Indian cryptocurrency exchange WazirX has unveiled a plan to mitigate the effects of a recent hack that resulted in the loss of nearly $235 million.
The hack, which affected 45% of user funds, prompted the exchange to introduce what it called a “social loss strategy” to ensure what it called a fairer solution for its users and maintain the stability of the platform.
July 27 by WazirX Blog post The company plans to implement a 55/45 approach, where users will have access to 55% of their assets immediately, while the remaining 45% will be locked in tokens equivalent to Tether (USDT).
The exchange says its strategy aims to distribute losses fairly among all users, and prevent disproportionate impacts on any one group.
According to correspondence sent by WazirX to affected users — a copy of which was shared with crypto.news — the exchange offered a survey of two options for recovering stolen funds. “Option A” allows users to access 55% of their funds “for trading and depositing,” with no withdrawal rights, but gives them priority in potential recovery proceeds. “Option B” allows users to withdraw 55% of their assets “in a tiered manner,” albeit with lower priority in the recovery queue. In both cases, WazirX states that the remaining 45% of user assets will remain locked on the exchange as “USDT-equivalent tokens,” which will only be returned to users if the company successfully recovers the stolen funds.
In its post, the exchange asked affected users to vote on their preferred option by August 3, 2024.
According to survey results shared with the crypto.news team, at the time of writing, around 62% of affected users chose option B, which allows them to make withdrawals. The other 38% decided not to, opting instead to forgo instant withdrawals in favor of securing first priority for any potential refund proceeds.
Background on the massive hack
The WazirX hack resulted in a massive loss of around $235 million, making it the second-largest centralized exchange hack of recent times. This incident was only surpassed by the DMM exploit on May 31, which resulted in losses of $308 million.
Nishal Shetty, the co-founder of the exchange, today assured X users that the exchange can recover and grow after the major hack.
It is worth noting that Shetty identified two historical responses to such crises: lengthy legal proceedings or adopting a social loss model alongside rebuilding efforts. He advocated the latter option, emphasizing rapid recovery through operational growth and dividend distribution.
Shetty also stressed the importance of community support, adding: “Only together can we do this,” as he rallied for a unified approach to overcoming the platform’s challenges.
Criticism of society
Meanwhile, there has been a lot of discontent among crypto users regarding WazirX and its co-founder, especially regarding the social loss strategy. This method has been described as a scam. Some have questioned why users should be burdened with the challenges facing the exchange.
In addition, some of those affected Users have expressed their opinions. Their preference is not to convert the 45% of their affected assets that will remain locked into a stablecoin like USDT, but rather keep them in native cryptocurrencies.
In response, Shetty acknowledged these concerns, arguing that maintaining a stable value for USDT is crucial to effectively planning recovery strategies.
Shetty noted that the cost of cryptocurrencies is constantly fluctuating, with values falling in bear markets and rising in bull markets, making it difficult to determine a fixed recovery amount with volatile assets.
In 2023, cryptocurrency industry participants lost over $1 billion in various hacks.