Crypto exchange WazirX faced significant backlash over its proposed “55/45” plan to distribute losses from a recent cyberattack among its users. Following this uproar, the exchange has decided to abandon the controversial proposal.
Controversial Plan Sparks Outrage
On July 27, WazirX initiated a poll to gauge public sentiment on a recovery plan after the platform suffered a hack resulting in the loss of millions in crypto assets. The proposal aimed to distribute the $230 million loss among all users, allowing them to spend only 55% of their assets on the platform while converting the remaining 45% into stablecoin reserves.
Community Backlash and Abandonment of Plan
The plan met with severe criticism from the crypto community, leading WazirX to reportedly abandon it. The exchange's blog detailed the proposal, which sparked significant concern among users.
Co-Founder's Clarification
In response to the backlash, WazirX co-founder Nischal Shetty clarified that the poll was not legally binding and was merely intended to collect community feedback. However, this clarification did little to quell the dissatisfaction among users. Shetty acknowledged the severity of the cyberattack and emphasized the need for more time to devise a resolution. He assured users of the exchange’s commitment to transparency and ongoing updates based on user feedback.
User Concerns and Security Analysis
Users have raised numerous concerns about the exchange's efforts to reimburse victims of the hack. Some have accused WazirX of selectively answering questions and avoiding critical issues. Crypto security firms and analysts, including TruthLabs, have provided explanations on how the hack might have occurred. TruthLabs, in particular, had previously warned about security vulnerabilities affecting multiple layer 2 blockchains, which they believed could jeopardize billions of dollars in user funds.
TruthLabs' analysis suggested that WazirX's deployer address had transferred funds to destinations associated with laundering stolen funds. However, WazirX has denied these accusations, maintaining that it employs multiple key holders to ensure security.
Potential Ties to Binance
The security analyst also suggested that WazirX's main exchange address, established in 2022, might have originated from a Binance address previously connected to fraud and theft. This implication hints that WazirX and Binance may not have fully severed their ties as claimed.
In 2019, Binance announced it had “acquired India’s leading digital asset platform WazirX,” but later clarified that it was an agreement to purchase “certain assets and intellectual property” of WazirX. Binance's influence in the crypto space, being the largest exchange, means any developments involving it have systemic implications for the industry.
Moving Forward
WazirX’s decision to abandon the socialization of losses plan highlights the power of community feedback in the crypto world. The exchange’s commitment to transparency and user engagement will be critical as it navigates the aftermath of the cyberattack and works to restore trust among its users.
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