Only few weeks after Kucoin, a Singaporean crypto exchange was hacked, resulting to the compromise of about $250m in crypto funds, we are yet seeing another crypto hack in wLEO, an Ethereum-based version of the Hive-based LEO token.
IMAGE CEEDIT: Cointelegraph.com
Although the volume of funds that were compromised in the wLEO hack was far lesser than what was involved in the Kucoin hack, both events raise an important question, the Know-Your-Customer (KYC) question. In the case of Kucoin, KYC made it possible for the exchange, in collaboration with ten other projects which include other exchanges, to recover over $140m of the stolen funds.
Interestingly, the absence of KYC on decentralized exchanges, which hackers now exploits and will continue to exploit, has made it impossible for Kucoin to recover about $124m in stolen funds held on DEXs platform.
Now it appears the the LEO team is also suffering the fate of Kucoin. It has so far been unable to recover the stolen and swapped Ethereum sent to Binance. The reason? Binance claims that the said account has no KYC. Even at that, Binance has the powers to freeze the hacker's account and help recover the stolen funds. However, it will never be able to help unmask the hacker's identity and bring him to justice because the account has no KYC.
If the victimology theories are true to the extent that crimes will always occur in the face of opportunities, the absence of a capable guilder, and the presence of a motivated offenders. In a lay man's terms, hackers will always be motivated to carry out crypto attacks as long as they are able to find vulnerabilities in the codes, knowing that their identities will remain unknown if they employ the services of DEXs.
Therefore, the KYC question continues to come up in the temple of decentralization and freedom. The irony is that those whose funds are yet to be compromised find the idea of KYC to be quite overbearing and unnecessary while those whose funds are compromised have nothing else to rely upon in their recovery efforts than KYC.
In conclusion, whether we choose to admit it or not, the advantages of KYC outweighs the disadvantages. The cryptospace cannot continue to be reminiscent of the Hobbesian state of nature, where men were nothing but brutes, mistresses of anarchy and lawlessness.