An interesting debate has been sparked on X over the past few days. The catalyst has been the FTX Hacker who notoriously stole $400M from FTX during its collapse moving the stolen funds across various protocols. One of the main protocols he's using? Thorchain.
Thorchain is obviously close to home for me. RUNE is one of my largest crypto positions in my relatively exclusive portfolio of only about 6 crypto assets.
Recently, they released streaming swaps. Streaming swaps allow users to set a swap target and allow their swap to be arbitraged as it is played through blocks over a predefined amount of time.
In layman's terms, this allows whales to trade large amounts of crypto in and out of the Thorchain Liquidity Pools without the pools needing sufficient depth for a single trade. Think of it like taking a big trade and breaking it up into 100 small trades rather than pulling the trigger all at once.
The magic of streaming swaps is that it does this all at one time for you. Now that streaming swaps are in place, whales of all kinds have been moving MASSIVE amounts of crypto through the Thorchain Router. This is what also enabled the FTX hacker to move millions of dollars worth of ETH through the router and into other wallets.
Using Thorchain
The hacker's first move in 10 months of silence was a move to sell 700 ETH through the Thorchain Router using a streaming swap.
Multiple other swaps have happened since. Each for millions of dollars worth of Etheruem.
Are Decentralized Protocols Like Thorchain Responsible to Stop Hackers?
The debate sparked over on X has been a multi-day event. When the swaps first happened, a few prominent Thorchain influencers in the community praised the big swaps. It's possible that some of them didn't have all the info yet when they broke the news - unbeknownst to them that it was a hacker moving large swaths of funds.
Some knew and didn't care. Others knew and did care. It caused somewhat of a rift. Many in the crypto twitter community started bashing Thorchain and saying that they facilitate black hat activity.
My take is that malicious actors will use anything you give them access to. If it's the U.S. Dollar, they'll use that to commit horrible crimes.
If it's BTC, they'll use that to.
If it's Thorchain Routes, why wouldn't they also use that?
Malicious actors do malicious things all the time. The USD is still the #1 preferred currency amongst global crime.
All of this reminds me of Tesla's autopilot. In the early days - and even still today - any autopilot accident gets 1000x the media attention than a regular accident.
Does this mean that autopilot is bad? Does it mean that autopilot causes more accidents?
No. It's just something new and shiny. When it comes along, people will cite it as the reason for the thing happening. They disregard all of the positive actions: all of the accidents that were avoided, all of the safety features built in the process and lives saved.
Humans are always going to human. We focus on the bad and often forget the good. 1 bad thing out of 99 good things could happen and we will give 99% of our attention to the 1 bad and only 1% to the 99 good things that happened. That's life.
Back to the Question
So back to the original question: should Thorchain have attempted to stop it?
Well, it's run by nearly 100 decentralized nodes. Even if they moved to prevent it, I don't think they could actually stop it.
That's the double-edged sword of decentralization: decentralization is extremely positive because it enables us good actors to do positively good things. It allows us to move away from the FTX's (ironic, huh?) of the world and self-custody our funds.
It also allows malicious actors to do whatever the hell they want with the tools provided. That is the double-edged sword.
Put a tool out into the world and it is not the tool that is the enemy, but the person weilding it. Perhaps other measures could be done at a source-level to prevent the enemy from wielding so much influence. Could FTX have been prevented by government measures or other measures altogether?
Actually, if you run full circle: if Thorchain were bigger than all the CEXes, would FTX's blow-up have been less impactful? Since more people could be self-custodying funds instead of letting FTX do it for them and losing their money?
Focus on the good over the bad. Any tool can be leveraged in any way. If you want to prevent bad actors, then you need to go after the actor - not the tool.