality, there is a gradient scale from centralization to decentralized. Often, a better question is: how decentralized should we (exchanges, societies) be, now and in the future? If decentralization simply increases freedom but decreases security and ease-of-use, there is a point where it becomes a net negative, and may not be worth it.
The key point of today’s newsletter is regarding the actions taken by several altcoin teams associated with the recent Kucoin hack on Sept 26th.
With over $200m in estimates of stolen funds, recent updates reveal that many of the affected projects have swapped, frozen, invalidated, or somehow interfered with their tokens.
Ampleforth disabled transfer of 14m AMPL
Tether froze $22m USDT tokens
Covesting froze 3.12m COV tokens
VIDT Datalink froze 14.5m VIDT tokens
NOIA Network completed a token swap of 81m NOIA affected
Silent Notary re-issued 78.9bn SNTR tokens affected
Velo Labs re-deployed and replaced 122m VELO
Kardiachain completed a token swap of 525m KAI
Aleph.im re-issued 8.5m stolen tokens
Orion Protocol completed a token swap of 3.82m ORN
All these actions are aimed at invalidating the stolen tokens and equally reducing any form of continued selling pressure from the hacker.
Apparently, this is a move that can’t be done with BTC, or per se, extremely difficult. Reminds me of when Binance’s CZ suggested a BTC re-org after Binance got hacked in May 2019.
Some crypto proponents aren’t totally buying the idea of this type of decentralization though. Growth leader at Kraken exchange Dan Held tweeted: If you can freeze it, it isn’t “crypto” It’s completely fucking centralized.
Jameson Lopp, co-founder of CASA added: If a "decentralized" project can invalidate stolen tokens then it can invalidate YOUR tokens. Censorship resistance for all or censorship resistance for no one.
It’s worthy to note that these project teams have reacted to the situation faster than traditional centralized institutions may be able to, boosting the superiority of the technology in some way.
The problem happens to be the level of control these project teams exert over their tokens. Although this power has been so far used only for a good cause. That makes it a necessary evil; but is it something to worry about in the future?
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I would love to know your thoughts on this. So do well to drop them below.