31 Dec Cover Protocol announces compensation plan following mining contract attack
Cover Protocol will distribute new “coins” to token holders as Binance announces compensation for affected traders.
Peer-to-peer coverage market Cover Protocol has published a compensation plan for token holders and liquidity providers affected by the recent hack. As part of the process, the Cover Protocol team took a snapshot at block height 11541218, the last transaction block before the exploit began.
Eligible liquidity providers on Uniswap, SushiSwap, and Balancer will receive new COVER tokens based on their share of the liquidity pool on those platforms. Liquidity providers on the first two platforms will also receive a share of the ETH returned by ‘white hat’ exploiters like Grap.Finance.
The compensation plan also revealed that token holders will receive new COVER coins on a 1-to-1 ratio with their initial wallet balance before the hack. Commenting on the reimbursement for coins held on centralized exchanges, Cover Protocol stated:
“We are working with centralized exchanges to reward users who had $COVER in their balances at the abovementioned block number with the new $COVER token (1:1).”
Meanwhile, Binance says it will recompense customers whose COVER tokens became worthless following the exploit on Dec. 28. Announcing the plan on Thursday, Binance revealed that the $10 million compensation will come from the platform’s SAFU Fund split between Binance USD and Ether.
According to the exchange, the decision was reached based on the fact that a majority of Binance users affected by the hack were not covered in the Cover compensation plan. Binance pledged to reimburse about 8.17 million BUSD and 2,581.16 ETH for a total of about $10.1 million.
As previously reported by Cointelegraph, the Cover Protocol suffered an infinite minting attack that triggered a price crash. Several entities exploited the vulnerability, with the first attacker reportedly draining over $4 million from the protocol.
In its report on the hack, the Cover Protocol team revealed that it was monitoring the address of the first attacker as well as other participants in the exploit.
The spate of successful attacks against decentralized finance projects in 2020 remains a source of concern. Indeed, while crypto crime declined during the year, the DeFi space contributed to over half of all thefts and hacks in the second half of the year.