As earlier reported by CoinDesk, Algo Capital lost a few million dollars in USDT and ALGO tokens. This happened because the CTO Pablo Yabo's phone was compromised and the hackers were able to seize control of the Algo hot wallet he controlled. CEO David Garcia emailed CoinDesk and told them that Algo Capital had lost roughly $1 million to $2 million. Yabo resigned from his post following the incident.
While this is a regrettable incident, it has led to a lot of unnecessary FUD within the community. Many in the community are paranoid that this will lead to enormous selling pressure and loss of value of the ALGO tokens in the market. However, it seems like the dangers related to the hack has been overestimated.
Brief introduction to Algorand
Algorand is an open-source software company building technical innovation for the borderless economy. The platform has a first-of-its-kind permissionless and pure proof-of-stake protocol. This allows them to provide a high degree of scalability, open participation, and transaction finality. The platform is the brainchild of cryptography pioneer and Turing award winner Silvio Micali.
What are the real consequences of the hack
While it is very unfortunate that this hack happened, the fact remains that more than 99% of the ALGO tokens are securely held in Coinbase custody’s cold storage wallets. In other words, 99% of the funds held by Algo Capital is safe. Plus, Algo Capital’s General Partners and Pablo Yabo have personally compensated the investors who were negatively impacted by the incident.
Algo Capital has also tweeted the following regarding the support that they have received from the community:
“Some of the top security experts who really care for the industry to flourish came forward and are working with us to collaborate and address this issue, and we really appreciate their efforts.
It is unfortunate this breach happened but it made us much stronger. We appreciate all the support from the community.”
Pablo Yabo’s thoughts following the hack
Pablo Yabo released a blog post following the unfortunate incident. In it, Yabo has personally taken responsibility for the accident. He further elaborated that the attackers split the funds into numerous accounts and transferred them separately to exchanges. The attack has made him think about the current state of the ecosystem and how difficult it is to secure funds for institutions that need them readily available. These security issues have become a major barrier to mainstream adoption. As such, he will be working on creating different tools and softwares to solve these problems with Randlabs.io.
The Aftermath
While there is no denying that the hack happened, the reality is that it happened because of human error as opposed to some fundamental issue with Algorand’s architecture. The team has responded pretty admirably to the hack. They've gone out of their way to compensate the investors who have been impacted negatively. Also, it should be made clear that Algorand and Algo Capital are two different entities. As of now, the investors shouldn’t give in to paranoia and understand this incident for what it really is - a freak accident. There is no reason to give in to needless FUD.