Billionaire Sam Bankman-Fried tries to fix crypto’s hacking problem

Crypto billionaire Sam Bankman-Fried has outlined a framework for limiting the impact of the hacks and exploits plaguing the industry, including capping the maximum bounty for attackers at US$5mil (RM23.63mil).

His intervention comes just days after a hacker got to keep US$50mil (RM236.35mil) of the roughly US$100mil (RM472.70mil) drained from the Mango decentralised-finance application under a deal with the platform after the heist. Over US$3bil (RM14.18bil) has been looted from the crypto sector this year, which is set to be a record for hacking.

ALSO READ: A 30-year-old crypto billionaire wants to give his fortune away

Bankman-Fried, co-founder of digital-asset exchange FTX, proposed in a blog post what he called a “5-5 standard” where hackers keep either 5% of the amount they’ve taken from a protocol or US$5mil (RM23.63mil), whichever is smaller.

Other key provisos are that customers must be made whole and that the hacker is acting in “good faith” and fully intended to cooperate and return most of the assets. In crypto, attackers are sometimes viewed as white-hat hackers who seek to expose vulnerabilities in return for a reward rather than to make malicious gains.

“Hacks are extremely destructive to the digital asset ecosystem,” Bankman-Fried wrote, adding his 5-5 approach would have curbed the impact of hacks “more than 98%” but that he’s still unsure what the right standard would be.

Data from blockchain specialist Chainalysis Inc show most of the exploits and hacks this year have targeted decentralised finance – or DeFi. DeFi protocols offer software-based algorithms that enable crypto investors to trade, borrow and lend on digital ledgers without using a central intermediary.

The spate of attacks is putting the onus on crypto players to find solutions given that DeFi is touted as important for the wider adoption of digital tokens, which are also reeling from this year’s rout in coin prices.

Bankman-Fried’s comments were part of a broad post that addressed issues like sanctions, tokenisation of stocks and what makes an asset a security. – Bloomberg