Morgan Chittum

<div id="highlights-block_611c05465e50d" class="highlights">
 <ul>
 <li>“Mr. White Hat” has returned roughly $400 million of the stolen assets, but Poly Network has offered the hacker a $500,000 bounty if they give back the rest of the stolen funds</li>
 <li>The crypto market capitalization touched $2 trillion since the massive cyberattack last week</li>
 </ul>
 
</div>



In a strange turn of events, Poly Network has offered the hacker who exploited its protocol to steal $611 million in crypto a job as chief security officer.



Poly Network offered the hacker (or hackers), dubbed “Mr. White Hat”, a role as the protocol’s chief security advisor on Tuesday. “Mr. White Hat” is a common reference for a hacker who receives a bounty or award for exposing a system’s security flaws.&nbsp;



On August 10, “Mr. White Hat” <a href="https://cms.blockworks.co/hackers-steal-over-600m-biggest-in-defi-history/" target="_blank" rel="noreferrer noopener">breached the security of DeFi exchanges</a> like Polygon, Binance Smart Chain and Ethereum and stole $266 million in Ethereum, $253 million in tokens on Binance Smart Chain and $85 million in USDC on Poly Network.



In response, Poly Network urged crypto exchanges to “blacklist tokens” that were connected to the alleged hacker. Poly Network tweeted following the massive cybercrime that the company would “take legal action” and “urge[d] the hackers to return the assets.”&nbsp;&nbsp;



On August 12, Poly Network offered up $500,000 to the hacker to return all funds. The hacker <a href="https://twitter.com/tomrobin/status/1425849937137393666?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1425849937137393666%7Ctwgr%5E%7Ctwcon%5Es1_c10&amp;ref_url=https%3A%2F%2Fcms.blockworks.co%2Fpoly-network-hacker-returns-600-million-offered-500000-bug-bounty%2F" target="_blank" rel="noreferrer noopener">declined</a> the bounty the same day, but has since returned $400 million of the stolen assets. 



Poly Network offered the hacker the chief security advisor role so that “Mr. White Hat” could continue “contributing to security advancement in the blockchain world,” according to a <a href="https://polynetwork.medium.com/?p=241398d64a40" target="_blank" rel="noreferrer noopener">Medium post.</a> Poly Network also doubled down on their offer of a $500,000 bounty if the hacker returns the remaining stolen funds.  



Following the hack, addresses (later proven to be connected to the hacker) responded publicly via a <a href="https://twitter.com/tomrobin/status/1425849937137393666?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1425849937137393666%7Ctwgr%5E%7Ctwcon%5Es1_c10&amp;ref_url=https%3A%2F%2Fcms.blockworks.co%2Fpoly-network-hacker-returns-600-million-offered-500000-bug-bounty%2F" target="_blank" rel="noreferrer noopener">series of encrypted messages</a> through crypto exchanges. On returning the stolen assets, they responded, “That’s always the plan! I am _not_ very interested in money! I know it hurts when people are attacked, but shouldn’t they learn something from those hacks?” 



While devastating, hacks like Poly Networks can actually strengthen the ecosystem because they expose vulnerabilities, according to Michael Tant, an analyst at Inside and an angel investor. “Now that the hack has happened and funds are being sent back, we can catch it [next time]. It’s one less way the protocol can theoretically be hacked,” he told Blockworks.



Despite the tumultuous journey for Poly Network, crypto markets have not been significantly <a href="https://cms.blockworks.co/what-investors-have-to-say-about-defis-largest-hack-to-date/" target="_blank" rel="noreferrer noopener">impacted</a> by the security breach. Ethereum is up 0.20% over the past seven days. Bitcoin has dipped less than 1% over the past week as of press time. Similarly, the crypto market capitalization has since touched $2 trillion the following Monday.



“You almost would rather have those vulnerabilities exposed earlier when it’s $600 million instead of 10 years when it’s $600 billion,” Tant said. “It’s not to say that hacks are bullish, but it is to say that DeFi is still very early. People are still writing new code. It’s probably good to get the bad code out of the way now so that people can keep building.”



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Poly Network Offers Chief Security Officer Role to Hacker That Stole $600M

Sam Reynolds

<div id="highlights-block_6116b49e0d7a3" class="highlights">
 <ul>
 <li>Almost all the funds stolen during the Poly Network hack have been returned</li>
 <li>On Twitter, digital assets experts debated whether the hackers really were ‘White Hat’ operatives of if they found it too difficult to launder funds at scale</li>
 </ul>
 
</div>



The <a href="https://cms.blockworks.co/hackers-steal-over-600m-biggest-in-defi-history/">Poly Network hack</a> has nearly come to a close with a favorable result for stakeholders and users of the network as the hackers that stole close to $600 million have returned their stolen digital loot.&nbsp;&nbsp;



Poly Network confirmed that the process was underway via a <a href="https://twitter.com/PolyNetwork2/status/1425870262067548163?s=20">Twitter post</a> Thursday, and while on-chain data showed that the funds were being transferred Poly Network <a href="https://twitter.com/PolyNetwork2/status/1426212479147724805">also said</a> that they were awaiting a key from the hacker to unlock the wallet. Functionality on the network is expected to be re-enabled shortly after.&nbsp;



Although the hacker or hacking group that executed the attack claims to be a White Hat hacker — meaning they don’t intend to be malicious — so far they have declined to accept a ‘bug bounty’ of nearly $500,000 for exposing flaws in the network.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The Poly Network hacker is now saying that they were offered a $500k bounty to return the stolen assets &#8211; but that they will not be claiming it <a href="https://t.co/Dqp2ZhSO47">pic.twitter.com/Dqp2ZhSO47</a>&mdash; Tom Robinson (@tomrobin) <a href="https://twitter.com/tomrobin/status/1425849937137393666?ref_src=twsrc%5Etfw">August 12, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Within the White Hat world of information security professionals, bug bounties are a common practice. In exchange for proactively disclosing information about the security flaw and keeping it confidential, hackers are rewarded for their efforts.



However, security firm SlowMist which was working with Poly Network to investigate the hack said that they had discovered the hacker’s IP address and email perhaps forcing their hand to return the funds and claim that they were a White Hat group.



In response to the news, DeFi tokens were generally bullish throughout the US trading session on Friday with Ether up 7%, Cardano up 16%, and Polkadot up 7%.



Want more investor-focused content on digital assets?&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Join us</a>&nbsp;September 13th and 14th for the Digital Asset Summit (DAS) in NYC. Use code ARTICLE for $75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/" rel="noreferrer noopener">Buy it now</a>.

Poly Network Hacker Returns $600 Million, Offered $500,000 Bug Bounty

Casey Wagner

<div id="highlights-block_6112fdd8244f4" class="highlights">
 <ul>
 <li>Tuesday’s Poly Network hack was the greeted decentralized finance security breach in history, but the crypto market remained steady </li>
 <li>While the hack does reflect a need for greater security in the space, it is unlikely to sway broader institutional investor interest, experts say. </li>
 </ul>
 
</div>



In the largest decentralized finance hack in history, perpetrators stole more than $600 million from interoperability protocol Poly Network Tuesday, but the security breach does not seem to have investors concerned.&nbsp;



<blockquote class="wp-block-quote">“I don&#8217;t think anybody cares, it&#8217;s not good and it&#8217;s going to obviously lead to people being more cautious,” said Daniel Matuszewski, co-founder of CMS Holdings. “But here&#8217;s the reality of it, it’s a pretty risky section of a risky chunk of our industry; it&#8217;s a cross-chain product. These are the riskiest of the risky places.”&nbsp;</blockquote>



The hackers exploited Poly Network on DeFi exchanges Polygon, Ethereum and Binance Smart Chain. Poly Network is a cross-chain protocol for swapping tokens across various blockchains. Cross-chain protocols act as a way to connect different blockchains and enable transfers between protocols, acting as a bridge.&nbsp;



The broader cryptocurrency market did not seem to have a significant reaction to the hack. Bitcoin and ethereum <a href="https://cms.blockworks.co/crypto-prices-steady-after-defi-hack-markets-wrap/">dipped</a> slightly initially following the news, but were both trading in the green later in the day Tuesday.&nbsp;



“Those who have allocated to the crypto landscape for a while are very numb to these exploits,” said Imran Khan, lead at the DeFi Alliance. “We&#8217;re still very early, and these economic hacks are essentially ways to improve the overall ecosystem over a long period of time.”&nbsp;



The hacks, Khan explained, reveal which areas in the space need more work.&nbsp;



“We&#8217;re seeing a lot of attacks right now with cross-chain swaps, and that&#8217;s an area that we&#8217;re not going to allocate as much capital to,” said Khan. “That&#8217;s what we&#8217;re doing internally, and I could see that happening everywhere else, too.”&nbsp;



<h3 class="wp-block-heading">Swaying institutional interest</h3>



While the hack does reflect a need for greater security in the space, it is unlikely to sway broader institutional investor interest, experts say.&nbsp;



“Frankly, these investors don&#8217;t care about one particular project, or even five particular projects, they are much more thematic,” said Michael Moro, CEO of Genesis. “They are wondering if <a href="https://cms.blockworks.co/the-investors-guide-to-defi/">DeFi </a>will be a thing in the next ten years.”&nbsp;&nbsp;



Investor interest in DeFi today, Moro said, comes down to three areas: ease of onboarding, potential for returns and the actual product or service the DeFi protocol is attempting to accomplish. Investors today are primarily concerned with returns and onboarding, Moro said, but that will eventually change.”&nbsp;



“For institutional investors, there are few that believe the product is the number one narrative — it’s not the number one reason why they are using DeFi,” Moro said. “We&#8217;re not there yet, but that&#8217;s okay because these [institutional investors] are investing for that future.”&nbsp;



<h3 class="wp-block-heading">A need for improvement</h3>



For those concerned with the current security of DeFi protocols, experts agree that there are areas in need of improvement.&nbsp;



“People need to realize that many of these DeFi platforms don’t offer the security that some of the big centralized exchanges offer,” said Charlie Silver, Permission.io CEO. “DeFi long term is fantastic, but it is still immature and not really ready for consumers that don’t have high tolerance for risk.”&nbsp;



Still, the dust hasn’t settled yet from the hack and it is not clear how more traditional institutions will respond. In a <a href="https://www.internationalinvestment.net/news/4034776/most-significant-crypto-hurdle-institutional-investors-revealed-survey" target="_blank" rel="noreferrer noopener">recent survey</a> of global institutional investors conducted by London-based Nickel Asset Management, 76% of respondents cited security concerns related to custody as a reason preventing them from investing.



While savvy crypto native funds that are the most active market participants understand the risks of investing in DeFi protocols, many less technical institutional investors do not.



“The smart money at institutions know DeFi is the future of finance,” said Silver. “However, operators of platforms will need to demonstrate that security is job one.” 



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