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Cypher reveals strategy for recovery, indicating it will ‘share’ losses during the initial phase.
Crypto trading platform Cypher has unveiled a strategy to recover from its $1 million exploit, indicating that it will “socialize” losses across the platform during the initial phase of recovery. In this first phase, the Solana-based trading platform will create a “pro rata redemption package” of its existing assets, which users will be able to withdraw via a web interface. However, the platform currently lacks sufficient funds to reimburse all depositors, meaning that losses will be shared among all accounts in this initial phase rather than being shouldered by any specific individual or group.
During the second phase of the recovery effort, the protocol plans to generate funds through an initial DEX offering (IDO), which will be allocated for audits and further development. Concurrently with the IDO, users will receive a “debt token” that represents the remaining assets owed to them by the protocol. This debt token will entitle them to future profits in USD Coin (USDC) generated by Cypher, enabling the eventual reimbursement of the protocol’s losses from the exploit to users.
In response to our recent exploit, Cypher is fast tracking an IDO.
Here’s the game plan. pic.twitter.com/DFnJFvj4zD— cypher ©️ (@cypher_protocol) August 23, 2023
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“Our top priority is to allocate funds to affected users, highlighting our commitment to remedy their financial losses,” the team remarked. Once these funds are disbursed, the team will collaborate with auditors OtterSec and Mad Shield to conduct public audits on the updated version of Cypher in an effort to identify any additional bugs before they escalate into issues.
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The protocol will only recommence operations “after a thorough assessment, ensuring that every potential vulnerability is resolved.” In the interim, the app’s smart contracts will remain inactive, as stated in the plan.
The $1 million exploit of Cypher took place on Aug. 8. Security researchers have not yet identified its cause. Approximately $600,000 worth of cryptocurrency siphoned during the attack has been frozen by various centralized exchanges, preventing the attacker from liquidating it. Cypher has announced its intention to recover these funds for users through collaboration with exchanges or via seizure warrants issued by law enforcement.
