Dear Community,

Earlier this week, Bancor experienced a security breach that resulted in the theft of roughly $23.5 million worth of cryptocurrency, after which $10 million worth of BNT was immediately recovered. As a decentralized liquidity network, Bancor neither holds nor has access to user funds and no user wallets were compromised. Users were able to access their private wallets and transfer their funds at any time during the attack on Bancor and the subsequent maintenance period.

First and foremost, we would like to apologize to our users and supporters for the network being down during this incident. A thorough investigation is continuing and we will release more information in a report analyzing the attack when we conclude our review.

Going forward, let me be clear that the loss of funds will have no significant impact on our ability to execute our mission. As the first and largest decentralized liquidity network, the Bancor Network has processed over $1 billion in token conversions in its first year. It has facilitated affordable and accessible liquidity for 100+ token projects, who joined the open-source network with no listing fees. We’ve seen many innovative uses of the Bancor Protocol already and others that will be released in the coming months. These include new types of blockchains, stable coins, derivatives, community currencies, and other use-cases we can’t yet fully imagine.

Bancor designed an economic innovation that reimagines the way value can be created and transferred. We are working towards a future where one form of value can be easily connected to any other through an open-source protocol without rent-seeking middlemen, similar to how information networks are connected through protocols such as TCP and HTTP. If today’s market-makers are like taxi cab drivers, and market takers are their passengers, you can think of Bancor like a self-driving car. This new model may create efficiencies and inclusion in the financial system, and we believe it is imperative to explore.

On the way to our goals, we traverse an often perilous path in the asymmetric cyber crime reality of 2018. There are constant challenges and dangers that are growing in sophistication in parallel to the maturing ecosystem.

Just as democracies in extreme situations can call on unique measures to protect themselves from destruction in extenuating circumstances, from our first day, we explained our position that on the path towards decentralization, certain security mechanisms must be at least temporarily retained. These trade-offs are complex and worthy of debate, and we welcome the opportunity this unfortunate situation has presented to engage in real conversation about how best to balance them.

Following the theft, our intentionally designed emergency mechanism allowed Bancor to halt the breach and recover $10 million in hijacked BNT — protecting the Bancor Network and community from further damage. This was the first time we have utilized this emergency capability, whose existence was transparently communicated to the world at large and heavily discussed prior to Bancor’s token sale. We hope to never have to use this security feature again, and while we were compelled to use it this time, we see a growing need for evolving governance models to allow different configurations of permissions to act on a community’s behalf. We look forward to continuing the dialogue on how to best implement diverse governance models for a variety of situations that may arise.

We encourage all responsible token issuers to follow Bancor’s example in transparently implementing emergency capabilities to protect their communities — and the industry at large — from thieves and criminals. Equally important is the ability of projects to develop upgradeable code which enables them to learn, iterate and more rapidly progress towards mass-market adoption of these important technologies.

This incident, while troubling, will not divert us from our goals. If anything, we will now redouble our efforts and accelerate our roadmap so that criminals will not prevent Bancor and the industry from achieving our most important of missions — enabling freedom of currency.

These types of events emphasize that our ability to build the future we all deserve depends on unity in the blockchain community to collectively fight criminals who attempt to profit at the expense of honest people and the greater good.

As a first step following the recent reactivation of the network, Bancor is creating a coalition of crypto defenders who will pledge to contribute resources and capabilities to fight criminals together. Members will collaborate on mechanisms to warn and assist each other in times of peril, coordinate around shared blacklists, and contribute open-source tools aimed at creating a safer world for all stakeholders. In the coming days will begin to open up our own internal software tools that can track stolen funds in real-time and make the information available to the entire crypto community. Additionally, during the course of our incident investigation, we have already discovered attempts to attack other projects and have reached out to these teams to inform them of imminent threats and potential exploits in their networks. Their loss is everyone’s loss as well.

On a personal note, I would like to thank the countless partners, advisors, colleagues, member tokens, BNT hodlers, members of the press, friends and family who have sent us their support, love and offers of assistance through every channel. We will not forget your kindness and generosity, just as we will not forget the criminal actions of those involved.

Bancor is back online.

Guy Benartzi, Co-Founder of Bancor