By
Tolu Ajiboye
April 8th, 2024
The decision to compensate victims is a very important step toward the project’s sustainability in the long run.
The decentralized finance (DeFi) aggregator ParaSwap has agreed to compensate victims of a recent vulnerability on its smart contract using funds from the treasury.
On March 18, the ParaSwap AugustusV6 contract went live, albeit briefly. However, it was rolled back shortly after it was discovered that the upgrade contained a critical loophole that hackers used to drain funds from users. While it was a relatively quick rollback that saved nearly $3.4 million worth of assets from being lost, some users were not as lucky. As Coinspeaker earlier reported, no less than $864,000 worth of assets were initially lost to the situation, leading to public outcry from the victims. Although approximately $500,000 worth of assets have been recovered so far, some users are still left in the horror of the avoidable hack event.
In response, the ParaSwap DAO, the community behind the project, floated a compensation idea on April 4. The proposal suggested that all victims be compensated from ParaSwap’s treasury funds. However, as is common with community-based decisions, the idea had to be voted upon.
After a three-day voting period, 96.81% of ParaSwap voters have now aligned with the method of compensation that the DAO proposed. Therefore, all users who were affected by the hack would now get full refunds for their losses.
ParaSwap Eyes Sustainability
Per ParaSwap, the decision to compensate victims is a very important step toward the project’s sustainability in the long run. As it aims to bolster the trust of users, ParaSwap will stop at nothing to ensure that the event is quickly forgotten.
To this end, the ParaSwap Foundation has assured that it will cover all costs that the vulnerability has made the project incur. Those include the cost of processing the refunds, engaging blockchain analytics and security firms, Chainalysis and TRM Labs, audits, and linking up with authorities.
Meanwhile, blockchain security firm PeckShield has highlighted what was perhaps a notable month of March, particularly in terms of security incidents. According to data compiled by the firm, more than 30 hacks happened within the crypto space in the said month. Interestingly, however, total losses in the month were 48% lower than that of February. Additionally, 52.8% of the hacked funds were returned, most of which came from the security incident with NFT-based game Munchables.