Over the years, the bitcoin industry has been plagued by hacks. The most damaging hacks are those that target a protocol since they cost traders millions of dollars. How users will be paid or how the protocol will recoup lost monies is a constant concern with these hacks.
But not every situation is the same. A reentrancy attack was used on April 30 to compromise the Fei protocol. Following the incident, tokens worth $80 million were lost. The creator of the protocol has developed a recovery strategy that has received mixed feedback from the community about four months after it occurred.
For instance, the Acala stablecoin was recently compromised, and a hacker mistakenly created approximately 2 billion aUSD tokens. Since the team acted quickly to burn the newly created tokens before the hacker could redeem them, aUSD was able to regain its peg and investor losses were kept to a minimum.
It appears that the Fei protocol is prepared to close its doors. However, the early investors have voiced strong opposition to the proposal put forth to compensate the $80 million hacking victims. The idea aims to partially compensate the hacking victims and require holders of Fei to exchange their tokens for DAI stablecoin.
The Fei protocol has enough money, according to some detractors, to fully refund everyone who lost money as a result of the attack. The partial reimbursement proposal may now indicate that the majority of the project’s remaining funding will be retained.
The plan was introduced on Friday of last week, and the crypto community responded in a variety of ways. The project’s early sponsor and creator of Frax Finance, Sam Kazemian, has called the idea “a new low for DeFi.”
The protocol is also looking ahead to the project to find a way to lower risk. To address this, one strategy is to support the FEI peg without relying on governance. The proposal’s cancellation, however, does not imply that the Fei protocol won’t make a reappearance. Four months after ceasing operations due to a $77 million exploit, Beanstalk Farms resumed operations.
The summer of 2021 saw the introduction of the Fei protocol. An issue with a contract during the protocol launch led to the FEI stablecoin losing its peg. Rewards for creating new FEI tokens were then eliminated, and users who tried to sell them for less than $1 were penalised.
Fei has had success in the decentralised finance (DeFi) market as well, though. The initiative became the largest pool on the exchange at the moment after raising an astounding $1.3 billion in ETH tokens deployed as FEI-ETH liquidity on Uniswap, one of the best DeFi exchanges. The Fei protocol’s parent company, TribeDAO, merged with the DeFi lending platform Rari Capital in 2021. Rari had a re-entrancy attack on April 30 that cost the platform’s lending pool $80 million worth of tokens.
- Fei’s suggestion not to compensate all hack victims is a new low for DeFi
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