Jul 27, 2022 Frank Stewskid
The Harmony team has issued a list of 65,000 wallets and 14 different asset types affected by the June 2022 Horizon Bridge hack, and proposed a plan of reimbursement that the community isn’t too happy about. According to the proposal, there are two options for compensation both of which include the issuance of new ONE tokens.
While the first option is estimated to account for 100% reimbursement, it includes the minting of 4.97 billion ONE tokens through three-year monthly emissions of 138 million tokens, which will be gradually brought into circulation over the three-year time frame. The second option has an estimated 50% reimbursement rate and requires the minting of 3.48 billion ONE tokens through three-year monthly emissions of 69 million ONE tokens, once again gradually brought into circulation over the three-year period.
At the same time, the team notes that since the hacking incident led to the depeg of various stablecoins, traders took advantage of arbitrage opportunities by borrowing ONE against depegged stablecoins with no intention of repaying these loans, resulting in a cascade of uncollectable loans across various DeFi lending protocols in the Harmony ecosystem. For this reason, Harmony plans to issue additional 86 million ONE tokens, that are to be distributed among affected DeFi protocols over the same three-year period in hopes of mitigating losses and making these projects not drop their support for Harmony.
Naturally, the proposal met severe backlash from the community, with many highlighting the fact that large issuance of new tokens results in inflationary pressure, essentially bringing the digital asset’s value down. As of the time of writing this article, the Twitter post with the proposal is yet to receive its first positive response, as many users are pointing out the responsibility for the reimbursement should be on the Harmony team, and not the community which will most likely suffer from minting new tokens.
TL DR: we are not paying for the hack, the users are.— CT lurker (@cryptof48796643) July 27, 2022
The Harmony proposal states that its team has “worked tirelessly to brainstorm and develop paths towards reimbursement” over the past weeks but the “current state of Harmony’s treasury has limited our [the Harmony team] ability to provide any solution which involves immediate reimbursement”. If the proposal is accepted, it will require a hard fork of the Harmony blockchain as it increases the supply of its native ONE token. Impacted users will have to claim their tokens monthly over the next three years.