The pGALA incident has triggered a Crisis of Confidence, as a certain exchange faces a $250 million trust crisis.

Recently, a controversy involving pNetwork, Huobi, and GALA has garnered widespread attention in the crypto world. The incident originated from a controversial action taken by pNetwork to recover $400,000 in liquidity, which ultimately evolved into a situation where Huobi is facing at least a $250 million crisis of confidence. The ins and outs of this incident are worth our careful examination.

The catalyst for the incident was the problem with the cross-chain bridge of the pNetwork project. In order to recover $400,000 in liquidity, they issued 55.6 billion pGALA, referring to it as a "white hat attack." However, this action was not coordinated in advance with any trading platform to suspend deposit and withdrawal operations, resulting in a large amount of GALA being deposited into the platform and sold. Some investors seized the opportunity to arbitrage successfully, while others who sincerely attempted to buy the dip were forced to accept the significant depreciation of pGALA.

pNetwork's approach clearly lacks a basic understanding of the security of decentralized finance. They injected overissued tokens into the ecosystem without adequately assessing the potential risks, an action that is both hasty and irresponsible. Even more questionable is their failure to explain the increase in the engine and the possible insider trading afterwards, instead maneuvering between a certain trading platform and GALA in an attempt to shirk responsibility.

In the face of this crisis, the reaction of a certain trading platform is disappointing. They failed to timely acknowledge the failure of their security emergency response and risk control systems, and were slow to act on the suspension of deposits and withdrawals. During this time, there were rumors of internal personnel "calling orders". Worse still, they indiscriminately labeled all users who bought the dip on GALA as arbitrage attackers and froze their related assets. In the end, they pointed fingers at the pNetwork project party, leading to a public dispute between the two parties.

The handling of this crisis was chaotic and disordered, damaging the platform's reputation in the industry. Although centralized exchanges still hold significant power in the crypto world, this incident may make more people realize the inherent flaws of centralized systems.

For users participating in arbitrage, this incident serves as a wake-up call. They first blindly followed the trend to arbitrage, and then collectively protested for their rights, reflecting a lack of understanding of the high-risk nature of the crypto assets market. In this unregulated field, investors must realize that while there are opportunities for wealth, there are also significant risks of loss.

It is worth noting that the security companies that usually speak out actively in similar events have collectively remained silent this time. This is because, although security audits can identify code defects, they are difficult to prevent "man-made disasters" caused by industry participants' eagerness for quick success. Although this incident was not caused by a smart contract vulnerability, it is more alarming than any code issue.

Currently, the $250 million loss faced by a certain trading platform is based on 6.6 billion GALA deposited at the current market price. However, the potential losses caused by the resulting Crisis of Confidence are much harder to estimate. This incident will undoubtedly leave a mark in the history of crypto assets and will cause many to reconsider their initial intentions towards this industry.

As a blockchain security practitioner and supporter of the concept of Crypto Assets, the author has not directly participated in it, but hopes to share these insights with a professional and objective attitude through full observation and in-depth analysis of on-chain data, contributing to the healthy development of the industry.