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TL;DR

• The native token for Gala Games (GALA) fell more than 12% after confusion about the token's supply led many people to believe the network experienced a $1 billion hack.  

• The event was not a malicious hack, but resulted from a cross-chain bridge issuing $1 billion of a synthetic version of the GALA token (pGALA). 

• The President of Blockchain at Gala, a play-to-earn gaming company, said the company was unaware these synthetic tokens would be minted.  

• After this misunderstanding was discovered, GALA — a holding in the Hashdex Crypto Metaverse ETF — recovered to a level in line with its price prior to the event.

• The episode underscores the challenges that can arise as blockchain networks increasingly interact with one another, impacting the investment case for these networks.  

 

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The crypto community is very familiar with the bridge hacks that have occurred this year. However, a recent episode that took place in pNetwork, a cross-chain bridge that supports the minting of synthetic versions of Ethereum-native assets on the BNB Smart Chain, was mistaken for a malicious hack. The exploit involved GALA, the native token for Gala Games — a blockchain-based play-to-earn gaming platform that rewards players with digital assets for their in-game accomplishments — and consisted of a tremendous amount of GALA tokens being minted out of the blue. 

 

What happened?

 

On November 3, approximately $1 billion worth of pGALA tokens were suddenly minted in the BNB Smart Chain by a single blockchain address, raising immediate concerns in the crypto community. The tokens had been minted and started being offloaded on the popular decentralized exchange PancakeSwap, in what seemed to be another hacker attack. However, according to recent tweets from pNetwork’s official profile, the episode was a major misunderstanding that ended up causing their GALA bridge to be halted temporarily.

After an alleged “misconfiguration” was identified in their bridge contracts, pNetwork has intentionally minted tokens to protect holders from having a malicious actor exploit the bridge vulnerability and drained the BNB/pGALA PancakeSwap pool in order to disincentivize the trade of pGALA tokens, which had just become not redeemable. Regarding this white hat situation, a pNetwork representative said “We regret any inconvenience this may have caused to the community and we will endeavor to avoid these issues in the future.” This is a common method to solve security breaches in smart contract platforms and had the express purpose of mitigating potential vulnerability in their bridge. Additionally, the pNetwork representative also claimed that “All GALA tokens on Ethereum as well as the underlying bridge collateral are SAFE.”

 

The aftermath?

 

At first, pGALA’s token price plunged 94% and the community saw panic levels go over the top, and the Ethereum-based GALA displayed a 12.5% decline. However, after both pNetwork and Gala publicly explained what happened, markets calmed down. GALA token prices are fluctuating at a fairly regular level, with its pair with USD-pegged stablecoins being traded at somewhat the same price as one week prior to the incident. 

According to Jason Brink, the president of blockchain at Gala Games, the company was not pleased with the way pNetwork handled the situation. He revealed that the pNetwork did not consult his team before minting a whopping amount of tokens, which led to his frustration. 

 

Conclusion

 

As both pNetwork and Gala Games have made public announcements on the matter, what initially seemed to be a major hack turned out to be just a misunderstanding. Bad press is never a good thing for a serious company’s roadmap, but it seems that today’s event won’t amount to a major problem for the Gala Games ecosystem and token. Naturally, we’ll keep monitoring the aftermath of this episode, and will update investors on future outcomes if necessary. 

To learn more about the impact of these events on the crypto asset class, visit our Research Center and subscribe to our newsletter.

 

_{[1] In blockchain contexts, bridges facilitate communication between blockchains through the transfer of information and assets.}

_{[2] Cross-chain technology refers to a tool that allows assets to flow between unrelated blockchains. It uses a smart contract to allow networks to interact seamlessly.}

^{[3] A white hat hacker is an individual who uses hacking skills to identify security vulnerabilities in software or networks.}

 

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