WazirX Announces Decentralized Exchange Following Major Hack

TLDR

• WazirX announces DEX launch following $235M hack in July 2024
• Lazarus Group exploited multi-signature wallet vulnerability
• Exchange initially froze 45% of user balances, later reversed decision
• New DEX will launch in early 2025 with its own governance token
• Ongoing dispute between WazirX and Liminal over hack accountability

WazirX, one of India’s largest cryptocurrency exchanges, has announced plans to launch a decentralized exchange (DEX) following a massive security breach that resulted in the theft of $235 million in July 2024.

The new platform, set to launch in early 2025, represents a major shift in the company’s approach to digital asset trading.

The July incident, attributed to the North Korean hacking group known as Lazarus, exposed vulnerabilities in the exchange’s multi-signature wallet system.

Hackers successfully exploited these weaknesses and channeled the stolen funds through Tornado Cash, a privacy tool that masks transaction histories.

In the immediate aftermath of the breach, WazirX took emergency action by freezing 45% of users’ account balances, converting them to USDT stablecoins.

The exchange allowed users to continue trading with the remaining 55% of their funds, a decision that quickly sparked controversy within the crypto community.

Users voiced strong opposition to what they perceived as an unfair distribution of losses. The backlash prompted WazirX to reverse course in August, restoring all account balances to their pre-hack levels and canceling trades made after the security breach.

Co-founder Nischal Shetty addressed the community during the company’s fourth town hall meeting, explaining the motivation behind the DEX launch.

“With a decentralized exchange, assets remain fully in users’ control, free from counter-party risks,” Shetty stated, highlighting the key advantage of the new platform.

The planned DEX will operate alongside WazirX’s existing centralized platform, offering users a choice between traditional and decentralized trading options. The new platform will feature its own token, designed to handle transaction fees and enable community governance of the protocol.

Recovery efforts following the hack have been complicated by an ongoing dispute between WazirX and its former custody partner, Liminal.

Both companies have pointed fingers at each other, with WazirX claiming Liminal failed to maintain proper security standards, while Liminal argues that the exchange’s management practices contributed to the breach.

The stolen funds remain unrecovered, leaving hundreds of thousands of users affected by the incident. The hack stands as one of the largest in India’s cryptocurrency history, highlighting the risks associated with centralized cryptocurrency storage.

WazirX’s development team has outlined a phased approach for the DEX launch, prioritizing security measures and user experience. The platform will gradually onboard users to ensure system stability and proper functionality.

The new DEX will implement advanced security protocols, learning from the vulnerabilities exposed in the July incident. Users will maintain direct control of their private keys, eliminating the need to trust third-party custodians with their assets.

Technical specifications for the DEX include smart contract-based trading, automated market making protocols, and integration with multiple blockchain networks. These features aim to provide users with a secure and efficient trading experience.

The platform’s native token will play a central role in the ecosystem, incentivizing liquidity provision and enabling holders to participate in governance decisions. Token holders will have the ability to vote on protocol updates and fee structures.

WazirX has committed to regular security audits and transparency reports for the new platform, addressing concerns about oversight and accountability. The exchange plans to publish detailed documentation about the DEX’s security measures before launch.

The development team continues to work on user interface improvements and testing protocols, with beta testing scheduled for late 2024. WazirX has emphasized that the DEX will prioritize ease of use while maintaining robust security features.

Industry observers are watching the project closely, as it represents one of the first major shifts from centralized to decentralized trading following a large-scale security breach. The launch timeline remains on track for early 2025.