The Oyster Protocol has allegedly been compromised by its founder Bruno Block, who generated 3 million Oyster Pearls (PRL) without permission, crashing the PRL market cap from USD 20 million to less than USD 3 million in a day. Oyster Protocol is a hybrid between IOTA and Ethereum, and is used for data storage, but its reputation has been severely impacted by this event and trading volume has fallen to less than BTC 5 per day.
Block is actually a pseudonym and his real identity is unknown even to the Oyster Protocol team members. The founder apparently installed a transferDirector function in the Ethereum smart contract which generated the PRL cryptocurrency. Oyster Protocol was audited three times and this function was noticed but Block assured the team it was necessary to adjust PRL’s peg.
The transferDirector function ended up being used as a hack in this incident, with Block creating PRL 3 million and quickly transferring them to KuCoin, before selling them for other cryptocurrencies and withdrawing the proceeds. This incident occurred only days before KuCoin, the primary crypto exchange which PRL is listed on, was due to implement know your customer (KYC) procedures, which would have prevented this from occurring. In any case, KuCoin has frozen PRL trading until the code is fixed.
In total there are PRL 98.5 million in circulation, so the 3 million tokens created and dumped by Block should not have been the main reason for the market crash. It is believed that PRL’s damaged reputation is what caused most of the 80+% decline in price since now traders and investors know it can be created at will by an anonymous bad actor.
The CEO of Oyster Protocol, William Cordes, is planning on revising the smart contract to remove the transferDirector function exploit installed by Block. Cordes says a token swap is likely, asserting that all PRL is safe and will eventually be exchanged 1:1 for a new token called PEARL “or something to that effect”. Beyond this, Cordes is asking for the community’s help to track down Block.
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