Lossless Decision-Making Body and How It Works

The DeFi market is a large and lucrative one. Its total value locked (TVL) at the end of 2020 was $16 billion, only to increase to a mind-blowing $150 billion in August 2021. It owes this unstoppable and awe-inspiring growth to the many advantages and opportunities for everyone involved, primarily its ability to allow users to control their privacy and finances.

Unfortunately, in addition to great interest and sizable assets, this market has attracted some very unwanted attention, as well. Witnessing the sheer amount of money passing through the space each year and the still obvious lack of proper regulation, it should come as no surprise that there are so many who will try (very often with success) to take an undeserved piece of cake for themselves.

To achieve this, they use all sorts of tricks and scammy methods intended for bypassing the still inadequate defenses deployed by various stakeholders in the DeFi market.

These methods include:

• minting hacks,
• flash loan attacks,
• intentional rug pulls,
• exchange hacks,
• wallet hacks,
• back-door vulnerabilities
• and other attacks,

For far too long, these tricks have allowed scammers to get away with billions of dollars in crypto assets without punishment.

Meeting the demand for an effective hack-mitigation platform

As mentioned above, the DeFi market still lacks efficient methods to prevent or undo all these various hacks, despite its exceptional growth. And projects are desperate for help. We see it in the sheer amount of projects reaching out to us, eagerly waiting for our solutions to see the light of day.

As you may already know, the Lossless hack-prevention algorithm consists of two parts:

1. short-term freezing of suspicious transactions (up to 24 hours), allowing enough time for the second part to take place, which is:
2. the verification of the suspected hack. If a hack is verified as such, then the hacker’s address is blacklisted, preventing them from using the funds. The hacked funds are then taken and sent to the appropriate address. If the hack isn’t verified as such, then the short-term freeze is released and the transaction is allowed to pass to the intended address.

Naturally, when presented with a method such as this one, some may worry about two potential problems:

Problem 1: How can we allow people to flag suspicious transactions without letting them abuse the power by blacklisting addresses?

Solution:

Don’t worry, we’ve got this all covered, by:

• Allowing whitelisted addresses to go through with their transactions
• Asking flaggers to provide a stake in LSS tokens to blacklist an address — rewarding them for valid blacklisting and punishing them for unvalidated ones by slashing their staked tokens

Problem 2: How to avoid placing too much-centralized power in the hands of hack verifiers?

Solution:

Well, that’s a problem with an easy solution as well, which in our case is by:

• Creating the Lossless decision-making body, consisting of the Lossless team, project team (ERC20 token creator), and an independent committee with equal voting weights
• Confirming with a majority vote (at least 2 out of 3) whether a hack has occurred

Here’s how the process of appropriation of legitimate funds will take place:

1. An ERC20 token is wrapped into the Lossless code.
2. This wrapping allows the freezing of suspicious addresses by staking LSS tokens.
3. Once a suspicious address has been indicated by staking, a request to the Lossless Decision-Making Body is sent.
4. The Lossless Decision-Making Body decides if the address indicated as suspicious has indeed benefitted from a hack.
5. If a positive decision (hack is confirmed) is reached within 24 hours, the reported address is frozen and its funds are returned to the rightful owners.

Lossless Committee and Lossless Decision-Making Body

The Lossless Decision-Making Body is crucial to the mechanics of returning the hacked funds. This body consists of the ERC20 Token Creator, the Lossless Company, and the Lossless Committee with equal voting weights.

The Lossless Committee serves as an independent party from the Lossless Decision-Making Body. As Lossless moves towards more decentralization, it will lead to an increase in the weight of the Lossless Committee vote.

Currently, the initial members of the Committee are nominated and recalled by the Lossless Company. In the future, the members will be nominated and recalled through decentralized governance.

For each suspected hack, the Lossless Company will prepare a live hack-watching dashboard and an executive summary:

1. Each live dashboard will contain real-time updated references from social media and other sources. This way, the members of the Lossless Committee will be able to access unbiased information if they wish to investigate in more detail.
2. Thanks to the executive summary prepared by the Lossless Company, the Committee members will only need a maximum of 30 minutes of work to understand what happened and decide whether it’s a legitimate hack or not.

It is of crucial importance that the Lossless Committee makes a decision in every suspected hack case. To increase the odds of this happening, the Committee will have nine members, with the quorum requiring three members.

The Lossless Committee voting process will take place through the dashboard prepared and maintained by the Lossless Company. This will make it straightforward for the Lossless Committee members to vote, including the members without any technical background. The Lossless Committee members will manage their private keys themselves.

As a reward for their service, the Lossless Committee members will receive 2% of hacked and recovered funds in case of a confirmed hack. To further incentivize voting, the 2% of the recovered funds will be split as follows:

• 0.1% will be distributed to all Committee members equally
• 1.9% will fo to those who voted if there was a quorum

If the final decision is that the hack has indeed happened (a “hack” decision) but no quorum was reached by the Lossless Committee, 0.1% will still be distributed to all Committee members equally, but the remaining 1.9% will go to the Lossless Company reserve.

In case there’s no Committee quorum while the Decision-Making Body makes a “no-hack” decision, then 10% of the staked tokens will be sent to the Committee members who voted.

Ushering the DeFi market into a better future

To onboard the Lossless Committee, we are constantly scouring the DeFi space, looking for experts, whitehat hackers, and blockchain leaders. Working together with the Lossless Decision-Making Body, the Lossless Committee, and all the other parts of our platform, we strive to usher this market into a safer, richer, and better future.

In the future, the DeFi space will fulfill its true potential and become the source of unimaginable opportunity instead of fear of losing valuable investments, reputation, and goodwill through various hacks.

If you want to help us achieve this goal or you simply want to find out more about what Lossless has to offer and what our plans for the future entail, then join us at our:

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