Crypto project Harmony said it is working with exchanges to freeze funds after on-chain researchers reported roughly 4 billion ONE tokens were minted without authorization — about 27% of prior circulating supply — prompting it to pause its bridge and push an emergency validator update; analyst Juiceberg estimated ~2.8 billion ONE were routed to CEXs and only ~115 million remained available on-chain. ONE fell to a new low of ~$0.00057 on Aug. 12 with trading volume up ~4,000%, and the incident raises rollback and security risks for the protocol given prior losses (Horizon bridge ~$100 million in 2022 and a 2023 staking bug that created ~146 million ONE).

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Harmony escalated its response to a suspected Layer 1 exploit after on-chain researchers reported that roughly 4 billion ONE tokens were created without authorization and billions were quickly sent toward cryptocurrency exchanges.

The project said Wednesday it was working with exchanges to stop and freeze funds while evaluating rollback options. In a later update, Harmony identified four wallet addresses linked to the incident and asked exchanges to block funds traced back to them. It also paused its bridge and instructed validators to install an emergency software update that it said prevents any further minting.

Harmony has not disclosed the vulnerability that allegedly enabled the mint or independently confirmed the four-billion-token figure. On-chain analyst Juiceberg said the tokens were created through empty blocks and estimated that about 2.8 billion ONE were quickly routed to exchanges. The researcher later said only about 115 million ONE remained available to sell on-chain.

This implies that most of the newly created supply already reached exchange infrastructure.

Rollback may not recover tokens sent to exchanges

That distinction could complicate any rollback. Reverting Harmony to a pre-incident state could remove unauthorized tokens that remain on the network, but it would not automatically recover assets already deposited or sold on centralized exchanges.

A rollback could also reverse legitimate transactions finalized after the chosen recovery point, which makes the decision a network-governance issue rather than simply a technical fix.

The scale of the reported mint is also very large. Market trackers showed approximately 15 billion ONE in circulation, which means that another 4 billion tokens would equal roughly 27% of the previously reported circulating supply.

ONE falls to record low

ONE fell as low as roughly $0.00057 on Aug. 12, which was a new all-time low, according to CoinCodex. Trading volume jumped by more than 4,000% from the previous day as traders reacted to the potential supply shock.

ONE’s price action over the past 24 hours (Source: CoinCodex)

Harmony has faced major security problems before. Its Horizon Bridge lost approximately $100 million in 2022 in an attack the FBI later attributed to North Korea's Lazarus Group. In 2023, the network also dealt with a separate staking bug that improperly created roughly 146 million ONE.

The immediate question is now how much of the reported mint exchanges can freeze and whether Harmony ultimately decides that a rollback is necessary.

Read the article at Coinpaper