Linear Business Update — End 2023
Its fair to say the last quarter of this year did not go to plan. When I joined Linear in the late summer, we had plans to hit the ground running. We would recruit a super talented new team and start delivering on not only the promises of the past, but also new and exciting developments. We planned to elevate Linear back to its rightful position, as a leading protocol on not just the BNB Chain, but in the entire overarching crypto space. We still do.
On 21st of September disaster struck. The dev team handover was convoluted, moving responsibility from the old team to a temporary team, and the temporary team to the new permanent team. On exiting the temporary team one the Devs shared login details to crucial parts of the Linear code base with a third party, who subsequently installed a malicious code into the LAAVE contract, whereby the deployer then had full admin access and was able to mint AAVE coins at will. This contract was signed into the Asset Control system, which brings it in to the Linear protocol. Although this in itself is damaging, after minting the coins without any collateral, and trading extensively in the Linear exchange, the real damage was then caused by the economic structure of the protocol being destroyed, and of course the LUSD-BUSD pool on PancakeSwap being drained. The net cash gain to the hacker was estimated at $250k, sadly the damage to the protocol was considerably worse than the financial loss.
Why did it take two months to restart the protocol? There are two major factors in this, first we must consider that the new Dev team had only been recruited for a few weeks, and as talented as they are having this level of damage done during what was planned as a learning and development curve could not have come at a worse time. The second factor is the sheer amount of work the exploit generated for the team to repair and restore. To bring the protocol back, we had to find a way to re-collateralize the system so that the economy was intact and ensure that stakers and investors in Linear were in a positive or neutral position to that which they were in prior to the exploit. This also, of course, had to be done at cost to the protocol, and so solutions were based on financially viable options that didn’t cause the protocol to fail financially. The chosen solution was to roll back all user’s funds to the pre-exploit status, on a set of new liquids, and re-establish the peg on LUSD. This meant we had to:
· Find all users positions prior to the exploit.
· Recreate new liquids for every asset, and airdrop the amounts required to the users.
· Rollout a new LUSD and ensure all systems using LUSD were migrated to this new coin.
· Create new Graph interfaces with the new liquids.
· Update liquid names so it was clear which is the old and new coin.
· Ensure liquidation did not occur during the exploited state.
· Ensure no trading could continue during interim status.
· Ensure that rewards were rolled over.
There were many other tasks that are simply too technical in nature to explain here, but needless to say the team worked non-stop, including flying team members to a central location to work together shoulder-to-shoulder to expediate the process.
What is the current status? The core functions of the protocol are restored and working. Users can stake and collateralize Lina, build LUSD, trade liquid assets, trade back into LUSD and cash out profits in the new LUSD-USDT pool on PancakeSwap. Reward claims and reward unlocks have both also been restored, with no loss of earnings for our community. Some users have noted that accumulated claims over the closed period are less than they expected, there are two possible reasons for this. Firstly, the rollover claims for the closed period have been spread over two weeks, so you need to claim both to catch up. Secondly, the reward output was reduced significantly in September, just prior to the exploit, and is continuing to decrease to reduce inflationary sell pressure on the Lina token. We anticipate this will support more positive price action, especially if we are moving towards a crypto bull market, but of course neither token price, nor the market, is directly within our control, and this does not constitute financial advice.
What is left to be fixed? There are a few smaller items currently still being worked on, all of which we anticipate finishing in January.
Perpetuals. Due to the tiny number of perpetual positions that were live during the exploit it was not deemed worthy of the time and cost in man hours to restore the positions. If you had a perpetual position, we request that you send the value of the position at the time of the exploit, and the associated wallet address, to help@linear.finance. We will double check the figures and then reimburse the value to the user. Perpetual functionally on the exchange is low priority, but will be restored.
Vault. The LP staking vault for users who contribute to the LUSD-USDT will be restored shortly and the APY will be published.
Dashboard. We realise the dashboard is important to our users and we expect it to be back up and running in early Jan.
Liquidations. All users marked during the exploit will be unmarked and we will notify the community shortly of the date liquidations will resume.
What, and when, is Linear 2.0? Linear 2.0 is the name for the newly restored protocol, upon which we will be building our new features and upgrades. As previously disclosed, we are finally introducing multi- collateral staking, some cool AI technology, a new website and brand feel and ultimately we intend to introduce an Order Book Dex. Work began before the exploit and will continue again in January, with the first upgrades being deployed in Q1 2024.
What else are you doing to get us back on top? An important part of our strategy going forward is partnerships. You will have seen that over the past few months we have used our Linear Explorers podcast to start building relationships with other projects and key influencers in the crypto space. In the new year you can expect to see more of this as we work closer with the team at BNB Chain and focus our efforts on joining forces with more projects and protocols. In addition to this we have the previously mentioned ‘AI Secrets’ — not to be underestimated as our Lead Developer is an expert in this field, and this narrative is HOT right now.
I still have questions? Not surprising with everything that has happened recently. To address the community’s questions there will be a team AMA in Jan, so look our for the invite and instructions on how to submit your questions.
Again we would like to wish you all a happy and healthy 2024, and thank-you for your ongoing support.
Warm Regards,
Team Linear
