The latest cryptocurrency exchange has gone down, and surprisingly it was the decentralized exchange, Bancor. The news came as the Bancor team had to halt trading and gave an announcement via their Twitter stating at 00:00 UTC a security breach had occurred where a wallet they used to upgrade smart contracts was compromised. It seems user wallets were not affected and it was only that particular wallet owned by Bancor.
The team reported that 24,948 ETH ($12.5m) was stolen as well as 229,356,645 NPXS ($1m) and 3,200,000 BNT ($10m). While Bancor was able to freeze the stolen BNT as it is their network token, the stolen ETH and NPXS were not able to be frozen.
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
Here is the latest update on the recent security breach: pic.twitter.com/JroypFvBri
— Bancor (@Bancor) July 9, 2018
Bancor has stated they are working with several cryptocurrency exchanges to trace the stolen funds in order to make it difficult for the thief to liquidate and cash out. More updates are to be given as new developments are made. For now, the network has shut down trading while it works on investigating the hack.
The Bancor Protocol has received quite a bit of backlash on Twitter, especially when it comes to the fact that they’re able to freeze funds. While including scripts that allow freezing funds in emergency security breaches like this can be beneficial in minimizing damages to the network, many are complaining that the exchange is not truly decentralized if the Bancor team has this ability.
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. https://t.co/22UYygIhEF
— Charlie Lee [LTC⚡] (@SatoshiLite) July 10, 2018
I’m sorry to hear about the @Bancor hack and hope they recover their funds.
But this paragraph perfectly demonstrates my criticism: you can’t have your cake and eat it too. You’re not a “decentralized exchange” if you’re taking away other people’s tokens whenever you want. pic.twitter.com/FVY10V2jkQ
— Udi Wertheimer 🔨 [#reckless] (@udiWertheimer) July 9, 2018
The key thing here is not the hack itself – it’s the fact the Bancor team had the ability to freeze funds. How many other “decentralized” DApps have a built-in kill switch that’s centrally controlled? https://t.co/3XtULafGRD
— Jackson Palmer (@ummjackson) July 9, 2018
The news of the exchange’s theft does not come as a huge surprise as Bancor is one of several cryptocurrency exchanges hacked this year. According to CipherTrade, a data security company, exchange thefts are reported to be up 3 times as much as 2017 in just half of 2018. Following the news of Bancor’s hack, the BNT token has dropped over 14% falling from $3.15 to $2.64.