Cypher Protocol to Transfer Exploit Losses to Its Community

Approximately two weeks ago, Cypher Protocol experienced an attack by an unidentified malicious actor, resulting in the theft of over $1 million in cryptocurrency through a smart contract vulnerability.

Since that incident, both the developers of the project and the community have made efforts to contact the attacker via social media and spontaneous NFTs. However, the assailant has not responded, leading the Cypher Protocol developers to adopt a new strategy: shifting the repercussions of their inadequate security onto their community.

This Is The Way

Last night, the developers of Cypher Protocol outlined their recovery strategy, which consists of two phases.

The initial phase includes a “pro rata redemption package” that will enable Cypher Protocol users to withdraw a portion of their assets that remain accessible on the platform. However, due to the fact that Cypher lacks sufficient assets to reimburse customers who suffered losses from the platform’s inadequate security protocols, the losses will be “socialized” among all participants.

“Socializing losses refers to a mechanism by which the negative impacts of an unfortunate occurrence, such as a protocol exploit, are shared among all users instead of being shouldered by a select few. Rather than a minority facing the majority of the loss, the effects are distributed more evenly, reducing individual impact.”

It is noteworthy that a socialization of losses among those accountable for the inadequate security that enabled the hack was not suggested.

Currently, $600k belonging to Cypher Protocol has been frozen across various centralized exchanges – likely Binance and KuCoin, as the attacker transferred the stolen funds to accounts on these platforms. These assets, along with the remaining funds still on the platform, will be allocated to users in preparation for the second phase, which involves an IDO.

Audits and Relaunches

After users receive the rest of their funds, Cypher Protocol will undergo an audit by OtterSec and Mad Shield in anticipation of the final phase of the recovery plan.

Once the audit is finalized, Cypher Protocol plans to initiate an Initial DEX Offering to raise capital that would facilitate the platform’s recovery. During this phase, Cypher will mint and distribute 50 million debt tokens to its users. Should Cypher recover, these tokens would enable the community to withdraw future profits from the DEX in USDC.

Regrettably, there is no assurance that investors will be inclined to support a platform that has already been compromised by inadequate security measures.

If the funding round does not succeed, there is no guarantee that previous investors will be able to recover their losses.

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