Source: Adobe/Michael

Unprecedented movements of Altcoins after the hack of KuCoin showed that the old saying not your keys, not your coins could only apply to decentralized crypto currencies such as bitcoin (BTC).

As reported by CryptoNews.com, after several abnormal transactions, first noticed on September 25, KuCoin experienced a leak of private keys associated with hot wallets, resulting in a hack of millions of dollars worth of customer funds. Following an update by the KuCoin team and the release of further suspicious addresses, it now appears that more than USD 200 million of funds have been lost, and more could be lost if more such addresses are uncovered.

The updates also show that a number of projects have swapped, frozen, invalidated, or otherwise disrupted their tokens and token transfers. Such activities include:

The market has shown an unprecedented response to the recent KuCoin hack, commented ICO Analytics.

However, these are also steps that many believe cannot be carried out with BTC.

If you can freeze it, its not crypto, said Dan Held of the great crypto exchange Kraken. Its pretty damn centralized.

However, Changpeng Zhao, CEO of another major crypto stock exchange Binance, took the opportunity to reiterate his earlier statements that decentralization is not binary black or white, but that the reality is usually a little grayer.

After Binance was hacked in May 2019, Zhao also mentioned the possibility of reversing some of the BTC transactions to recover the lost funds and teach the [hackers] a lesson. This triggered a heated debate in the crypto world, which showed that this would be technically possible in theory, but it would be so likely that all miners would stop mining Bitcoin and let it die because there is a great collective incentive not to change history.

Even after the infamous Ethereum (ETH) DAO hack in 2016, the ETH community controversially decided to strengthen the ETH block chain in order to reintroduce practically all funds to the original contract and return the ether of the DAO token holders.

In the meantime, the above mentioned projects have made their probably centralized steps faster than a traditional centralized authority is often able to – which speaks both of the superiority of technology in some ways, but also of the potentially disturbing fact that it is possible for an individual / team to make these decisions and even exercise so much control over the project. So it can be argued that the only thing that stands between projects using their power for something that could be interpreted as a good thing (e.g. stopping a hacker) and using it for their own not so good goals is the goodwill of the authority.

If a decentralized project can invalidate stolen tokens then it can invalidate YOUR tokens.

Censorship resistance for all or censorship resistance for no one. – Jameson Lopp (@lopp) September 27, 2020

Nevertheless, some industry players and observers wonder whether certain measures, such as the freezing of tokens, could be useful in certain situations, while others see the power of projects as a necessary evil, so to speak.

Dont you feel thats kind of ridiculous? – Dan Held (@danheld) September 27, 2020

There is also concern as to what this unprecedented set of responses might be based on in the future.

yeah its almost as if #DeFi projects arent decentralized – Kyle Torpey (@kyletorpey) September 27, 2020

Meanwhile, the attacker appears to have been on the move since the hack, trading other stolen Altcoins for ETH on the Decentralized Finance Protocol (DeFi) Uniswap. However, this would still leave traces in the Ethereum block chain, and the associated addresses could possibly be blocked. Nevertheless, the situation could have interesting implications, as Bitfinex and Tether Chief Technical Officer Paolo Ardoino said.

This might have interesting repercussions. While were staring at laundering while it happens on a transparent DEX, couple of consideratios arise for me:

– will liquidity providers be tainted?

– privacy is key, probably the next DEX should use confidential transactions https://t.co/tmDCSf7yun – Paolo Ardoino (@paoloardoino) September 27, 2020

As already mentioned, the CEO of KuCoin Global, Johnny Lyu, assured the affected users in a live stream on 26 September that all losses are covered by the risk provisions of the stock exchange. The team also offered rewards of up to $100,000 for anyone who can provide valid information regarding the hack.

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Further reactions:

IF A PROJECT CAN INVALIDATE A TOKEN ITS NOT DECENTRALIZED!!! – RG3² ☠️ (@RG3_Pirates) September 27, 2020

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People yearn to be governed and prefer a fake sense of security to real freedom – Jack (@John_Moxie) September 27, 2020

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Well. But since this issue now is public Im wondering how this will change. Potentially youre knowingly providing liquidity to an hacker. The more time it passes the more difficult is to argue you were 100% unaware. – Paolo Ardoino (@paoloardoino) September 27, 2020

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