Bybit Asks DAO to Return Fees Earned from Hack Transactions
Bybit, a prominent cryptocurrency exchange, has sent a proposal to the ParaSwap decentralized autonomous organization (DAO) requesting that it return fees earned from hack transactions. The proposal, which was posted on ParaSwap's DAO forum in March, asked for the return of 44.67 Wrapped Ether (wETH), worth almost $100,000, to a wallet address.
The proposal initially attracted skepticism from some DAO members, with several calling for verification before advancing the proposal. However, Bybit confirmed its involvement in the proposal by sharing a verification post on its official X account on March 5. The move sparked a heated debate among DAO members, with many considering the future implications of a potential return of the fees.
DeFi researcher and ParaSwap DAO delegate Ignas highlighted the dilemma placed upon the DAO, stating that profiting from the hack was "bad optics" and that returning the funds would show support for another industry player. He also warned that keeping the funds may attract regulatory scrutiny and legal headaches. However, he cautioned that issuing a refund could set a dangerous precedent for DeFi.
Ignas' concerns were echoed by the rapid growth of THORChain's swap volume after Bybit hackers used the protocol to convert stolen funds into different crypto assets. The volume exploded past $1 billion by February 27, generating $5 million in fees and reaching $5.4 billion by March 4.
Bybit hackers' use of THORChain highlights the potential for significant fund recovery if a similar refund request is pursued from the exchange. Cointelegraph reached out to Bybit for comment but did not receive an immediate response.
ParaSwap DAO Members Weigh In on the Proposal
DAO member SEED Gov outlined three possible courses of action: returning the full amount, refusing the request, or negotiating a structured return that includes keeping 10% as a bounty, in line with Bybit's existing bug bounty program. The community was split, igniting a heated debate within the ParaSwap DAO forum.
Some community members argued that the funds should be returned, while others suggested that they could arrange a structured return of the funds if they could keep the 10% bounty and secure the elimination of any future liabilities for the DAO. On the other hand, some ParaSwap DAO members were strongly opposed to returning the funds, citing concerns about damaging their reputation.
Context: A Similar Situation in 2013
A community member pointed out a similar situation in 2013 when a protocol asked ParaSwap to refund fees after hackers used the protocol to swap assets. The DAO member highlighted that there was "no reason to rule it otherwise this time," sparking further debate among members.
The Implications of Returning Fees
The potential return of fees from hack transactions raises significant implications for DeFi and its regulatory landscape. Bybit's proposal highlights the need for clearer guidelines on how to handle such situations, ensuring that the industry does not inadvertently create vulnerabilities for itself.
As the cryptocurrency market continues to evolve, it is essential that exchanges, protocols, and DAOs prioritize transparency, accountability, and responsible practices to maintain trust and mitigate potential risks. The outcome of this proposal will serve as a benchmark for future discussions on how to address similar situations in the DeFi space.