Mistaken $1B Hack Exposes 'Blessing and Curse' of Web3

The cross-chain bridge provider, pNetwork, swung into damage control after its attempt to address a “misconfiguration” in its code gave the appearance of a $1B hack.

On Nov. 3, someone minted $1B worth of pGALA tokens and was offloading them on PancakeSwap, BNB Chain’s top exchange, according to transaction data from BSC Scan. pGALA’s price plunged 94%.

Misunderstanding

pGALA is a BNB Chain-compatible version of GALA, the Ethereum-based utility token of web3 gaming network, Gala Games.

pNetwork said the debacle is a big misunderstanding.

It tweeted that it intentionally minted the 28.4B pGALA tokens to drain the PancakeSwap pool and protect tokenholders after a “misconfiguration” was identified in its bridge contracts.

“All GALA tokens on Ethereum as well as the underlying bridge collateral are SAFE,” pNetwork said. “We regret any inconvenience this may have caused to the community and we will endeavor to avoid these issues in the future.”

Not Happy

Gala Games is not happy about how pNetwork handled the incident.

“We were not part of that process,” Jason Brink, the president of blockchain at Gala Games, told The Defiant. “They operate totally independently from us… According to their tweets, they were doing this in an attempt to cover the pool for when they redeployed the contract.”

Brink said pNetwork did not consult his team before minting a whopping 28.4B GALA tokens.

pGALA/BNB Price. Source: PeckShield

Unlocked Tokens

The team now will create a new pGALA token and airdrop it to wallets that were holding the coins prior to the incident. pNetwork also took a snapshot of the pGALA pool on PancakeSwap and will return both BNB and pGALA to liquidity providers.

pNetwork issues pGALA on BNB Chain when a user locks their GALA token in its bridge contract. The pGALA tokens are then destroyed when the user wishes to migrate their assets back to Gala Network, which unlocks their GALA tokens on Ethereum.

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The Defiant

Gala’s Brink said the episode exposes the vulnerabilities of blockchain-based business. “One of the downsides of crypto and web3, in general, is that people can spin up these external services over which you have little or no control,” he said. “This is both a blessing and a curse.”

The Ethereum-based GALA token lost as much as a quarter of its value in the immediate aftermath of the incident before recovering to a 12.5% decline.

‘One of the downsides of crypto and web3, in general, is that people can spin up these external services over which you have little or no control. This is both a blessing and a curse.’

Jason Brink

pNetwork warned that the new pGALA is not yet live and that scammers may try to take advantage of the incident by issuing fake tokens. It also urged opportunists not to purchase old and devalued pGALA tokens from PancakeSwap in an attempt to arbitrage it with GALA.

“Newly bought pGALA on Pancakeswap are not redeemable for pGALA at 1:1,” pNetwork said. “We are trying to drain the pGALA PancakeSwap pool so please STOP buying as it will just slow down the recovery process for everyone… Whoever is buying on PancakeSwap now risks to lose everything as their newly bought pGALA are unredeemable (hence worthless).”

PancakeSwap is the No. 2 DEX by 24-hour trade volume with $296M, according to CoinGecko. The exchange accounts for 54% of BNB Chain’s $6B TVL.