Why WazirX’s ’55-45 plan’ has its users up in arms – Times of India

Domestic crypto exchange WazirX has sparked outrage among users after announcing a plan to distribute the $230 million loss from a recent cyberattack among its customers. The Mumbai-based platform suspended trading last week following the heist and aims to resume operations within a week while implementing a “socialised loss strategy.”
WazirX’s proposal to distribute the losses among its customers has drawn criticism, with many users questioning why the exchange isn’t utilising its profit reserves to mitigate the impact.

What is a ‘socialised loss strategy’

In an FAQ page, the company answers: “A socialised loss strategy is a method where the losses from a situation, such as a cyberattack, are shared among all crypto portfolio users fairly and equitably. Instead of placing the full burden of the loss on a single individual, the impact is spread out to minimise the financial strain on any one person.”

How WazirX accounts will be “socialised”

To explain its strategy the company wrote: “Users with 100% of their tokens in the ‘not stolen’ category will receive 55% of those tokens back. The remaining 45% will be converted to USDT-equivalent tokens and locked. This is part of our fair and transparent socialised loss strategy to distribute the impact equitably. The deducted tokens are used for rebalancing other users’ portfolios who have more than 45% of stolen tokens in their portfolios.
If your entire portfolio (100%) consists of stolen tokens, we’ll create a balanced portfolio for your unlocked portion (55%) using a basket of crypto assets. This basket will be derived from the available assets on the platform.”
WazirX has also presented users with two options to manage their assets. Users can either choose between prioritising recovery efforts by restricting withdrawals while maintaining trading access, or opting for immediate withdrawal accessibility at the expense of lower recovery priority. The platform emphasises that users can switch between these options under specific conditions.

What are SHIB and will it be automatically converted to USDT

The company noted: “SHIB is classified as a stolen token. Therefore, 45% of the value of your SHIB holdings as of 21 July 2024, 8:30 PM IST, will be converted to USDT-equivalent tokens and locked. The remaining 55% will be used to create a balanced portfolio with available crypto assets on the platform.”
WazirX also explained why it’s locking 45% of the value in USDT-equivalent tokens instead of locking it in the original form. The company said: “In a bear market, prices tend to be low, while in a bull market, they can be high, causing significant fluctuations in the value of cryptos. By locking 45% of the value in USDT-equivalent tokens, we ensure a stable amount for recovery planning.”