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WazirX Announces Compensation Plan After $235 Million Hack, Launches New Rebalanced Portfolio Scheme

8 hours ago
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Following the catastrophic hack that struck the Indian cryptocurrency exchange WazirX in July 2024, a considerable development took place.

WazirX recently announced a compensation plan directed toward users affected by the hack. As a matter of fact, this hack, which resulted in the loss of an eye-popping $235 million (USD) in digital assets, not only shocked users of WazirX but also rocked and reverberated through the Indian crypto community at large. Adding several twists and turns to this already crazy saga, WazirX recently surfaced with a compensation plan and has promised to reimburse users to the tune of 85% of the USD values of their portfolios that they held on the day of the breach (July 18, 2024).

The Rebalanced Portfolio Scheme

The rebalanced portfolio scheme that WazirX has launched is now live for users who were affected by the hack to recover some of their lost funds. Under the scheme, users will receive about 85% back of the value of their portfolio, calculated based on the USD value of the assets at the time of the hack. In addition, users will receive 20% of the actual current market value of their holdings.

The attack ultimately rebalanced WazirX’s own portfolio in a way that had the company’s users not holding Bitcoin or Ethereum would certainly have preferred. The new scheme structured to ensure users got back a reasonable portion of their lost funds was a clear as day statement that the crypto exchange’s financial health post-breach was anything but robust. In fact, it indicated that WazirX must have taken a serious hit to its solvency because the amount users were able to recover under the new scheme (as of now) isn’t even close to being a full reimbursement of their identified losses.

The Development of the Decentralized Exchange (DEX)

A central component of the compensation plan concerns the creation of WazirX’s new decentralized exchange (DEX). Reports say that the company plans to construct this exchange using the very funds that were originally earmarked to compensate users. This is, in effect, a win-win for WazirX: Building the DEX for what is essentially a no-cost outlay will make the long-term operation of the exchange (and thus the platform) more feasible. Compensating users with funds that do not have to be repaid from WazirX’s operating budget allows the company to keep solvent while working through its hack-related financial troubles.

The decentralized exchange will give users more control over their funds and offer more security in light of the breach. A DEX runs on a decentralized network, so it poses far fewer risks than a centralized exchange. Yet WazirX still isn’t out of the woods; its team dubbed the incident a “WazirX hack,” and it could take up to 11 weeks for an internal audit to determine how much cash and crypto the platform lost. On the upside, the team promises that it will roll out a revenue-sharing model in which WazirX’s DEX profits go back to users over the next three years.

Still, while the initiative aims to benefit the affected users, the structure of the compensation plan appears to be somewhat more favorable to WazirX’s leadership team. They are expected to receive a kind of profit sharing for as long as the DEX is operational. Unlike the plan for compensating affected users, this part of the structure seems to be set up as a long-term revenue stream for the platform’s executives.

Profit Sharing: A Limited Window for Users

Some aspects of the compensation plan have raised eyebrows. WazirX has made it clear that users will receive a share of the DEX’s profits, but that arrangement is only for a period of three years. After that, affected users won’t receive any more profits, even though the DEX will continue to operate.

Conversely, WazirX’s leadership will continue to rake in the profits for as long as the DEX operates and turns a profit. Users are made whole and potentially profitable in the short run; the long run, however, seems to reward the platform’s upper management far more than it rewards users.

What Does This Mean for the Future of WazirX?

WazirX compensating users and developing a decentralized exchange demonstrates that the platform is trying to learn from its past mistakes. These two actions could restore trust within the crypto community and WazirX itself. However, the company still has work to do in establishing user satisfaction and confidence. That’s because the dual moves of compensation and establishment of a decentralized exchange really aren’t much if only 85% of users’ losses are reimbursed and the decentralized exchange is set to go live in an unspecified time frame after which users can trade the crypto exchange tokens they’ve earned as dividends.

The crypto industry will watch closely as WazirX builds its DEX (decentralized exchange) and continues compensating users of WazirX who were affected by the hack in August of this year. Will these efforts be sufficient for WazirX to win back the trust of the crypto community? Will the recovery serve as a reliable guide for “next time” in an industry that seems let down in the area of security?

At present, WazirX is directing its attention toward rebalancing its platform, recompensing users who were directly affected by the recent events, and pushing ahead with its roadmap to a decentralized future. The next few years will be make-or-break for the exchange, and for the money raised by its parent company and used to build the exchange, as it tries to show that it can come back from the hack stronger and more secure than ever.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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Source: https://nulltx.com/wazirx-announces-compensation-plan-after-235-million-hack-launches-new-rebalanced-portfolio-scheme/