Gnosis Chain, which is a blockchain for stable payments and decentralized apps (explore more about Gnosis Chain here), has made an important change to its system. They did this to recover money stolen during a hack related to Balancer. Balancer is a platform where people can trade and manage cryptocurrency. (read more about decentralized exchanges like Balancer here)
A few days ago, Gnosis announced that the stolen money is no longer in the hacker’s hands, and they told people managing their network, known as node operators (learn about node operators here), to update their systems. If they don’t, they might face penalties. Gnosis has not shared the exact amount of money they succeeded in recovering yet.
What is a Hard Fork?
Gnosis Chain made this recovery possible using a “hard fork.” A hard fork means making big changes to a blockchain’s rules and software. Everyone using the network must update to keep things running smoothly. Sometimes, this causes people using the blockchain to split into different groups. (Learn more about hard forks here).
Gnosis decided to do the hard fork after discussing it for weeks. This followed an incident in November when Balancer was hacked. Hackers took nearly $120 million worth of cryptocurrency from various platforms, including Gnosis. When the theft first happened, the validators in Gnosis Chain (validators are people or groups who approve and secure transactions on blockchains – read more about validators here) reacted quickly. They made a temporary fix called a “soft fork,” which blocked the hacker from transferring the stolen money. A soft fork is an easier change to a blockchain system that doesn’t affect its overall network. (What is a soft fork? Read here).
How the Hacker Found a Way In
The attack on Balancer happened because of a weakness (or vulnerability) in one of its tools called Balancer V2 Composable Stable Pools. Even though this tool was tested by four security companies, the hackers still found a way to steal money. After stealing, they quickly moved large amounts of money, such as staked Ether (a type of locked-in cryptocurrency), to different wallets to hide their tracks.
Some Money Already Recovered
After the hack, white hat hackers (these are ethical hackers who try to stop bad hackers by identifying weaknesses – read about white hat hackers here) managed to get back about $28 million. But for a long time, most of the stolen money remained inaccessible. Within Gnosis Chain, roughly $9.4 million of the stolen money had been frozen on their blockchain using the earlier soft fork fix. This prompted debates in the community about how to recover these frozen funds while keeping the blockchain fair and secure.
A Mixed Reaction from the Community
The Gnosis team decided to go ahead with the hard fork to return the stolen funds to users. Philippe Schommers, an important member of the Gnosis team, said this decision was necessary and urged every node operator to support the change. He also reminded everyone that failing to update their nodes to the latest version of the software could result in penalties. Philippe shared that the goal was to ensure the recovered money reached back to its rightful users before the end of December.
This decision led to divided opinions in the Gnosis community. Some people supported the hard fork, saying it showed that the team cared about protecting its users and doing the right thing. However, some others were against it. They believed that making changes like this affects the blockchain’s immutability. Immutability means that the data in the blockchain is permanent and cannot be changed, creating trust and transparency. (What is blockchain immutability? Learn here)
Critics also said that the soft fork, used earlier, already broke the blockchain’s history. They thought clear guidelines should be made to decide when such actions are allowed in the future. Meanwhile, some supporters viewed the hard fork as just continuing what the soft fork had already started.
Even though there were debates, many people agree that this intervention proved Gnosis Chain’s commitment to user protection while raising important topics about balancing security with blockchain principles.