Bancor Hack Casts Doubts over its Decentralization

The Bancor team froze BNT tokens to combat a security breach, but this might be a proof the exchange is far more centralized than previously thought.

Bancor, a decentralized smart contract crypto exchange, might not be as decentralized as it claims. After hackers stole $23.5 million worth of three types of tokens from the exchange earlier this week, Bancor suspended operations and successfully froze their native Bancor (BNT) token to prevent any further losses. However, according to an analysis by Crypto Inferno published on Steemit, the suspension of the token might have inadvertently proven the cryptocurrency exchange platform is far more centralized than previously speculated.

“There is centralised control of BNT, and a single point of failure,” writes Crypto Inferno. “No other tokens can be controlled in this way, of course, hence the reason they couldn’t freeze the stolen ETH.”

Bancor is a cryptocurrency exchange that sets itself apart from its competitors by trading through smart contracts, while most other exchanges conduct trading peer-to-peer. The Bancor Token was one of the successful initial coin offerings (ICOs) of 2017, raising approximately $153 million worth of Ether in mere three hours. Although not actively advertising itself as such, Bancor Network still maintains to be a decentralized exchange on its website.

Even though Bancor has not been shy about their control over the BNT token – and has even advocated for other exchanges to adopt such measures – the Bancor Foundation points out no user wallet has been compromised or even been at risk of being compromised.

Bancor has already been under heavy criticism for the kinks in its system, with some experts even predicting their security breach. However, the company has not been shy when it comes to criticism, directly addressing it, and even lashing out at some of their most vocal pundits.

“I personally think having a security protocol in place is essential to protect users and ultimately achieve widescale market adoption,” writes another steemit user in a comment below the analysis. “If Bancor abuses their ability to freeze tokens they can easily be forked. Forkability to me is the key element to decentralization.”

After Bancor’s security breach on Monday, the BNT token plummeted, losing nearly one third of its value so far. The network did not recover until Thursday, when it resumed operations.