Binance will Pay $10 Million to Users Affected by Cover Protocol Attack
Cryptocurrency exchange Binance announced measures to eliminate user losses resulting from the attack on the DeFi project Cover Protocol this week.
"The COVER smart contract was subjected to an unlimited release attack on December 28, as a result of which a large volume of tokens was purchased by arbitrageurs on decentralized exchanges and deposited on Binance, which caused COVER to decline at an alarming rate, and many Binance users suffered significant losses," the exchange writes.
The company notes that the loss was too large to be compensated by the Cover team. In this regard, the exchange decided to provide compensation from its own SAFU fund, designed "to protect users in extreme cases." 10% of the collected commissions are sent to it.
In order to correct the situation, Cover plans to issue new tokens that will be credited to the accounts of holders of the first version at a rate of 1 to 1 based on a snapshot of the blockchain before the attack, including on Binance. It is expected that in this regard, existing tokens will completely lose their value. However, there are users who purchased COVER on Binance after the attack, so they cannot qualify for crediting new tokens based on the blockchain snapshot.
To compensate for the losses of such users, Binance will allocate $10,107,505, including 8,171,634. 10 BUSD and 2,581. 16 ETH, which will be distributed among them in accordance with the COVER price at the time of purchase.
"Binance will not provide additional compensation to users who have only deposited tokens in the period from the moment of taking a snapshot of the blockchain to the moment of stopping trading," the exchange notes.
The exchange also announces that it will rename the old COVER tokens to COVEROLD, and assign the original ticker to the new ones. She will decide later whether to open trades with new COVER tokens.
Before the attack, COVER was trading around $850, but the arrival of a significant amount of new tokens on the market in excess of the established issue and the negative background quickly led to a collapse of its rate to near-zero levels.
Blogger Hasu believes that Binance's decision may have negative consequences. "For the first time in history, the exchange compensates users for losses from hacking DeFi. Quite unexpected for me, as this may cause users to become frustrated during future hacks or complicate the listing of new assets. Maybe I'm complicating things. More than anything else, this creates incentives to buy and hold DeFi tokens on Binance. Especially now that they're even doing their staking for you (as in the recent SUSHI example), " he writes.
The OKEx exchange also today revealed a plan for the distribution of new COVER tokens, but in its case this will be done on the basis of images of users ' wallets, carried out on December 31 at 13: 30 Moscow time.
"The potential for transforming traditional finance into decentralized is huge, but it is still in its infancy. A painful lesson like this should not undermine our determination to create a decentralized future, " said OKEx CEO Jay Hao.