Hacks are synonymous with crypto fire is with smoke,this foe has wrapped it head around crypto and everyday many are crying foul.
The Mtgox hack was a defining moment for crypto,it almost sent it into extinction,it has not stopped since then,let example some common place hacks in crypto:
1. Exchange hacks : these are hacks at the exchange level,the likes of cryptopia and other exchange have been forced to shutdown after hacks
2. Wallet hacks :this is at the personal level,youtubers and non youtubers in the space at one point on the other,the likes of Ian Balina, Oman Crypto etc have been affected.
3. Token minting : This is when a hacker spots a bug in a token contract,refuse to report it but instead exploit it for selfish gains
4. Rug pulls : These most times are intentional,someone decides to pull tokens from a liquidity pool without prior notice to the community,it’s common with tokens associated with anonymous teams.
5. Flash loans : These are loans that are not collaterized,you can get any amount as long as you pay such back in the same transaction.
What has been done before now?
1. Hardware wallets : often regarded as the industry standard against hacks,but nothing is absolutely secure,even the white house(the world’s most secured building) was breached.
2. Crypto insurance : platforms usually go and extra mile by engaging in insurance policies for their exchanges or tokens,the likes of Nexus mutual,Cover Protocol, Bitgo insurance etc have also been helpful.
3. Crypto custody : Custody solutions act like banks,they take security an extra mile,the security of your tokens are 100% in the hands of the custody provider,the likes of Bitgo custody has done well for the industry.
4. Audits : Smart contracts and blockchain auditing firms have been on the increase,it’s a lucrative industry but despite this,hacks are still common place
5. Bug bounties : People are incentivized to report bugs,many projects fail to give commiserate rewards for bug reports and at such many spot these errors,keep mute and exploit them later because it’s pays more to hack a protocol than be compensated meagrely for reporting such bugs.
What has not been done before?
Lossless is bringing the solution to the vary root,other solutions have approached the problem from the branch but lossless is taking the root approach.
At its core is a DAO with proper incentives,this DAO compromises community members,developers,white hat hackers etc who work collectively to spot,report and squash hacks.
The PoS hacking platform
To be incentivized for finding bugs,one must stake some LSS tokens(5000 LSS tokens),this is to prevent spamming the network with untrue hack claims,after that they can join the platform,here is how it works :
1. Dashboard : Users upon satisfying the minimum stake requirement,will be given access to the dashboard for where they can report and manually review hacks.
As proof of work is synonymous with Bitcoin network, we may say Lossless implements Proof of Hack(spot and report hacks to get rewarded)
2. Two- step process : Whenever a user submits a hack notification to the system,the first course of action is to instantly freeze the assets(pending investigations). like in traditional banks,your account is frozen when “unusual” transaction pattern is noticed,you will have to come in person to clarify that it was not a hacking attempt.
So after the initial freezing,an investigation will be initiated and if found true that it was a hack,the funds will be permanently confiscated and another process initiated on how to give back the funds to the rightful owners. The reporter will be rewarded for such. On the otherhand,if after thorough investigation,it was discovered that the initial notification was a false alarm,the reporter will lose part of their stake
3. Decision making committee : There exist different committee for different tokens. To integrate the lossless protocol into a token smart contract,the token creator will do such by inserting some lines of code to call the lossless contract and of course,this is what makes the token eligible for hack investigation. Each committee consists of the token creator(s), the lossless company and lossless committee
How may one identify hacks
1. Listen for on-chain activities
2. Check for unusual token activity
3. 3rd party reports
Developers can freely integrate the lossless contract in their token contract but by doing so they are obliged to a pay 7% fee only if a hack is reported,stopped and the funds are recovered.
The 7% fee is divided :
2% — Finders
2% — Lossless committee
2% — distributed to LSS token holders that staked
1% — Lossless company
The token is used for staking to become a finder,it’s also used as finder fees to compensate the finder,it’s for the platform governance,for promotion and referral program and through it you may get early access and insights.