Replay of the GALA incident: A $250 million Huobi trust crisis caused by $400,000

The story begins with pNetwork trying to recover $400,000 in pool liquidity, and ends with Huobi being caught in a trust crisis of at least $250 million . pNetwork and Huobi are at loggerheads, and many people still haven’t figured out the logic behind the #GALA incident. Without exaggeration or slander, the following Thread systematically summarizes it:

The cause was that the pNetwork project had problems with its cross-chain bridge. In order to recover $400,000 in liquidity, it issued an additional 55.6 billion pGALA and implemented a so-called "white hat attack." However, during this process, Huobi was not "notified" to suspend deposits and withdrawals (the two sides were arguing) ; as a result, a huge amount of GALA was deposited into Huobi for sale. Some people followed suit to make arbitrage and ran away with deposits, sales, and withdrawals, while others followed suit to buy at the bottom with real money but were forced to exchange it for worthless pGALA.

The pNetwork project lacked common sense of DeFi security , and injected the over-issued liquidity into the ecosystem without completely eliminating potential hazards. It was too hasty and irresponsible. Afterwards, it did not explain the motivation of mint and the possibility of potential insider operations. Instead, it mediated between Huobi and GALA to shirk responsibility and even went to court. It is understandable and not an exaggeration to say that it was the initiator.

Faced with the crisis, users did not wait for Sun Yuchen’s big picture, but were confused by a series of outrageous operations :

1) Not acknowledging the inaction of security emergency response and risk control systems;

2) Deposit and withdrawal were not suspended for a long time, and during this period, rumors of internal man-made disasters were heard everywhere;

3) The GALA users who bought the bottom were identified as arbitrage attackers and the relevant assets were blocked;

4) Finally, the spearhead was directed at the pNetwork project team, and the two sides started to quarrel.

Sun Yuchen, who has always been good at marketing, never expected that he would fail in "PR". It took two days to find the real target, but unfortunately the wind direction has changed . The whole crisis process was handled in a messy and disorganized manner, which was not up to standard, and failed to live up to the image of the "Big Three" in everyone's mind; but centralized exchanges have always had a strong voice in the Crypto world. The original sin of centralization may be the key to the uprising of the masses, but it can only be left to time.

What about arbitrage users? First, they followed the trend of arbitrage, and then they all rushed to protest for their rights. They lacked the basic knowledge of security and industry for the high risks of the Crypto Dark Forest, and always underestimated the risks of participation. In the financial world of zero-sum game, there is no such thing as getting rich quickly without losing money. It is really powerless to always shout at this Crypto world that lacks supervision and has only itself as the savior with the weak cultural attribute of "herd effect"!

Have you noticed that the security companies that usually jump out to popularize science, warn and track any disturbance were absent in this GALA incident. The reason is simple: security audits and services can check all code defects, but it is difficult to fight against the potential "man-made" crisis caused by the eagerness of industry ecosystem participants for quick success. This is a security crisis caused by a non-smart contract vulnerability, but it is more alarming than any code vulnerability.

The $250 million is the value of the $GALA that was recharged with 6.6 billion at the current price. It is the book loss caused by Sun Yuchen's "big picture" to pay for it at the beginning. But now Huobi is under criticism, how much is the potential trust crisis loss? Everyone has an answer, maybe it is insignificant, after all, the memory of leeks is only a few seconds, maybe it will be recorded in history, but it will definitely evoke your original intention of Crypto.

As a Crypto evangelist and blockchain security practitioner, I personally do not hold any GALA and am not a Huobi user. I have been watching and participating in the entire process of the incident, and have dug deep into the on-chain data. In a professional and responsible position and with an objective attitude, I would like to express some observations and insights here. If you agree with me, please help forward them. If you don’t agree, please don’t criticize me. I only want to promote positive energy for crypto.