Gnosis Chain, which plays a key infrastructural role in Balancer’s ecosystem, has executed a hard fork to recover a portion of funds that were frozen during the $116 million early November exploit of the protocol.

According to an official announcement, the hard fork was activated on Dec. 22 following months of debate over immutability and governance intervention, with the community still divided over the precedent it sets.

“The funds are now out of the hacker’s control,” the announcement said.

Node operators have been urged to upgrade their clients to avoid penalties.

The idea was first proposed by Philippe Schommers, Gnosis’s head of infrastructure, who argued that the network would need to undergo a hard fork to be able to recover the funds that were frozen right after the exploit.

“We believe that in due course, validators should not be able to censor transactions and the underlying network infrastructure should be actually blind. We commit to work towards this future, but in the meantime encourage a community discussion on how and when the community should wield this power it still has when acting in concert,” Schommers said in a Dec. 12 forum post.

Why did Gnosis Chain propose a hard fork?

After Balancer was exploited and the bad actors managed to drain roughly $128 million to a series of wallets spanning multiple chains. As an immediate containment measure, Gnosis validators implemented an emergency soft fork that effectively blacklisted the hacker’s address, but also left the assets in a frozen state, inaccessible to both the attacker and victims.

To be able to return the funds, the hard fork was the only technical route that would allow the network to rewrite its recent history and forcibly move the frozen funds from the hacker’s wallet to a recovery address controlled by the Gnosis DAO.

For this to succeed, all node operators were required to upgrade their clients immediately to follow the new chain.

While some community members have dubbed the move a rescue mission, others argue that by altering the chain state, Gnosis has compromised the foundational principle of blockchain immutability.

“Before we can move forward with the hard fork, it’s vital to define the process surrounding it so that all similar cases can be handled, and not just those that benefit one party or another,” one community member, going by MichaelRealT wrote.

“Validators are key players whose role is to enforce a set of rules and preserve the chain’s integrity. Accepting the hard fork could set a dangerous precedent, opening a Pandora’s box and bringing the Gnosis Chain closer to traditional finance,” they added.

“The greatest issue is the precedence – if immutability is not a thing, then what prevents the DAO to overwrite Blochchain state more frequently in the future?,” another community member, going by TheVoidFreak, questioned.

Recovery efforts

Since the exploit, a number of coordinated recovery efforts have been implemented to claw back funds across affected networks.

As previously reported by crypto.news, liquid staking protocol StakeWise successfully managed to recover approximately $19 million in osETH, while Berachain recovered $12.8 million after coordinating with a white hat hacker.

In late November, Balancer proposed a plan that outlined a reimbursement strategy to return approximately $8 million in recovered assets to impacted liquidity providers, pending further community approval.