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I was replying to another comment and came to a realization. It deserves its own comment. Jump Trading fixed the problem by depositing $320M ETH tokens into t

by ww520 5y ago

I was replying to another comment and came to a realization. It deserves its own comment. Jump Trading fixed the problem by depositing $320M ETH tokens into the Wormhole's ETH account to ensure the falsely issued wETH tokens are backed. The fake Solana tokens released from the fake wETH were deposited back into Wormhole's Solana account. They are still in Wormhole's Solana account after the re-capitalization. It's basically they're using the $320M ETH tokens to buy a bunch of Solana tokens, created by the hackers. So at the end, they're not really out of $320M money; they still have the $320M Solana tokens, fake or not. It's just the general public got screwed by having $320M of Solana tokens inflated up on them.

ffggvv 5y ago
so can you use this as a loophole to print inordinate amounts of solana? confused how they inflated the supply
- ww520 5y ago
  Sure. Ever wonder how Tether work? Ha.
  - SilasX 5y ago
    Or central banks, for that matter? They print new money, and use it to buy and hold financial assets (usually government bonds). New money was added to the system, other assets were taken out.
- lxgr 5y ago
  They apparently just supplied the backing assets without receiving anything in exchange, presumably to preserve trust in the larger ecosystem/chain. Pretty interesting precedent!
ddalex 5y ago
Yea, if the public trades in Solana. But they are out of $320M in ETH which is way more used then Solana.
- ww520 5y ago
  Yeah, so they accidentally expanded the supply of Solana tokens by $320M. Whether it's a good thing or bad thing, no one is sure.
  - 22c 5y ago
    They didn't expand the supply of SOL, they "expanded" the supply of wormhole bridged ETH, or rather returned the liquidity ratio of bridged ETH to 1:1. Bridged assets are really just an IOU issued by the bridge, all the assets remain in custody of the bridge on whatever network they came from (in this case, Ethereum mainnet). As long as you can take that "IOU 1 ETH" to the bridge and get back 1 mainnet ETH, everything runs smoothly. If you can't, the market will decide the value of those IOUs accordingly.
throwhauser 5y ago
Isn't it Jump Trading that is out $320M? Didn't they put up the money to make sure the maliciously created Solana tokens were backed by [whatever they're supposed to be backed by]? Jump doesn't own the tokens now, do they?
- ww520 5y ago
  Jump Trading still has the maliciously created Solana tokens at the end, valued at $320M. They might lose some by Solana inflation but it's not like they're really out of $320M.
firloop 5y ago
> It's just the general public got screwed by having $320M of Solana tokens inflated up on them. The general public didn't get screwed here. Solana ETH is an IOU for ETH. Now it's backed by ETH. It's not like anyone got diluted or anything.
- ww520 5y ago
  “The SOL token distribution is as follows: 16.23% went towards an initial seed sale, 12.92% of tokens were dedicated to a founding sale, 12.79% of SOL coins were distributed among team members and 10.46% of tokens were given to the Solana Foundation. The remaining tokens were already released for public and private sales or are still to be released to the market.” So how were the seed Solana tokens backed by ETH based on the distribution? Weren’t they created out of the thin air?
  - saurik 5y ago
    That's SOL, not bridged/"wrapped"-ETH that happens to exist on Solana as an IOU for actual-ETH on Ethereum.
pcmonk 5y ago
This isn't correct. There's no Solana tokens in the equation at all, so I assume you mean wrapped ETH on Solana, and that all got sent through the bridge to Ethereum, so it doesn't exist anymore.
- ww520 5y ago
  Which wallet does the Solana tokens go when they are released from the wETH tokens?
mutant_self 5y ago
I think you've gotten confused. Jump did have to fork over $320m worth of tokens to fill the hole from the hack. There's no weird accounting trick here
- ww520 5y ago
  Who is holding the SOL from the created wETH by the hackers at the end?
  - lima 5y ago
    No SOL was created, the transfer was sent to a zero address.
- octoberfranklin 5y ago
  > Jump did have to fork over $320m worth of tokens txid please
vilhelm_s 5y ago
I don't think this is right at all. The attack first created 100,000 wETH ($320 million) on the Solana side, and then bridged 93,750 wETH ($250 million) to ETH on the Ethereum side [1]. So some of the added ETH backs the remaining 6250 "extra" wETH tokens on the Solana side, but almost all of it would have gone to replace the stolen 93,750 ETH, and that's a pure loss. Either way I don't think this would cause any inflation, since the wETH still corresponds 1:1 with locked ETH. [1] https://twitter.com/samczsun/status/1489044939732406275 https://twitter.com/samczsun/status/1489044939732406275
- ww520 5y ago
  Who is holding the SOL from the created wETH by the hackers at the end?
  - vilhelm_s 5y ago
    creating wETH doesn't create any SOL, they are separate things.
    - ww520 5y ago
      In a normal setting when a user deposits his SOL to create the wETH, where does the SOL go at the end when the wETH is settled? Where does the SOL go when it's released from the wETH? The wETH pairs X amount of SOL with an ETH. When it's settled, it releases both the SOL and the ETH to the corresponding parties. When the wETH is falsely created, it creates the SOL it wraps.
      - somebodythere 5y ago
        wETH wraps ETH, not SOL.
        ww520 5y ago
        So where does the SOL go in a normal transaction?
uncomputation 5y ago
Yes and no. I see your point on one hand. Hackers mint 120k wETH. Bridge guarantees 1 wETH = 1 ETH. Therefore, hacker transfers 120k ETH to their Ethereum account. They can then sell this for approximately $320 M not to Wormhole or Jump Trading, but to the market who will collectively pay $320 M hypothetically (of course, slippage is a thing). But, on the other hand, since Jump restored 120k wETH (valued at $320 M), they kind of are “out” that money in the sense that they would not have spent that without the hack. They are now forced into an “investment” of 120k wETH. They may profit from their investment if the price of the asset rises, but they may also lose some of their investment if the price decreases. Likely, it won’t fall to 0 so they are not “out” $320 M in the sense that the hackers directly stole that, but they essentially forced to trade $320 M for 120k wETH. I don’t see how the public is screwed here. There is no “inflation.” They essentially increased the backing assets of the bridge by 120k wETH at current ETH market price.
- ww520 5y ago
  The public invested in SOL directly or indirectly got their SOL value diluted by $320M. The public here includes Jump.
  - JacobThreeThree 5y ago
    Although everyone shoulders a loss, it does give one slightly more confidence in the decentralized half of the DeFi equation. Compare this Wormhole example to what happened with the Ethereum DAO attack that was "reversed". https://levelup.gitconnected.com/how-ethereum-reversed-a-50-million-dao-attack-cee528d8c030 https://levelup.gitconnected.com/how-ethereum-reversed-a-50-...
octoberfranklin 5y ago
> Jump Trading fixed the problem by depositing $320M ETH tokens Do you have an etherscan link (ie txid) for this? At the moment all we've got is a "funds are SAFU" tweet. $320M is not chump change. I have trouble believing this ends any other way than (a) Wormhole goes kaput, (b) hacker gets doxed and gives back the loot. There might be a lot of fractional-reserve posturing before one of these occurs, of course.

by ww520 5y ago

ffggvv 5y ago

so can you use this as a loophole to print inordinate amounts of solana? confused how they inflated the supply

ww520 5y ago
Sure. Ever wonder how Tether work? Ha.
- SilasX 5y ago
  Or central banks, for that matter? They print new money, and use it to buy and hold financial assets (usually government bonds). New money was added to the system, other assets were taken out.
lxgr 5y ago
They apparently just supplied the backing assets without receiving anything in exchange, presumably to preserve trust in the larger ecosystem/chain. Pretty interesting precedent!

ddalex 5y ago

Yea, if the public trades in Solana. But they are out of $320M in ETH which is way more used then Solana.

ww520 5y ago
Yeah, so they accidentally expanded the supply of Solana tokens by $320M. Whether it's a good thing or bad thing, no one is sure.
- 22c 5y ago
  They didn't expand the supply of SOL, they "expanded" the supply of wormhole bridged ETH, or rather returned the liquidity ratio of bridged ETH to 1:1. Bridged assets are really just an IOU issued by the bridge, all the assets remain in custody of the bridge on whatever network they came from (in this case, Ethereum mainnet). As long as you can take that "IOU 1 ETH" to the bridge and get back 1 mainnet ETH, everything runs smoothly. If you can't, the market will decide the value of those IOUs accordingly.

throwhauser 5y ago

Isn't it Jump Trading that is out $320M? Didn't they put up the money to make sure the maliciously created Solana tokens were backed by [whatever they're supposed to be backed by]? Jump doesn't own the tokens now, do they?

ww520 5y ago
Jump Trading still has the maliciously created Solana tokens at the end, valued at $320M. They might lose some by Solana inflation but it's not like they're really out of $320M.

firloop 5y ago

> It's just the general public got screwed by having $320M of Solana tokens inflated up on them. The general public didn't get screwed here. Solana ETH is an IOU for ETH. Now it's backed by ETH. It's not like anyone got diluted or anything.

ww520 5y ago
“The SOL token distribution is as follows: 16.23% went towards an initial seed sale, 12.92% of tokens were dedicated to a founding sale, 12.79% of SOL coins were distributed among team members and 10.46% of tokens were given to the Solana Foundation. The remaining tokens were already released for public and private sales or are still to be released to the market.” So how were the seed Solana tokens backed by ETH based on the distribution? Weren’t they created out of the thin air?
- saurik 5y ago
  That's SOL, not bridged/"wrapped"-ETH that happens to exist on Solana as an IOU for actual-ETH on Ethereum.

pcmonk 5y ago

This isn't correct. There's no Solana tokens in the equation at all, so I assume you mean wrapped ETH on Solana, and that all got sent through the bridge to Ethereum, so it doesn't exist anymore.

ww520 5y ago
Which wallet does the Solana tokens go when they are released from the wETH tokens?

mutant_self 5y ago

I think you've gotten confused. Jump did have to fork over $320m worth of tokens to fill the hole from the hack. There's no weird accounting trick here

ww520 5y ago
Who is holding the SOL from the created wETH by the hackers at the end?
- lima 5y ago
  No SOL was created, the transfer was sent to a zero address.
octoberfranklin 5y ago
> Jump did have to fork over $320m worth of tokens txid please

vilhelm_s 5y ago

I don't think this is right at all. The attack first created 100,000 wETH ($320 million) on the Solana side, and then bridged 93,750 wETH ($250 million) to ETH on the Ethereum side [1]. So some of the added ETH backs the remaining 6250 "extra" wETH tokens on the Solana side, but almost all of it would have gone to replace the stolen 93,750 ETH, and that's a pure loss. Either way I don't think this would cause any inflation, since the wETH still corresponds 1:1 with locked ETH. [1] https://twitter.com/samczsun/status/1489044939732406275 https://twitter.com/samczsun/status/1489044939732406275

ww520 5y ago
Who is holding the SOL from the created wETH by the hackers at the end?
- vilhelm_s 5y ago
  creating wETH doesn't create any SOL, they are separate things.
  - ww520 5y ago
    In a normal setting when a user deposits his SOL to create the wETH, where does the SOL go at the end when the wETH is settled? Where does the SOL go when it's released from the wETH? The wETH pairs X amount of SOL with an ETH. When it's settled, it releases both the SOL and the ETH to the corresponding parties. When the wETH is falsely created, it creates the SOL it wraps.
    - somebodythere 5y ago
      wETH wraps ETH, not SOL.
      - ww520 5y ago
        So where does the SOL go in a normal transaction?

uncomputation 5y ago

Yes and no. I see your point on one hand. Hackers mint 120k wETH. Bridge guarantees 1 wETH = 1 ETH. Therefore, hacker transfers 120k ETH to their Ethereum account. They can then sell this for approximately $320 M not to Wormhole or Jump Trading, but to the market who will collectively pay $320 M hypothetically (of course, slippage is a thing). But, on the other hand, since Jump restored 120k wETH (valued at $320 M), they kind of are “out” that money in the sense that they would not have spent that without the hack. They are now forced into an “investment” of 120k wETH. They may profit from their investment if the price of the asset rises, but they may also lose some of their investment if the price decreases. Likely, it won’t fall to 0 so they are not “out” $320 M in the sense that the hackers directly stole that, but they essentially forced to trade $320 M for 120k wETH. I don’t see how the public is screwed here. There is no “inflation.” They essentially increased the backing assets of the bridge by 120k wETH at current ETH market price.

ww520 5y ago
The public invested in SOL directly or indirectly got their SOL value diluted by $320M. The public here includes Jump.
- JacobThreeThree 5y ago
  Although everyone shoulders a loss, it does give one slightly more confidence in the decentralized half of the DeFi equation. Compare this Wormhole example to what happened with the Ethereum DAO attack that was "reversed". https://levelup.gitconnected.com/how-ethereum-reversed-a-50-million-dao-attack-cee528d8c030 https://levelup.gitconnected.com/how-ethereum-reversed-a-50-...

octoberfranklin 5y ago

> Jump Trading fixed the problem by depositing $320M ETH tokens Do you have an etherscan link (ie txid) for this? At the moment all we've got is a "funds are SAFU" tweet. $320M is not chump change. I have trouble believing this ends any other way than (a) Wormhole goes kaput, (b) hacker gets doxed and gives back the loot. There might be a lot of fractional-reserve posturing before one of these occurs, of course.