Are Decentralized Protocols Like Thorchain Responsible to Stop Hackers?
An interesting debate has been sparked on X over the past few days. The catalyst has been the FTX Hacker who notoriously stole $400M from FTX during its collapse moving the stolen funds across various protocols. One of the main protocols he's using? Thorchain.
Thorchain is obviously close to home for me. RUNE is one of my largest crypto positions in my relatively exclusive portfolio of only about 6 crypto assets.
Recently, they released streaming swaps. Streaming swaps allow users to set a swap target and allow their swap to be arbitraged as it is played through blocks over a predefined amount of time.
In layman's terms, this allows whales to trade large amounts of crypto in and out of the Thorchain Liquidity Pools without the pools needing sufficient depth for a single trade. Think of it like taking a big trade and breaking it up into 100 small trades rather than pulling the trigger all at once.
The magic of streaming swaps is that it does this all at one time for you. Now that streaming swaps are in place, whales of all kinds have been moving MASSIVE amounts of crypto through the Thorchain Router. This is what also enabled the FTX hacker to move millions of dollars worth of ETH through the router and into other wallets.
Using Thorchain
The hacker's first move in 10 months of silence was a move to sell 700 ETH through the Thorchain Router using a streaming swap.
Multiple other swaps have happened since. Each for millions of dollars worth of Etheruem.
Are Decentralized Protocols Like Thorchain Responsible to Stop Hackers?
The debate sparked over on X has been a multi-day event. When the swaps first happened, a few prominent Thorchain influencers in the community praised the big swaps. It's possible that some of them didn't have all the info yet when they broke the news - unbeknownst to them that it was a hacker moving large swaths of funds.
Some knew and didn't care. Others knew and did care. It caused somewhat of a rift. Many in the crypto twitter community started bashing Thorchain and saying that they facilitate black hat activity.
My take is that malicious actors will use anything you give them access to. If it's the U.S. Dollar, they'll use that to commit horrible crimes.
If it's BTC, they'll use that to.
If it's Thorchain Routes, why wouldn't they also use that?
Malicious actors do malicious things all the time. The USD is still the #1 preferred currency amongst global crime.
All of this reminds me of Tesla's autopilot. In the early days - and even still today - any autopilot accident gets 1000x the media attention than a regular accident.
Does this mean that autopilot is bad? Does it mean that autopilot causes more accidents?
No. It's just something new and shiny. When it comes along, people will cite it as the reason for the thing happening. They disregard all of the positive actions: all of the accidents that were avoided, all of the safety features built in the process and lives saved.
Humans are always going to human. We focus on the bad and often forget the good. 1 bad thing out of 99 good things could happen and we will give 99% of our attention to the 1 bad and only 1% to the 99 good things that happened. That's life.
Back to the Question
So back to the original question: should Thorchain have attempted to stop it?
Well, it's run by nearly 100 decentralized nodes. Even if they moved to prevent it, I don't think they could actually stop it.
That's the double-edged sword of decentralization: decentralization is extremely positive because it enables us good actors to do positively good things. It allows us to move away from the FTX's (ironic, huh?) of the world and self-custody our funds.
It also allows malicious actors to do whatever the hell they want with the tools provided. That is the double-edged sword.
Put a tool out into the world and it is not the tool that is the enemy, but the person weilding it. Perhaps other measures could be done at a source-level to prevent the enemy from wielding so much influence. Could FTX have been prevented by government measures or other measures altogether?
Actually, if you run full circle: if Thorchain were bigger than all the CEXes, would FTX's blow-up have been less impactful? Since more people could be self-custodying funds instead of letting FTX do it for them and losing their money?
Focus on the good over the bad. Any tool can be leveraged in any way. If you want to prevent bad actors, then you need to go after the actor - not the tool.
Posted Using LeoFinance Alpha
I concur with your assessment that the responsibility should not be placed solely on the tools but on the individuals who misuse them. Decentralized protocols, by design, offer freedom and lack of censorship, which can be a double-edged sword, serving both well-intentioned and malicious actors alike. It's crucial to educate users about the risks and responsibilities that come with this freedom, fostering a community that actively discourages malicious activities.
Do you think there could be community-driven initiatives or mechanisms within the decentralized protocols that can help mitigate the risks of misuse without compromising the inherent principles of decentralization?
I really have to look into Rune. Amazing that these tools exist. I would say it is not a protocols responsibility to check who is using it. Would be great to mark funds like that though and always publish which wallet is holding stolen funds. If there was an open source thing that frontends could run not allowing these marked wallets to interact it could have a great impact on the hacker side. I think many exchanges and even dexes would run this. Thus making it hard to give hackers a chance to move their stolen goods.
THORChain is transparent. You can see all of the trades the "hacker" made.
Technology isn't evil or good, its the people using the tools that makes their choice how to use them.
There will alswayd be bad actors trying to use a technology to their advantage.
The arrest of the Tornado cash dev sure put an example. If node operators are doxed, they sure expose them self to a big risk. Now it is not the 100% same case as Tornado, since there was one man to go after, while here will be a 100, but still something can be done. Furthermore if there is any legal entity that is responsible for development, like foundation or similar, that can be at risk. Like it or not, these are the real threats. Devs and node operators should be all anons and that is hard to do in todays environment even if they wanted to.
This is a huge paradox, where we feel more comfortable with know devs, yet becoming know is a big risk to devs. A crazy situation.
It makes me think that ThorChain is a lot more centralized than advertised considering they freeze the chain all the time and often cave to pressure like this. The FTX hacker was going to find a route to matter what. FTX is the responsible party and not anyone else. I love how all these people try to act like decentralization is the problem when this is 100% FTX's fault. Centralized honeypots should not exist.
Good point.
I always think the frequent chain halts on Solana being a definite indication of centralization, and now I feel embarrassed that I didn’t use the same ruler to measure Thorchain.
THORChain did not cave to any pressures. The dev's of THORswap, a centralized front end, shutdown their front end. THORChain has been active and remains active (although it has halted from majority node vote in the past and is certainly more centralized than BTC, but is likely at Hive's level of decentralization - 100 nodes). The central points of failure will be tested and ultimately weeded out. If THORswap can't take the heat... can Shapeshift? TrustWallet? AsgardEx? There are many other TC front ends.
I would have to dig a little deeper on the subject. What I can say is that the malicious will always look for a way to get a monetary flow that will allow them to make bullshit. It is their mode of operation. I think more should have been done to prevent it.
I agree that this is the nature effect of building tools, that anyone can use, so some will use it for good and others for bad. We literally don’t hold gun manufacturers responsible for murders committed with their guns, and the clear purpose of their product is to do harm.
I also agree that tools which promote or allow investors to interact without sacrificing control of their assets is the goal of cryptocurrency interactions. The main security of crypto is keeping your crypto in your wallet, protected by your keys. Thorchain allows this, and when they perfect their liquidity pools I suspect the TVL will go through the roof.
With a well analyzed post as this, it is easy to come to a conclusion that Thorchain, even with the thousand decentralized nodes available, it still cannot put a stop to the hackers.
Like you i also have only 7 assets or so in my portfolio, and rune is one of them, i don't think the protocol design should take responsibility for the user actions...
This is the ETH /ETH Classic moment for THORChain. Front ends are going to decide if they are permissionless or not. The chain itself will run, billions will be swapped. Some front ends will cave to pressure, others will not. Central points of failure are destined to fail in this industry. TC nodes and front ends need to focus on decentralization, if they can do that... THORChain is the future rails of the new economy.