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This is interesting. The hacker did not return the ETH, so the $320M has come from the deep-pocketed investors and VCs behind Solana/Wormhole. Interesting to n

This is interesting. The hacker did not return the ETH, so the $320M has come from the deep-pocketed investors and VCs behind Solana/Wormhole. Interesting to note that the VCs are bailing out the retail users here, instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks.

octoberfranklin 5y ago
> so the $320M has come from the deep-pocketed investors and VCs If that had really happened there would be a txid, and people would be parading around an etherscan link. At the moment, this is no different from "funds are SAFU"
steelstraw 5y ago
An underappreciated improvement.
slg 5y ago
They aren't doing this because it is the morally right thing to do. They are doing it because they feel that the $320m is important to secure the value of their business, the Solana ecosystem (thanks for the correction arberx), and crypto in general. My personal interpretation of that, there are a lot of awfully rich people who are scared of the bubble popping.
- arberx 5y ago
  Solana ecosystem* Exploit happened on Solana. Jump Trading has a vested interest in the Solana ecosystem and is effectively the sole market maker on it.
  - lima 5y ago
    There's a number of market markers besides Jump, like Alameda Research.
    - benreesman 5y ago
      I think Wintermute and Efficient frontier also at least dabble.
- bigdaddyrabbit2 5y ago
  Nothing happens in finance because it is "the morally right thing". It's all a game of incentives. Wall Street Banks take disproportionate risks because they are incentivized to do so. The interesting thing here is how the un-bailout-able nature of ETH affects the players in Crypto. Because ETH can't be magically printed, the VCs have to decide if they will walk away or bail out the retail end users. It looks like they decided to do the latter. This has happened more than once in Crypto - I can think of the Binance hack, where Binance bailed out the users. OpenSea has also been covering ETH lost by its users who had their Bored Apes stolen because of user mistakes. I wonder what it is about Crypto that causes large players to cover user loses. I need to learn more.
  - latexr 5y ago
    > I wonder what it is about Crypto that causes large players to cover user loses. The answer is in the comment you replied to: > there are a lot of awfully rich people who are scared of the bubble popping. The value or cryptocurrencies depends on hype and on convincing the next chump that they should buy in. The large players have a lot of money invested which they will lose if the cryptocurrency value tanks because people lost trust. Covering user loses is itself an investment; it contains the damage by making the issue die down.
    - slg 5y ago
      Exactly, this move tells us that the people behind Wormhole think that $325m is the lower bound for the risk to their previous investment if they didn't act. That means they likely have billions at stake in which they fear losing or like I originally said they are worried it is a bubble that might pop.
      - rewtraw 5y ago
        or: it's not a bubble but the next era of the web. they see the long term value of being a leading ecosystem and don't want to fumble their position.
- naraga 5y ago
  they are scared of bubble popping yet give away $320m. okay.
- X6S1x6Okd1st 5y ago
  Were the 2008 bank bailouts done because it was the morally right thing to do or because they felt like it was important to secure the value of the economy. It seemed like there was a lot of awfully well resourced individuals that were scared of slipping into a depression
  - slg 5y ago
    >Were the 2008 bank bailouts done because it was the morally right thing to do or because they felt like it was important to secure the value of the economy Both. It was done to preserve the value of the overall economy. That impacts everyone at every level of society and therefore it was the morally right thing to do. You can argue that the specific action taken wasn't the most effective approach, but the goals were noble in 2008. The goal here is that these rich people don't want to lose their investments.
- throw_nbvc1234 5y ago
  Not meant as an attack on the parent comment but I've been interested in the concept of judging things by inputs versus outputs. I see aspects of this in many controversial subjects; particularly homelessness. Different groups of people seem to focus on one side and ignore the other side of the equation when making arguments. These groups just end up talking past each other then and don't make progress towards a consensus. I'm curious what kind of research (or keywords to search for) there is around this topic. Is it just a morality thing or does it go beyond that?
rlt 5y ago
If that’s the case “restored” is an interesting way to put it.
- verdverm 5y ago
  I was thinking "replaced" is more accurate
  - kordlessagain 5y ago
    I was thinking an "investigation" is in order.
- kwertyoowiyop 5y ago
  And the passive voice is telling.
tgv 5y ago
> deep-pocketed investors Or people with a lot of ETH, that want to hold on to the value of the rest they still own.
cbenneh 5y ago
Not really bailing out retail. There was enough liquidity for retail users to exit the tokens at risk without a penalty. On the other hand the VCs themselves that are large owners of the tokens in Solana ecosystem would incur large losses, and that's excluding additional losses from reputation in future. It just shows how successful Jump VCs are when they put up $320M in a few hours. Maybe a month of their PnL?
- im_down_w_otp 5y ago
  I don't see how this is an indicator of that. They didn't put in USD. They put in ETH. Which is a thing that has no requirements to be backed by fungible legal tender reserves. So, they're not actually putting up cash as a replacement. It's more like they're putting up assets as a replacement, but it's not even that concrete really. They're not the same thing. They're trading in chits, not money, when things like this happen. At least that's the case for as long as you can't regularly and commonly transact in ETH. The spot price/value of ETH multiplied across all the ETH that exists doesn't seem to be a description of total USD (or EUR or whatever) reserves available to convert ETH to USD, et al. as far as I can tell.
  - ludamad 5y ago
    You overcomplicate things. There is plenty of liquidity to sell 120k eth; the opportunity cost of doing this is near $300 million
    - antocv 5y ago
      2 days ago Jump had 93 000 ETH, today they do not have 93 000 ETH. By casting a spell, today they also have 93 000 extra ETH. They are saving some of their potions for later time to cast wider spells.
      - ludamad 5y ago
        Your spell metaphor doesn't serve you being this handwavey. What are you even saying happened on the ethereum blockchain during this?
keewee7 5y ago
>instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks Why is there so much misinformation on the 2009 bank bailouts? The bailouts were loans and investments that became profitable for tax payers. >In total, the government has realized a $109B profit https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
- defaultprimate 5y ago
  This is a commonly repeated trope that is completely false and based on very questionable accounting. Namely the omission of opportunity cost and the comparison of static parameters to temporal parameters. https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much-2008-bailouts-really-cost https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much...
  - NovemberWhiskey 5y ago
    What do you think that paper actually says? I keep seeing it cited as "no, this is how much the bailouts really cost!", but that's not what it's about at all and anyone who has actually read it cannot credibly come to that conclusion. It's about assessing the fair value of the bailout programs, at the time they were executed - i.e. the estimated net present value of the future cashflows under the bailout programs. The author argues that it unhelpful from a policy perspective to do an ex post analysis because it only describes what happened in this case, rather than what could've happened. i.e. when considering whether a bailout is good value, we should consider what happens if its unsuccessful. There is absolutely no doubt that the bailouts have been profitable for the government in terms of actual repayments.
    - defaultprimate 5y ago
      From the abstract: "Drawing selectively on existing cost estimates and augmenting them with new calculations, I conclude that the total direct cost of crisis-related bailouts in the U.S. was on order of $500 billion, or 3.5 percent of GDP in 2009. [...] Those conclusions stand in sharp contrast to popular accounts that claim there was no cost because the money was repaid, and with claims of costs in the multiple trillions of dollars." From 3.1.3. See Wall's analysis of Fannie Mae and Freddie Mac for more detailed discussion of their bailout costs: "Treasury collected $147 billion from Fannie and $98 billion from Freddie. As explained earlier, interpreting this tally as a cost measure is conceptually flawed for several reasons. Wall (2014) also discusses the shortcomings of this approach, which has been used to argue that the government has been more than fully repaid and that value should be returned to the shareholders." From the conclusion: "Nevertheless, the total is large enough to conclude that the bailouts were not a free lunch for policymakers as some have claimed." What the paper is saying seems pretty clear to me: bailout costs have been inaccurately measured and reported popularly at both ends. It was neither unfathomably expensive, nor profitable to the tax payer. If you lend me $100 and I pay you back $107 you can declare you profited from the loan if you literally only look at the principal and repayment amount, but finance is not so simple, especially at a national level. Opportunity cost, inflation, depreciation, and numerous other factors exist. The total cost of you lending me $100 could have been significantly more than $107.
duxup 5y ago
If they didn't have the money / decided it was too much for them, they would just walk too.
arcticbull 5y ago
> Interesting to note that the VCs are bailing out the retail users here, instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks. If you're referring to the 2008 bail-outs, those weren't grants, they were loans and investments. To date, beneficiaries have repaid more than the initial amount netting the government (and hence the people) a significant profit. $109B to date. And the expectation of significantly more to come. Talk about a good investment. [1] Fannie and Freddie alone received $191B and have paid $301B in dividends so far - and all the principal remains outstanding. [1] https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
- pirate787 5y ago
  There were multiple stages of bailouts, including Federal Reserve asset purchases which directly transferred resources from dollar holders to for-profit shareholders and bondholders. The Fed's intervention dwarfed the TARP bailout and is the largely the reason TARP was successful...they moved the economic loss from Treasury to the Fed. https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much-2008-bailouts-really-cost https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much...
  - arcticbull 5y ago
    That's not how the Fed works. [edit] (As I replied in a peer comment, increasing the money supply is not debasement or a loss - that is measured from its impact. In the years subsequent to the bailouts inflation hit at some point an annualized -4% before returning to a range of 0-2% going into COVID. Modern economics isn't as simple as "supply up bad.")
  - NovemberWhiskey 5y ago
    Your comment doesn't appear to have much to do with the link you have provided; could you add some more context?
- MadSudaca 5y ago
  Didn’t they have to debase the currency to make those payments?
quartz 5y ago
There's precedence for this in the crypto space as well. In 2017 Coinbase famously reimbursed everyone [1] impacted by an ETH flash crash that pushed the price from $320 to $0.10. [1] https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-losses-caused-by-the-ethereum-flash-crash/ https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-lo...
shrimpx 5y ago
Something similar happened in the WSB/GameStop fiasco where Citadel and Point72 bailed out Melvin Capital and its investors.
somenewaccount1 5y ago
How is it interesting for them to fulfill their fiduciary responsibility to individual retail user? Banks do this all the time.
jsnodlin 5y ago
How on earth do they have enough capital to replace $320 million? I seriously doubt it was entirely replaced.

octoberfranklin 5y ago

> so the $320M has come from the deep-pocketed investors and VCs If that had really happened there would be a txid, and people would be parading around an etherscan link. At the moment, this is no different from "funds are SAFU"

steelstraw 5y ago

An underappreciated improvement.

slg 5y ago

They aren't doing this because it is the morally right thing to do. They are doing it because they feel that the $320m is important to secure the value of their business, the Solana ecosystem (thanks for the correction arberx), and crypto in general. My personal interpretation of that, there are a lot of awfully rich people who are scared of the bubble popping.

arberx 5y ago
Solana ecosystem* Exploit happened on Solana. Jump Trading has a vested interest in the Solana ecosystem and is effectively the sole market maker on it.
- lima 5y ago
  There's a number of market markers besides Jump, like Alameda Research.
  - benreesman 5y ago
    I think Wintermute and Efficient frontier also at least dabble.
bigdaddyrabbit2 5y ago
Nothing happens in finance because it is "the morally right thing". It's all a game of incentives. Wall Street Banks take disproportionate risks because they are incentivized to do so. The interesting thing here is how the un-bailout-able nature of ETH affects the players in Crypto. Because ETH can't be magically printed, the VCs have to decide if they will walk away or bail out the retail end users. It looks like they decided to do the latter. This has happened more than once in Crypto - I can think of the Binance hack, where Binance bailed out the users. OpenSea has also been covering ETH lost by its users who had their Bored Apes stolen because of user mistakes. I wonder what it is about Crypto that causes large players to cover user loses. I need to learn more.
- latexr 5y ago
  > I wonder what it is about Crypto that causes large players to cover user loses. The answer is in the comment you replied to: > there are a lot of awfully rich people who are scared of the bubble popping. The value or cryptocurrencies depends on hype and on convincing the next chump that they should buy in. The large players have a lot of money invested which they will lose if the cryptocurrency value tanks because people lost trust. Covering user loses is itself an investment; it contains the damage by making the issue die down.
  - slg 5y ago
    Exactly, this move tells us that the people behind Wormhole think that $325m is the lower bound for the risk to their previous investment if they didn't act. That means they likely have billions at stake in which they fear losing or like I originally said they are worried it is a bubble that might pop.
    - rewtraw 5y ago
      or: it's not a bubble but the next era of the web. they see the long term value of being a leading ecosystem and don't want to fumble their position.
naraga 5y ago
they are scared of bubble popping yet give away $320m. okay.
X6S1x6Okd1st 5y ago
Were the 2008 bank bailouts done because it was the morally right thing to do or because they felt like it was important to secure the value of the economy. It seemed like there was a lot of awfully well resourced individuals that were scared of slipping into a depression
- slg 5y ago
  >Were the 2008 bank bailouts done because it was the morally right thing to do or because they felt like it was important to secure the value of the economy Both. It was done to preserve the value of the overall economy. That impacts everyone at every level of society and therefore it was the morally right thing to do. You can argue that the specific action taken wasn't the most effective approach, but the goals were noble in 2008. The goal here is that these rich people don't want to lose their investments.
throw_nbvc1234 5y ago
Not meant as an attack on the parent comment but I've been interested in the concept of judging things by inputs versus outputs. I see aspects of this in many controversial subjects; particularly homelessness. Different groups of people seem to focus on one side and ignore the other side of the equation when making arguments. These groups just end up talking past each other then and don't make progress towards a consensus. I'm curious what kind of research (or keywords to search for) there is around this topic. Is it just a morality thing or does it go beyond that?

rlt 5y ago

If that’s the case “restored” is an interesting way to put it.

verdverm 5y ago
I was thinking "replaced" is more accurate
- kordlessagain 5y ago
  I was thinking an "investigation" is in order.
kwertyoowiyop 5y ago
And the passive voice is telling.

tgv 5y ago

> deep-pocketed investors Or people with a lot of ETH, that want to hold on to the value of the rest they still own.

cbenneh 5y ago

Not really bailing out retail. There was enough liquidity for retail users to exit the tokens at risk without a penalty. On the other hand the VCs themselves that are large owners of the tokens in Solana ecosystem would incur large losses, and that's excluding additional losses from reputation in future. It just shows how successful Jump VCs are when they put up $320M in a few hours. Maybe a month of their PnL?

im_down_w_otp 5y ago
I don't see how this is an indicator of that. They didn't put in USD. They put in ETH. Which is a thing that has no requirements to be backed by fungible legal tender reserves. So, they're not actually putting up cash as a replacement. It's more like they're putting up assets as a replacement, but it's not even that concrete really. They're not the same thing. They're trading in chits, not money, when things like this happen. At least that's the case for as long as you can't regularly and commonly transact in ETH. The spot price/value of ETH multiplied across all the ETH that exists doesn't seem to be a description of total USD (or EUR or whatever) reserves available to convert ETH to USD, et al. as far as I can tell.
- ludamad 5y ago
  You overcomplicate things. There is plenty of liquidity to sell 120k eth; the opportunity cost of doing this is near $300 million
  - antocv 5y ago
    2 days ago Jump had 93 000 ETH, today they do not have 93 000 ETH. By casting a spell, today they also have 93 000 extra ETH. They are saving some of their potions for later time to cast wider spells.
    - ludamad 5y ago
      Your spell metaphor doesn't serve you being this handwavey. What are you even saying happened on the ethereum blockchain during this?

keewee7 5y ago

>instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks Why is there so much misinformation on the 2009 bank bailouts? The bailouts were loans and investments that became profitable for tax payers. >In total, the government has realized a $109B profit https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/

defaultprimate 5y ago
This is a commonly repeated trope that is completely false and based on very questionable accounting. Namely the omission of opportunity cost and the comparison of static parameters to temporal parameters. https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much-2008-bailouts-really-cost https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much...
- NovemberWhiskey 5y ago
  What do you think that paper actually says? I keep seeing it cited as "no, this is how much the bailouts really cost!", but that's not what it's about at all and anyone who has actually read it cannot credibly come to that conclusion. It's about assessing the fair value of the bailout programs, at the time they were executed - i.e. the estimated net present value of the future cashflows under the bailout programs. The author argues that it unhelpful from a policy perspective to do an ex post analysis because it only describes what happened in this case, rather than what could've happened. i.e. when considering whether a bailout is good value, we should consider what happens if its unsuccessful. There is absolutely no doubt that the bailouts have been profitable for the government in terms of actual repayments.
  - defaultprimate 5y ago
    From the abstract: "Drawing selectively on existing cost estimates and augmenting them with new calculations, I conclude that the total direct cost of crisis-related bailouts in the U.S. was on order of $500 billion, or 3.5 percent of GDP in 2009. [...] Those conclusions stand in sharp contrast to popular accounts that claim there was no cost because the money was repaid, and with claims of costs in the multiple trillions of dollars." From 3.1.3. See Wall's analysis of Fannie Mae and Freddie Mac for more detailed discussion of their bailout costs: "Treasury collected $147 billion from Fannie and $98 billion from Freddie. As explained earlier, interpreting this tally as a cost measure is conceptually flawed for several reasons. Wall (2014) also discusses the shortcomings of this approach, which has been used to argue that the government has been more than fully repaid and that value should be returned to the shareholders." From the conclusion: "Nevertheless, the total is large enough to conclude that the bailouts were not a free lunch for policymakers as some have claimed." What the paper is saying seems pretty clear to me: bailout costs have been inaccurately measured and reported popularly at both ends. It was neither unfathomably expensive, nor profitable to the tax payer. If you lend me $100 and I pay you back $107 you can declare you profited from the loan if you literally only look at the principal and repayment amount, but finance is not so simple, especially at a national level. Opportunity cost, inflation, depreciation, and numerous other factors exist. The total cost of you lending me $100 could have been significantly more than $107.

duxup 5y ago

If they didn't have the money / decided it was too much for them, they would just walk too.

arcticbull 5y ago

> Interesting to note that the VCs are bailing out the retail users here, instead of the usual flow where taxpayers are on the hook for bailing out too-big-to-fail WallStreet banks. If you're referring to the 2008 bail-outs, those weren't grants, they were loans and investments. To date, beneficiaries have repaid more than the initial amount netting the government (and hence the people) a significant profit. $109B to date. And the expectation of significantly more to come. Talk about a good investment. [1] Fannie and Freddie alone received $191B and have paid $301B in dividends so far - and all the principal remains outstanding. [1] https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/

pirate787 5y ago
There were multiple stages of bailouts, including Federal Reserve asset purchases which directly transferred resources from dollar holders to for-profit shareholders and bondholders. The Fed's intervention dwarfed the TARP bailout and is the largely the reason TARP was successful...they moved the economic loss from Treasury to the Fed. https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much-2008-bailouts-really-cost https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much...
- arcticbull 5y ago
  That's not how the Fed works. [edit] (As I replied in a peer comment, increasing the money supply is not debasement or a loss - that is measured from its impact. In the years subsequent to the bailouts inflation hit at some point an annualized -4% before returning to a range of 0-2% going into COVID. Modern economics isn't as simple as "supply up bad.")
- NovemberWhiskey 5y ago
  Your comment doesn't appear to have much to do with the link you have provided; could you add some more context?
MadSudaca 5y ago
Didn’t they have to debase the currency to make those payments?

quartz 5y ago

There's precedence for this in the crypto space as well. In 2017 Coinbase famously reimbursed everyone [1] impacted by an ETH flash crash that pushed the price from $320 to $0.10. [1] https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-losses-caused-by-the-ethereum-flash-crash/ https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-lo...

shrimpx 5y ago

Something similar happened in the WSB/GameStop fiasco where Citadel and Point72 bailed out Melvin Capital and its investors.

somenewaccount1 5y ago

How is it interesting for them to fulfill their fiduciary responsibility to individual retail user? Banks do this all the time.

jsnodlin 5y ago

How on earth do they have enough capital to replace $320 million? I seriously doubt it was entirely replaced.