Layer 1 confidence crisis exposed by $100M hack

Harmony blockchain executives canceled their commitment to return $100M in June.

Layer 1, which competes with Solana, has struggled since then.

Stephen Tse has new ideas. The Harmony Foundation's treasury may pay tokenholders over months and manufacture new ONE coins over years. Raising transaction fees would fund "ecosystem expansion."

Alternatives

In calls to examine alternatives and tradeoffs, 20 validators, 20 community members, and 15 bridge and DeFi partners engaged. Tse wrote in a proposal forum. Community, partner, validator, and delegate support are valued.

Long overdue for some. Many who responded to Tse thanked him for his leadership.

The breach exposed blockchain weaknesses, members said.

Curve Finance battles exploitation

Validators say Harmony, led by Tse, Rongjian Lan, Leo Chen, Li Jiang, and Ganesha Upadhyaya, has been slow to communicate, if at all; reluctant to address consolidation among validators; broken promises regarding funding of partner organizations; and shown little interest in fixing a broken governance system that makes it impossible to gauge community support for proposals to address important network issues.

Harmony didn't comment.

They led me in a circle of nothing.

PiStake

While Harmony organizers say the breach is fixed, validators argue another problem persists.

Validators run nodes that verify Harmony blockchain transactions. "Stake" ONE and bid for one of 800 validator seats.

"Sharding" enhances transaction speeds, according to a Harmony-commissioned report from November.

A sharded blockchain needs multiple validators, according to Blockworks' chief of research. Harmony's "unique" technique "discourages an over-concentration of tokens with any one node or group of nodes," he said.

Effortless

The Harmony squad isn't worried about big validators elbowing out smaller guys.

"[Larger validators] pushed out electable candidates," said Stakeridoo. "The crew didn't investigate. How can smaller validators win?"

Stakeridoo's peers left, he said.

He said, "Help the tiny validators, because they'll quit." Because you don't run a server for hours and pay for it to get elected.

Validators say Harmony's promise to support hundreds of DAOs is normal.

Harmony's March website encouraged leaderless DAOs.

Dreams, Expertise. The website declared, "Harmony is contributing $300M to DAO." Passion, dreams, and skill. DAO-ize"

Harmony's webpage discusses DAOs rarely. A validator called it no coincidence.

Community DAO and Validator DAO sent monthly reports, he said. PiStake criticized DAO payments.

Pioneer, a Harmony validator, listed DAOs with little to no work in July.

Their deliverables were shallow, and the program didn't succeed.

Pioneer LightItUp DAO specializes in outdoor light projection art. Author claims $75,000.

After attending Friday night events in Denver and InfoComm2022 in Las Vegas, "their community engagement collapsed," Pioneer said. "Their deliverables were shallow, and the project didn't succeed"

Aura Dogs DAO received $60,000 to improve animal care outside blockchain. Naija DAO received $30,000 to recruit Nigerian users and held a hackathon, "but they haven't paid the winners due to... funding?"

Face-slapper Meta Gamma Delta DAO gained $125,000 and "never looked back"

PiStake observed that several DAOs received investment without a multi-sig wallet, members, or anything. " I retreated then. "I worked 2 1/2 months for this and more, and they won't pay their DAOs."

Harmony's July 26 proposal to create billions of additional ONE tokens to reimburse $100M hack victims was criticized.

Wall Street traders love the merger...for now Summer's plot is The Merge. Ethereum's upgrade crowds out bear market stories, delighting DeFi bulls.

"Disingenuous exhibition," said LuhDaKidz.

Harmony governance halted in February, according to validators. Four Harmony ecosystem proposals are up for vote.

Problematic

After migrating to Snapshot, they highlighted the "Binance Problem" Binance has a lot of ONE but rarely engages in governance. Quorum requires 51% of nodes. Binance's high holdings and inactivity make quorum difficult, according to validators.

Voting is complicated by security breaches. Harmony's choice to move voting to Snapshot requires validators to export a private key to MetaMask.

Critics say nobody copies their validator's private key into MetaMask.

Harmony's silence isn't helpful, say protocol validators.

PiStake called it a meaningless circle.

"That's the problem with Harmony," Stakeridoo said.

PiStake said Harmony's hack wasn't its biggest problem. Cryptography has software exploits.

He felt the basics need greater attention. YES His $10,000 hack wasn't fatal. Lacking contact and support, he withdrew his share and shifted his crypto to a competitor.