Harmony Offers to Reimburse Community By Minting Billions of Tokens, Sparking Backlash
A month has passed since the bridge exploit that saw Harmony lose $100 million worth of Ether, and the subsequent decline of their Whitehat offer for the return of funds. As a result, the Harmony devs have begun looking for ways to reimburse the community for their lost funds.
Unfortunately, the response closely mirrors the solution found by Luna devs. Essentially, Harmony devs have proposed a hard fork and the printing of up to 4.97 billion OP tokens to be paid out to affected community members over three years.
Two Solutions Proposed, Community Happy With Neither
Following a month of near radio silence after the breach, Harmony addressed the community through a blog post, asking them to vote on the possible solutions.
To start off, the devs argued that given the current state of their treasury, an immediate reimbursement would be impossible – which could mean a number of things, few of them good. With over 14 different asset classes stolen from 65,000 wallets worth about $100 million, Harmony offered to reimburse the community in OP tokens to be minted following a hard fork.
This inflationary idea could be carried out by reimbursing users fully for the value of their stolen tokens sometime within the coming three years or by indemnifying only 50% of the value stolen.
- The first option is an estimated 100% compensation with a minting of 4.97B ONE, which equates to a 3-year monthly emission of 138M tokens ($2.76M using the price of $0.020). Minted coins will be gradually brought into circulation over the 3-year period.
- The second proposal is an estimated 50% reimbursement with a minting of 2.48B ONE, which equates to a 3-year monthly emission of 69M ONE tokens ($1.38M using the price of $0.020). Minted tokens will be gradually brought into circulation over the 3-year period.
The vote was also announced on Twitter, drawing the community’s ire.
The reimbursement proposal is posted and available for feedback. We encourage the #HarmonyONE community to read and engage in conversation with each other and the core team.
Thank you for your patience as we work to move forward together as ONE.
Link: https://t.co/9q7dlSrAvW
— Harmony
(@harmonyprotocol) July 27, 2022
Passing The Buck
The blog post also stated that the hack led to “the accruing of uncollectible loans” across various DeFi protocols that Harmony participates in. The devs blamed traders for taking advantage of the situation to borrow ONE with no intention of paying them back.
This situation led to a further loss of liquidity due to suppliers’ funds being drained, and Harmony devs fear this could lead to their project being removed from various DeFi protocols.
Unfortunately, this statement ignored the elephant in the room: namely, that the exploit was ultimately due to inadequate coding and that good-faith users of the platform should not be expected to foot the bill.
The post is followed by an FAQ outlining the reasons for these proposals.
For instance, the devs state that they are opting for inflationary tactics “in the interest of the longevity and wellbeing of the project.” Although this first part acknowledges that the proposed solution would be an inflationary measure, it continues by affirming that the reimbursements would not happen all at once “to prevent market disruptions” – an interesting attempt at having your cake and eating it, too, no doubt.
The vote between a rock and a hard place is due to begin on the 1st of August and will likely be a hot-button issue until then.
OhNoRipple via https://www.ohnocrypto.com/ @Jordan Lyanchev, @Khareem Sudlow