Litecoin founder Charlie Lee on Bancor security breach: An exchange is not decentralized if it can lose customer funds

Decentralized cryptocurrency platform Bancor experienced a “security breach” on July 9. The posted an official statement related to the security breach which took place at around 00:00 UTC.

Bancor mentioned in the statement that they are “committing every resource to resolving it”. The details of the breach are still being investigated. However, the things which are confirmed are, a wallet used to upgrade some smart contracts was compromised. The wallet was then used to withdraw Ethereum token (ETH) worth $12.5 million from BNT smart contract. The hack came as a shock not only to the users but also to everyone else in the crypto-verse. In fact, Litecoin founder, Charlie Lee even took a dig at the ‘decentralized’ wallet.

“A Bancor wallet got hacked and that wallet has the ability to steal coins out of their own smart contracts,” Lee tweeted. “An exchange is not decentralized if it can lose customer funds or if it can freeze customer funds. Bancor can do BOTH. It’s a false sense of decentralization.”

A twitter user commented on his post explaining the difference between the exchange and the bnt token. “Bancor does not hold your tokens so can therefore not freeze your funds. Bnt can be frozen as can many top erc20 tokens. It’s even considered a security best practice by some.” The user said, “The coins that were stolen didn’t belong to users. Bancor got its own funds stolen. Same as if you’d have yours stolen. Central to you. Also, the irony of this is that centralisation is what actually saved $12 mil bnt from being stolen. It’s the eth that can’t be returned. [sic]”

Another user mentioned how his statement is wrong saying, “All ERC token creators can freeze their smart contracts or freeze a specific wallet if the sc designed that way. Bancor is the creators of BNT token so they have full authority. [sic]”  The stolen Ethereum token (ETH) is from Bancor’s own wallet, not users wallet. “So both of your statements are wrong,” the user added.

Bancor’s official statement mentioned that after the theft was identified, they froze the stolen BNT. However, Ethereum token (ETH) or any other stolen token cannot be frozen, so, they’re taking the help of other cryptocurrency exchanges to trace the stolen tokens and make it difficult for the hacker to liquidate them. They have also assured saying that no user wallets have been compromised in the attack.

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Author: Pinaz Kazi
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