Bancor under the Scanner after Security Breach

Since the decentralized exchange platform Bancor became victim to a hack attack, it has been the subject of intense scrutiny on social media as the company’s strategy and design decisions are being questioned.

Bancor was one of the first projects to use the ICO (Initial Coin Offering) method of raising funds, raising a record $153 million in token sales. The startup has positioned itself as a decentralized market maker of small cap cryptos and crypto-assets and also a place where complete new tokens can be created.

A Recap of Events

On Monday, July 9, Bancor announced that it was shutting down its app for maintenance. Shortly after that, the company issued another announcement that a security breach had taken place. Bancor, however, assured everyone that users’ wallets had not been impacted by this breach.

Then, on Tuesday, July 10, the exchange posted an update and details of what had happened. The company said that a wallet that had been used to upgrade smart contracts had been compromised. That wallet had consequently been used to steal $10 worth of Bancor’s native cryptocurrency BNT (3.2 million tokens), $12.5 million worth of ETH (25,000 ETH tokens) and $1 million worth of NXPS (230 million tokens).

Bancor said that it had frozen all of its BNT tokens to prevent losses.

What the Critics Say

From its inception, Bancor has been the target of critics. This time, the fact that Bancor was able to free its funds so quickly was what critics focused on.

According to the platform’s critics, the ability of the company to so quickly freeze its funds shows that their network is the complete opposite of “decentralized”.

Develop Udi Wertheimer was much more vocal in his criticism. He reminded the community that the issue of decentralization was known and it was also known that the company had created a back door to freeze, issue or even destroy its tokens “whenever they want”.

Last year, on June 20, Wertheimer had cautioned the company against misusing that backdoor. He also said that this backdoor was the company’s biggest weakness and that if anyone were to steal the security keys, then Bancor could be destroyed.

Last week, Wertheimer harked back to that warning, stating that the current breach took place because of permissioned backdoors put in place by the company – exactly as he had predicted.

Of course, there were supporters of Bancor too who took to defend the company on social media, saying that they had done a great job in preventing a disaster. Bancor also defended its actions, saying that freezing its assets was necessary to protect the network as well as their users in an emergency like this.