My take on the theft aftermath

Assuming the worst-case scenario, if I was Harmony this is what I would do next:

The two mains problems are:

  • Ruined ecosystem because of unpegged assets
  • Ruined trust in the team because this hack could have been avoided

Solution expectations are:

  • Cleanup ASAP those unpegged assets
  • Rebuild trust into the system

The idea of implementation:
Buy-back program for those un-pegged assets:

  • List all impacted assets, and get the price of each on the day of the hack
  • Create a smart contract that takes and burns those assets, offering IOU which will pay over time using an incentive program in One Token.
  • Implement temporary HIP: Use transaction fees to fill the program bucket instead of burning those fees; also, 50% of the staking reward would go to this program instead of the stakers.
  • Maybe create an extra 20% supply in One, diluting everybody in the protocol
  • Ensure this program is open for over 2 months only. After that, non-transfered assets worth nothing. This is to force arbitrer to come and burn the non-collateralized tokens.

Every day the program will reward those who put the assets into the smart contract and reduce the reward balance based on the current One price. Based on Harmony One asset performance, it might take a few years for those people to get back on their principal.

We can assume this would “repeg” unbacked tokens to about 30 to 70% of their actual value. But since entering the program can be done only during a certain amount of time, we are now sure that assets that didn’t enter are worth NOTHING after expiration, so we can start again on good foundations.

Of course on another hand, those actions will make one token price drop sharply, probably around 1ct, but it might save the ecosystem.

About the trust issue:

  • Team needs to acknowledge they fucked up with security. Radical change must be taken or investors won’t trust again.
  • Trustless eth bridge must be deployed ASAP, as no one would ever trust Horizon bridge again.
  • Team must communicate with ecosystem team leaders and reassert their engagement with the chain.

At budgeting level, the team should shrink to the bare minimum to handle bear market pressure and keep the focus on tasks one by one. I think this was started to be implemented anyway.

Those are tough times, nobody can say if we are going to make it, but at least we can try.


This is additional resource with some simulation about the solution above: