Bybit formally asked ParaSwap’s distributed autonomous organization (DAO) to reimburse 44.67 Wrapped Ether (wETH), valued at about $100,000, which was gathered as fees from transactions connected to a hacking event. Posted on March 4, the idea has split the ParaSwap community as members consider its ethical, legal, and long-term ramifications.
The request first drew mistrust since DAO members insisted on proof before thinking about action. Aiming to collect the costs linked to the fraudulent transactions, Bit stated on March 5 via an official X post that it had in fact started the proposal.
The community is split on moral and legal consequences.
The idea has set ParaSwap DAO members into a convoluted argument. While some argue refunding the fees would support ethical governance and business integrity, others warn against creating a precedent that would contradict the fundamental ideas of distributed finance (DeFi).
DeFi researcher and ParaSwap DAO delegate Ignas noted that profit from a breach paints a bad picture for the network. Returning the money, he said, would show kindness and support for another important sector actor. He did, however, also caution the DAO from granting a refund since it might complicate its legal position and expose it to further regulatory scrutiny.
Ignas pointed out, “Code is law.” “Smart contracts let The DAO collect these payments. Should we go back today, what would happen in other situations? This incident creates a concerning precedent.
possible knock-on effects in DeFi
The choice can have ramifications outside ParaSwap as well. Another distributed tool allegedly used by hackers to exchange pilfers was ThorSwap. Through ThorChain, Bybit’s hackers handled large transactions that drove swap traffic to around $1 billion by late February. ThorChain generated $5 million in fees by March 4 and had a total trade volume of over $5.4 billion. Should Bybit seek comparable refund requests from ThorChain, the exchange may recover much more.
We have suggested lines of action.
Members of the DAO forum have debated potential likely reactions:
We are returning the money back to Bybit.
We are turning down the offer and maintaining the DAO’s position on transaction finality.
Negotiating a controlled return will let ParaSwap keep 10% as a bounty in line with bug bounty rules.
While some members support the complete return, others think holding a portion of the money will help the DAO remain financially honest while also addressing the ethical issues brought up by Bybit.
A minority of the DAO, meanwhile, still objects to any reimbursement. One member advised that following Bybit’s request could undermine ParaSwap’s autonomy and damage its reputation. Another cited a similar scenario in 2013 when a protocol sought charge reimbursements following a transaction linked to hacking. At that time, the DAO declined to issue a refund, and some members argue that changing the policy now is not necessary.
The Course of DAO Decision-Making
The demand from Bybit has put ParaSwap in a challenging situation whereby it must balance ethical issues against DeFi ideas of autonomy and finality. The ruling might affect DAOs’ handling of like circumstances going forward, therefore impacting the larger DeFi ecosystem.
The crypto community closely monitors whether ParaSwap will prioritize regulatory prudence and ethical responsibility, or adhere to the fundamental DeFi principle of transaction immutability and “code is law.” The debates continue.
