Cypher's Recovery Strategy: Sharing Losses, Aiming for Future Gain

In response to a significant breach that led to an approximate loss of $1 million, Cypher Protocol, an innovative decentralised futures exchange operating on the Solana blockchain, has promptly initiated measures. The incident, which unfolded near the start of this month, prompted Cypher Protocol to proactively address its X follower community and apprise them of the security breach. As a precautionary step, the platform has undertaken the decision to temporarily suspend its smart contract.

Then on 18 August, they updated that approximately $600,000 worth of cryptocurrency that was stolen had been successfully frozen. As of wee hours this morning, Cypher announced in a bid to recover from the hack, its plans for a “fair launch” token sale.

The recovery plan, as unveiled by Cypher, reveals an intricate roadmap to restore its financial equilibrium. Central to this strategy is the concept of "socialising" losses, a two-stage approach that seeks to distribute the impact across its user base.

The first phase entails the creation of a "pro rata redemption package" comprising existing platform assets, renderable for withdrawal through a web interface. Since the present financial resources are insufficient to fully reimburse all depositors, the platform is opting for a collective distribution of losses among all accounts, preventing any particular individual or group from shouldering an undue burden.

Subsequently, in the second stage, Cypher's recovery blueprint introduces an innovative mechanism. By initiating an initial DEX offering (IDO), the protocol aims to generate funds earmarked for audits and further developmental strides. Concurrently, a unique "debt token" will be issued to users during the IDO. This token will symbolise the residual assets owed by the protocol to its users. Importantly, the debt token will grant recipients a stake in the future USD Coin profits that Cypher generates. This progressive model seeks to pave the way for eventual reimbursement of losses stemming from the exploit.

The team noted, “Our foremost priority is to direct funds towards impacted users, underscoring our dedication to rectify their financial losses.”

Following the complete reimbursement of these funds, the Cypher team is taking a proactive step by enlisting the services of auditors OtterSec and Mad Shield. Tasked with conducting comprehensive public audits on the revised iteration of Cypher, the objective is to identify and rectify any latent bugs before they escalate into operational concerns. Emphasising a cautious and thorough approach, the protocol will only recommence its activities following a rigorous assessment that ensures all possible vulnerabilities have been effectively mitigated. As this evaluation transpires, the smart contracts powering the platform's application will be maintained in a frozen state, in alignment with the articulated plan.

The team went on to give a more in-depth breakdown on X.