Reviewing the GALA Incident: A Trust Crisis at Huobi Triggered by a $400,000 Issue Worth $250 Million

Original Title: 《Reviewing the GALA Incident: A $400,000 Trigger Leading to a $250 Million Trust Crisis for Huobi》

Original Author: Haotian

The story begins with pNetwork trying to recover $400,000 in pool liquidity, and it ends with Huobi mired in a trust crisis of at least $250 million; pNetwork and Huobi have started to clash, and many people still haven't figured out the logic behind the GALA incident. Without bias, the following Thread summarizes the situation:

The cause was a problem with the cross-chain bridge of the pNetwork project. To recover $400,000 in liquidity, they minted 55.6 billion pGALA and implemented a so-called "white hat attack," but this process did not "notify" Huobi to pause deposits and withdrawals (both parties were at odds);

The result was that a massive amount of GALA was deposited into Huobi for sale. Some people followed the trend to arbitrage and ran away after depositing and selling, while others, investing real money to follow the trend, were forced to exchange for worthless pGALA.

The actions of the pNetwork project team lacked basic DeFi security awareness, and without completely eliminating potential risks, they injected the over-issued liquidity into the ecosystem, which was too hasty and irresponsible.

After the incident, there was no explanation for the motivation behind the minting or the potential insider operations, but instead, they were mediating between Huobi and GALA to shirk responsibility and blame each other, even going to court, claiming that it was reasonable to hold them as the initiators, which is not unfounded;

Faced with the crisis, users did not wait for Justin Sun's grand vision, but were instead confused by a series of chaotic operations:

1) Not acknowledging the inaction of the security emergency response and risk control systems;

2) Delaying the suspension of deposits and withdrawals, during which rumors of internal disasters circulated endlessly;

3) A blanket assumption that users buying the dip in GALA were arbitrage attackers, leading to the freezing of related assets;

4) Finally, turning the blame towards the pNetwork project team, leading to a public dispute.

Justin Sun, who is usually strong in marketing, never expected to stumble in "public relations," and it took him two days to find the real issue, but unfortunately, the public sentiment had already shifted. The entire crisis was handled chaotically and lacked coherence, which also tarnished the image of the "three giants" in the eyes of the public;

However, centralized exchanges have always held strong discourse power in the crypto world.

The original sin of centralization may be the key reason for the uprising of many retail investors, but that can only be left to time.

And what about the arbitrage users? Initially, they rushed to follow the trend for arbitrage, and later, they all clamored for rights protection. They lack awareness of the high risks in the dark forest of crypto and consistently underestimate the risks of participation; in a zero-sum game financial world, where can one find a way to get rich without facing losses?

Always relying on the "herd effect" as a weak cultural attribute, shouting in this unregulated, self-reliant crypto world is truly powerless!

Have you noticed that the security companies that usually jump out to educate, warn, and track during any minor incident were collectively absent during this GALA event?

The reason is simple: security audits and services can detect all code flaws, but they struggle to combat the potential "man-made" crises caused by industry participants' short-sightedness.

This is a security crisis triggered not by a smart contract vulnerability, but it carries more significant warning implications than any code flaw.

$250 million is the value calculated based on $GALA deposited at 6.6 billion at current prices, representing the paper loss caused by Justin Sun's initial "grand vision." But now, with Huobi facing public outcry, what is the potential loss of trust that has resulted?

Everyone has an answer; it may be trivial, after all, the memory of retail investors lasts only a few seconds, or it may be recorded in history, but it will definitely evoke your original intention in crypto.

As a preacher of the crypto spirit and a blockchain security practitioner, I personally do not hold any GALA and am not a Huobi user. I have observed and participated in the entire event process and deeply analyzed on-chain data. From a professional and responsible standpoint, I would like to share some observations and insights here. If you agree, please help share; if not, please refrain from criticism; it's all for promoting positive energy in crypto.