Following a recent exploit in early November, the Balancer protocol attempted to recover a portion of the $128 million stolen. It is now time to distribute the meager $8 million that was actually recovered.
Balancer to Return $8 Million of the $128 Million Stolen
On November 2, the decentralized finance (DeFi) protocol Balancer suffered a dramatic security breach. A rounding error in its swap pooling function led to the loss of $128 million in cryptocurrency.
Quickly, many players in the crypto ecosystem worked together to recover as much of the funds as possible across multiple blockchains—both internally at Balancer and with the active support of white-hat hackers determined to claim the infamous bug bounties, paid out in proportion to the amounts involved.
A few weeks after the incident, the time seems to have come to take stock—but above all, to return the recovered funds to the users affected by this $128 million theft. In this context, the Balancer protocol has just proposed a recovery plan totaling… approximately $8 million.
Note: An additional $19.7 million recovered, in osETH and osGNO tokens, remains under the separate management of the StakeWise liquid staking protocol.
Over 50% of the funds recovered by white-hat hackers
The amount may seem paltry given the losses involved. However, as the Balancer protocol is careful to point out in its proposal, “users understand the risks inherent in DeFi and the community’s ongoing efforts to manage them.”
Of the total funds recovered, $3.8 million—almost exactly half—required the intervention of a white-hat hacker, who was compensated at a rate of 10%, with a cap of $1 million per recovery and mandatory KYC verification.
Details of recoveries made by white-hat hackers
In practice, this reimbursement procedure adopts a model described as “non-socialized,” meaning that “funds recovered from each affected pool will be distributed only to liquidity providers (LPs) of the relevant pool and blockchain,” using a pro-rata system based on actual holdings at the time of the attack.
It remains to be seen how members of the Balancer community will receive this proposal. Meanwhile, the price of BAL is struggling to keep pace with the current cryptocurrency market rally, having risen by less than 5% over the past 7 days.
