About two weeks ago, Cypher Protocol fell victim to a smart contract exploit, resulting in the theft of over $1 million worth of cryptocurrency. The identity of the attacker remains unknown. In an attempt to communicate with the perpetrator, both the project’s developers and the community reached out via social media and impromptu NFTs. Unfortunately, their efforts were in vain as the attacker did not respond.
In light of this, Cypher Protocol’s developers have decided to take a new course of action. They have outlined a recovery plan consisting of two stages. The first stage involves a “pro rata redemption package” that will allow users to withdraw some of their remaining assets on the platform. However, due to the insufficient amount of assets available, the losses incurred will be distributed among all community members. This approach, known as “socializing losses,” aims to minimize the individual impact by spreading the consequences evenly.
It is important to note that the proposal does not address the responsibility of those accountable for the platform’s poor security measures, as the losses will be shouldered collectively by the community. Currently, $600k of Cypher Protocol’s funds have been frozen across various centralized exchanges, such as Binance and KuCoin, where the attacker transferred the stolen funds. These frozen funds, along with the remaining assets on the platform, will be distributed to users in preparation for the second stage of the recovery plan.
The second stage involves an Initial DEX Offering (IDO) after users have received their funds. To regain financial stability, Cypher Protocol plans to undergo audits conducted by OtterSec and Mad Shield. These audits will ensure that the platform is secure before proceeding with the IDO. As part of the IDO, Cypher Protocol will mint and distribute 50 million debt tokens to its users. If the platform successfully recovers, these tokens will enable the community to withdraw profits in USDC from the future decentralized exchange (DEX).
However, there is no guarantee that investors will be willing to fund a platform that has already suffered from poor security measures. If the funding round fails, prior investors may not be able to recover their losses. The success of Cypher Protocol’s recovery plan relies heavily on the support and confidence of the crypto community.
In conclusion, Cypher Protocol has announced its recovery plan following a smart contract exploit that resulted in significant losses. The plan involves distributing the remaining assets to users, conducting audits, and launching an IDO to raise funds for the platform’s recovery. While the community will bear the socialized losses, the success of the plan depends on the willingness of investors to support the revamped Cypher Protocol.