Indian cryptocurrency exchange WazirX recently suffered a major hack, resulting in the loss of about $235 million. To address this issue, the exchange has introduced a “socialized loss strategy” to provide a more equitable solution for its users and maintain platform stability.
The new strategy involves allowing users to access 55% of their assets immediately, while the remaining 45% will be locked in Tether (USDT)-equivalent tokens. This approach aims to distribute losses fairly among all users, preventing any single group from being disproportionately affected.
WazirX presented two options to affected users for recovering stolen funds. “Option A” allows users to access 55% of their funds for trading and deposits without withdrawal rights, but they would have priority in potential recovery proceeds. On the other hand, “Option B” permits users to withdraw 55% of their assets in a staggered manner with lower priority in the recovery queue. In both cases, the remaining 45% of user assets will be locked on the exchange as USDT-equivalent tokens, only to be returned if the stolen funds are successfully recovered.
Affected users were asked to vote for their preferred recovery option by a specified deadline. According to poll results, the majority of impacted users have chosen Option B to make withdrawals, while a smaller percentage have opted for Option A to secure priority in potential recovery proceeds.
The hack at WazirX is one of the largest centralized exchange breaches, with losses totaling $235 million. The exchange’s co-founder, Nischal Shetty, expressed confidence in the platform’s ability to recover and grow following this incident. Shetty highlighted the importance of community support in overcoming the challenges faced by the exchange and emphasized the benefits of adopting a socialized loss model for faster recovery.
Despite the exchange’s efforts to address the hack and involve users in the recovery process, there has been criticism from the cryptocurrency community. Some users have raised concerns about the socialized loss strategy, labeling it as a scam and questioning why users should bear the burden of the exchange’s challenges. Additionally, there have been requests to keep the 45% of locked assets in their original cryptocurrencies rather than converting them to USDT.
In response to these concerns, Shetty explained that maintaining a stable value in USDT is essential for planning effective recovery strategies. He pointed out the volatility of cryptocurrency prices, which can fluctuate significantly, making it difficult to determine a consistent recovery amount with volatile assets.
The cryptocurrency industry has witnessed over $1 billion in losses due to various hacks in 2023, highlighting the importance of security measures and recovery strategies for exchanges like WazirX.