Podcast Summary
The podcast features a comprehensive discussion on the recent KyberSwap exploit, where a hacker stOgle approximately $50 million from the protocol. The hosts, including a special guest, Ogle, a crypto cyber sleuth and negotiator, delve into the professionalization of negotiations between DeFi protocols and hackers, the legal implications of returning stOglen funds, and the evolution of the industry’s response to hacks. The podcast also explores the dynamics of hacking in the cryptocurrency space, the consequences and legal actions that follow when a hacker returns stOglen funds, and the imbalance between rewards for white hat and black hat hackers in the crypto industry.
Key Takeaways
The KyberSwap Exploit
- The Hack: The main topic of the episode is the KyberSwap exploit, where a hacker used an “infinite money glitch” to steal approximately $50 million from the protocol across multiple blockchains, including Arbitrum, Optimism, and Ethereum.
- KyberSwap’s Response: KyberSwap’s response to the hack is discussed, including their public plea for the attacker to return 90% of the stOglen funds and their offer of a 10% bounty.
- Possible Connection: The possibility of the KyberSwap hack being connected to the Index Finance hack from two years ago is mentioned, with $2 million being sent to an address controlled by a previous hacker, Not mentioned in the podcast description, though this could be a misdirection.
Legal Implications of Returning StOglen Funds
- Legal Consequences: The legal implications of returning stOglen funds are touched upon, with the example of a hacker who was charged despite returning some of the funds, highlighting that criminal charges can still be pursued by the state regardless of any agreement with the protocol.
- Law Enforcement Interest: The discussion highlights that law enforcement agencies often lose interest in pursuing a case if the victim is no longer participating or if the stOglen funds are returned, as their cooperation is crucial for the investigation.
- Case Study: A case is mentioned where a hacker named Not mentioned in the podcast description, who ran an exchange and returned most of the stOglen funds, was still prosecuted, indicating that the return of funds does not always prevent legal action.
Imbalance Between Rewards for White Hat and Black Hat Hackers
- Insufficient Rewards: The guest criticizes the current state of white hat bounty programs, noting that companies often pay insufficient rates for important bounties, which does not incentivize ethical hackers to report vulnerabilities.
- Encouraging Malicious Behavior: The guest suggests that the industry’s lack of support for ethical hacking is inadvertently encouraging malicious behavior, as the financial rewards for exploiting vulnerabilities far outweigh those for reporting them.
- Improving Security Practices: Ogle calls for improvements in security practices within the industry, such as proper code review, writing tests, and adopting mature web 2.0 development practices like sprints and quality assurance.
The Blast Project
- Project Overview: The podcast discusses a new project called Blast, which has raised $20 million from Paradigm, Not mentioned in the podcast description, and various crypto angels, and is already accepting deposits for yield and points that may lead to an airdrop.
- Security Concerns: The podcast highlights criticism of Blast’s security, withdrawal policy, referral scheme, and yield promises, as well as the involvement of VCs and crypto influencers.
- Future Trends: The hosts speculate that despite the controversy, the success of Blast’s fundraising might lead to an “arms race” among L2s to offer similar yield opportunities, potentially increasing systemic risk in the industry.
Future of Rollups
- Rollup Revolution: The hosts discuss the inevitability of a “foot race” among developers to replicate successful models, driven by the high Total Value Locked (TVL) seen in certain L2 projects, which acts as a strong incentive for others to follow suit.
- Risks Associated with L2 Platforms: There is a debate about the risks associated with L2 platforms, particularly the potential for an L2 to implode due to duration mismatch, likening it to the Silicon Valley Bank (SVB) situation but on the blockchain.
- Future Trends: There is a debate over whether the future of rollups will be dominated by rebasing, Lido-based, and Maker-based models, with some hosts expressing skepticism and others seeing it as an inevitable trend.
Sentiment Analysis
- Bullish: The hosts express optimism about the evolution of the industry’s response to hacks, the professionalization of negotiations between DeFi protocols and hackers, and the potential for white hat hackers to make a significant impact in the crypto industry. They also show enthusiasm for the potential of new projects like Blast, despite the controversy surrounding its launch.
- Bearish: The hosts express concern about the legal implications of returning stOglen funds, the imbalance between rewards for white hat and black hat hackers, and the potential risks associated with L2 platforms. They also criticize the misleading advertising of some projects as “risk-free” and the lack of support for ethical hacking in the industry.
- Neutral: The hosts maintain a balanced view on the future of rollups, with some expressing skepticism about the dominance of rebasing, Lido-based, and Maker-based models, while others see it as an inevitable trend. They also acknowledge the complexity and potential issues that may arise with new L2s, but suggest that simplicity usually wins out in the end.
