Following a security breach that removed $1 million from its funds, the decentralized futures trading platform Cypher has unveiled its comprehensive recovery strategy.
Operating on the Solana blockchain, the platform faced severe scrutiny after it paused its smart contract, promptly notifying its 13,500 followers on X, formerly Twitter, about the security incident.
Equitable loss distribution: The first step
To counteract the consequences of the exploit, Cypher has decided on a “socialized” loss distribution across its user base. By doing so, the platform aims to evenly spread the incurred losses instead of singling out specific users or groups to bear the brunt.
In response to our recent exploit, Cypher is fast tracking an IDO.
Here’s the game plan. pic.twitter.com/DFnJFvj4zD
— cypher ©️ (@cypher_protocol) August 23, 2023
The initial phase of the recovery plan revolves around creating a “pro rata redemption package” from the platform’s existing assets. These assets will be accessible for user withdrawals through an online interface.
However, a significant challenge remains since Cypher needs the complete financial resources to reimburse all depositors in its current state, leading to the decision for pro-rata distribution.
Future funding and asset recovery
Cypher intends to source funds via an initial DEX offering (IDO) in its next steps. The accrued amount will predominantly cater to necessary audits and further platform enhancement. Additionally, users will be presented with a “debt token” during the recovery phase.
This token will represent the pending assets the platform owes its users. Furthermore, these tokens grant their holders rights to future USDC profits generated by Cypher, providing a structured mechanism to settle the losses from the exploit.
If cypher wins, the community wins.
Next Steps:
1. Perform audits with Ottersec and MadShield
2. Reinforce the insurance fund
3. Drive success back to cypher and its usersWe’re not going anywhere.
— cypher ©️ (@cypher_protocol) August 23, 2023
Following the roadmap, Cypher has emphasized returning funds to its affected users. Once this phase is complete, the platform will collaborate with external auditing firms, OtterSec and Mad Shield, to scrutinize and ensure the revised version’s security.
To safeguard the assets and interests of its users, Cypher has stated that its smart contracts will remain inactive. This freeze will stay in place until a comprehensive review takes place to address and rectify potential vulnerabilities.
Unraveling the exploit’s details
The exact events of the August 8th exploit remain under investigation. Cypher faced a loss of $1 million due to the exploit, with the origins and cause still deciphered by security experts. On a slightly positive note, several centralized exchanges had frozen $600,000 worth of cryptocurrencies, part of the total stolen amount.
update from cypher
~$600k has been frozen across CEXs, the return of these funds will be predicated on the cooperation of these CEXs and seizure warrants being issued by law enforcement
— cypher ©️ (@cypher_protocol) August 17, 2023
This manoeuver has temporarily prevented the perpetrator from converting these funds. However, the future of these frozen assets remains uncertain. The recovery plan for Cypher explains the many steps to recoup the funds for the benefit of its users. These steps include investigating the possibility of working together with cryptocurrency exchanges and potentially obtaining seizure orders from local law authorities.
Unfortunately, breaches and security challenges are not rare in the digital domain of cryptocurrencies. Platforms like Cypher, when faced with such incidents, have the responsibility to act transparently and work towards user interests.
By announcing its recovery strategy, Cypher has shown its commitment to addressing the situation. While the coming weeks and months will be crucial in determining the success of this recovery plan, the crypto community will undoubtedly be watching closely.
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