Hedera Hashgraph, a distributed ledger technology firm known for its fast and secure blockchain network, has temporarily suspended access to its wallet and app to protect users from a potential security breach. The move, which also involved turning off network proxies on its mainnet, has attracted criticism from some users who questioned Hedera’s commitment to decentralization.
Hedera announced on March 9 that it was blocking wallet and app access, as well as decentralized exchanges (DEX) and centralized exchanges, due to an “abundance of caution and safety for users.” The company assured its users that its mainnet remains operational and is still reaching consensus on new blocks. However, the network will be inaccessible to most users for the time being.
The decision was made after the company identified an issue related to the decompiling process of smart contracts and specifically affecting the Hedera Token Service (HTS). This means that liquidity provider (LP) tokens and wrapped tokens are affected. The issue has not resulted in any reported loss or theft of funds. Nonetheless, the bridge service Hashport also paused its services to help contain the problem.
Independent blockchain researcher Ignas reported on Twitter that the exploit was targeting the decompiling process in smart contracts. Justin Trollip, CEO of Pangolin Exchange, cited by Ignas as the original source of that information, warned that Hedera projects such as Pangolin, SaucerSwap, Heliswap, and others are also at risk.
Trollip advised users to “get [their] funds out now,” advice that was later repeated by a Pangolin Hedera tweet, urging those with HTS tokens in Pangolin Pools and Farms to withdraw immediately.
Hedera has not provided any timeline for when access to the services will be restored, causing frustration among some users. The decision to turn off access to most services is a result of the smart contract issues experienced earlier by the project.
Despite the temporary setback, Hedera has performed better than Bitcoin, which was down 7.4% over 24 hours. Hedera Hashgraph (HBAR) was down 6.2% over the same period.
Hedera’s decision to put the safety of its users first is laudable, but the company’s critics say that the move undermines decentralization, a core principle of blockchain technology. Decentralization, in this context, refers to the distribution of power and control, rather than having a central authority govern the network.
Hedera’s network relies on a governing council of members who make decisions about network upgrades, security, and other issues. Some users have argued that this structure makes Hedera’s network more centralized than traditional blockchains.
Hedera’s team has previously defended the network’s governance model, arguing that it strikes a balance between decentralization and efficiency. In an interview in 2020, Hedera CEO Mance Harmon said that the governing council is composed of companies from different regions and industries, making it more diverse than other blockchain networks.
The decision to block access to its wallet and app and turn off network proxies on its mainnet is, therefore, a difficult one for Hedera. It must balance the need to protect its users’ assets against the principles of decentralization that define the blockchain ecosystem.
In conclusion, Hedera Hashgraph’s temporary suspension of wallet and app access, as well as network proxies on its mainnet, underscores the importance of security in the blockchain space. The move, while necessary, also highlights the challenges of balancing security and decentralization, a core principle of blockchain technology. While Hedera’s governing council structure has attracted criticism over its level of centralization, it remains to be seen how the network will navigate this latest security issue and restore access to its services.
