Harmony Offers To Mint Billions Of ONE Tokens To Reimburse Hack Victims
The Harmony team came up with a few possible solutions to compensate users, but the community is not happy.
Harmony’s core team has proposed a hard fork to mint billions of new harmony (ONE) tokens. The proposal is part of the plan to reimburse victims of its bridge hack last month.
The reimbursement proposal is posted and available for feedback. We encourage the #HarmonyONE community to read and engage in conversation with each other and the core team.
Thank you for your patience as we work to move forward together as ONE.
Harmony is a proof-of-stake (PoS) blockchain that presents itself as a faster and cheaper Ethereum alternative. ONE token is used as the native asset to pay for transaction fees on the network.
In June, a hacker stole $100 million worth of crypto assets locked on the Harmony-run Horizon bridge on Ethereum. Since then, victims have asked for a refund.
On Wednesday, the team suggested the community should fork the Harmony network and mint a fresh supply of tokens to initiate the reimbursement process. “This proposal will require a hard fork of the Harmony blockchain as it will increase the supply of ONE tokens,” the proposal stated.
Passing The Buck
The blog post also stated that the hack led to “the accruing of uncollectible loans” across various DeFi protocols that Harmony participates in. The devs blamed traders for taking advantage of the situation to borrow ONE with no intention of paying them back.
This situation led to a further loss of liquidity due to suppliers’ funds being drained, and Harmony devs fear this could lead to their project being removed from various DeFi protocols.
Unfortunately, this statement ignored the elephant in the room: namely, that the exploit was ultimately due to inadequate coding and that good-faith users of the platform should not be expected to foot the bill.
The post is followed by an FAQ outlining the reasons for these proposals.
For instance, the devs state that they are opting for inflationary tactics “in the interest of the longevity and wellbeing of the project.” Although this first part acknowledges that the proposed solution would be an inflationary measure, it continues by affirming that the reimbursements would not happen all at once “to prevent market disruptions” – an interesting attempt at having your cake and eating it, too, no doubt.
The vote between a rock and a hard place is due to begin on the 1st of August and will likely be a hot-button issue until then.
Billion-dollar choices
The latest proposal gave community members two options to decide how much tokens to mint.
The first option is to mint 2.48 billion ONE tokens ($49.6 million), which the team claimed would be enough for 50% compensation to victims at the current market price of $0.02 per ONE token.
The second choice is to mint 4.97 billion ONE tokens ($99 million) enough for full compensation to victims.
The team argued that it shouldn’t spend the treasury funds for hack reimbursement, saying that it wanted to protect those assets for growth and ecosystem plans. It said, “We decided against using the foundation treasury in the interest of the longevity and wellbeing of the project as reimbursing from the treasury would greatly hinder the foundation’s ability to support the growth of Harmony and its ecosystem.”
Judging by comments on the governance forum, it appears that the community is largely unhappy with the proposal, primarily due to the inflationary impact of the minting of new tokens. Many argued that this would be detrimental to its price.
“DO NOT MINT MORE! This will really screw those who are staking. Did we not learn about inflation? When you increase the supply, the price does not follow,” said one commentator.
Currently, ONE’s total supply is 13.1 billion tokens. This means that if the plan is approved, the team would inflate ONE’s supply anywhere between 19% to 38% over the next three years. After the proposed plan of action is executed, impacted wallets will have to claim their tokens every month over the three-year period.
