As a seasoned researcher with years of experience in the dynamic world of cryptocurrencies, I find Nischal Shetty’s decision to build a decentralized exchange (DEX) alongside WazirX intriguing. Given his life experiences, especially the infamous WazirX hack, it seems like he’s learned from the past and is taking proactive steps to mitigate potential future risks.
Nischal Shetty, creator of well-known Indian cryptocurrency platform WazirX, disclosed plans for expansion and potential development of a standalone decentralized exchange (DEX), which would function alongside their existing centralized operation.
Based on Shetty’s statement, the move to establish a Decentralized Exchange (DEX) is a reaction to the July 2024 WazirX hack, where an estimated $235 million worth of user funds were stolen. Launching a DEX aims to minimize the risk associated with centralized platforms that comes from counter-parties. To put it simply, Shetty suggests this step was taken due to the WazirX hack incident, which highlighted the risks in centralized exchanges and the benefits of decentralized ones.
“The best thing is that you’ll be able to self-custody your assets here — your assets will be completely under your control — and you can freely trade or do what you want with your assets.”
In simpler terms, the creator of WazirX has shared ideas about introducing a token specifically designed for this exchange, which can be used to cover transaction fees and serve as a tool for decision-making within the platform.
The now-infamous WazirX hack
As an analyst, I experienced an unfortunate incident on July 18th where WazirX’s multi-signature wallet was compromised, suspectedly orchestrated by the North Korean cyber-crime group known as Lazarus.
As a crypto investor, I’ve learned that when cybercriminals wanted to launder their illicitly obtained $235 million, they resorted to using Tornado Cash – a system designed to obscure transaction trails by mixing funds together. This technique makes it challenging to trace the history of transactions on the blockchain and undermines tracking mechanisms.
After the security incident, WazirX revealed their intention to restrict trade funds to 55% of a user’s total account value and transform the remaining 45% into Tether-USD (USDT), which would stay locked on the platform. This proposed action received significant backlash from the exchange’s clients, who deemed it as a method for “sharing losses.
By August 2024, the platform undid all trades that had taken place after the hack and returned every account balance back to its original level, as it was before the July 18 incident.
At that point, representatives from the exchange stated that the reversal of the trades was intended to achieve a “fair result” for all their clients.
As a researcher, I found myself following the challenging journey of WazirX in their pursuit to retrieve the stolen funds, which occurred several months after the cyber-attack. The exchange itself, along with its previous custody partner Liminal, engaged in a blame game, each party pointing fingers at the other, alleging responsibility for the security lapse that ultimately led to the loss of funds.
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2024-11-06 23:08