Harmony, an Ethereum-compatible layer-1 blockchain, is proposing to shut down its own chain and migrate its native ONE token to Ethereum, seven years after launching its mainnet. The proposal, published on Sunday, comes weeks after Harmony revealed it was planning to roll back more than 109,000 transactions because of an exploit that minted billions of forged tokens.

The project described the proposal as non-binding and did not specify when the final block would be produced, nor whether the shutdown would be submitted to the network's validator-led governance process. If implemented, Harmony's chain would effectively cease to exist as an independent network and ONE would become an Ethereum-based ERC-20 token.

What the shutdown proposal includes

Harmony says the goal is to preserve user balances and allow the community to move forward on Ethereum rather than continue operating a separate chain. Under the proposed plan, all ONE balances would be recorded at the network's final block, and a new ERC-20 version of ONE would be airdropped to the same Ethereum addresses at a 1:1 ratio. The snapshot would cover wallets, staking delegations, validator rewards, smart contracts, and centralized exchanges. No claim process would be required.

• All ONE balances are recorded at the last block and mirrored as ERC-20 ONE on Ethereum.
• No user claims are required for regular wallets or exchange balances.
• The snapshot includes staking delegations and validator rewards.
• Multisig safes, liquidity pools, and onchain applications cannot be migrated.

The team advised users to exit all smart-contract positions before Sept. 10. That same date is listed as the earliest point at which validators may begin shutting down nodes. A pool of $1.372 million has been allocated to compensate validators that stop on time, retain their stakes, and agree to serve as governors.

Validator options and governance

Harmony is offering validators three paths. They can stop their nodes and accept compensation from the transition fund; continue as governors overseeing the post-migration process; or join what Harmony describes as a new AI-video initiative. The proposal does not specify whether the AI-video project would receive treasury assets or manage the compensated validators.

Harmony also laid out the governance mechanics related to its native chain. Under the published rules, elected validators may create proposals, while unelected validators may vote. Voting power is based on total stake weight. A proposal requires at least 51 percent of the total stake weight to participate and 66.7 percent support after a seven-day introduction period and a 14-day voting period.

The sunset proposal, however, was described by Harmony as non-binding. That has raised questions among community members about whether the plan will be submitted to the network's governance process or acted upon administratively. Without a binding governance vote, it remains unclear how the project will determine the final network halt date or how validator compensation will be distributed.

Migration limitations

One of the most important parts of the proposal is the line between what can be moved to Ethereum and what cannot. The migration is mainly designed for simple wallet balances and delegation records. Applications that rely on Harmony's native infrastructure, such as liquidity pools and multisig treasuries, would not be supported in the migration. Harmony explicitly told users to close all onchain positions before Sept. 10 to avoid losses.

It is also unclear how the network's block history, transaction history, or proving layer would be preserved after the proposed shutdown. While Ethereum is compatible with certain forms of state proofs, cleanly retiring a layer-1 network's history is practically difficult, and Harmony has not explained how it would archive past chain data for future reference.

Why Harmony is making this move

The shutdown proposal comes less than four weeks after Harmony disclosed a critical security incident. On Aug. 12, Harmony said it was considering a rollback after an attacker reportedly minted nearly 4 billion unauthorized ONE tokens, equivalent to roughly 26 percent of the network's total supply. An outside account claimed that about 2.8 billion of those forged tokens had reached exchanges, but Harmony had not confirmed that figure at the time.

On Aug. 17, Harmony said it planned to revert the blockchain to an Aug. 11 checkpoint. That rollback would discard 109,126 regular transactions and 315 staking transactions. Harmony said investigators had traced nearly all the forged tokens to wallets or service boundaries and were working with exchanges, bridges, and law enforcement.

Harmony's decision to consider shutting down entirely marks a major departure from typical post-exploit recovery. Many blockchain projects have chosen to patch vulnerabilities, perform state rollbacks, or compensate affected users while continuing to operate their own networks. Harmony's proposal instead suggests a strategic retreat from its existing community and infrastructure, a move that may reflect both the difficulty of maintaining a separate layer-1 after a major security breach and the increasing cost of building independent liquidity and tooling in a crowded blockchain ecosystem.

Background on Harmony network

Harmony launched its mainnet in 2019 with a focus on sharding and cross-chain interoperability. The network was designed to process transactions in parallel across multiple shards, offering lower fees and faster finality than Ethereum's base layer at the time. Harmony uses a proof-of-stake consensus mechanism called effective proof-of-stake, with validators selected based on delegated stake.

Harmony's native ONE token was listed on major exchanges and its ecosystem attracted decentralized finance applications, non-fungible token projects, and gaming applications. At the height of its popularity, Harmony promoted itself as a high-throughput Ethereum-compatible alternative, supporting the Ethereum Virtual Machine and focusing on scalability through sharding.

The network also had previous experience with major security problems. In June 2022, the Horizon bridge, Harmony's cross-chain link to Ethereum, was exploited for roughly $100 million in cryptocurrency. That attack added to scrutiny over Harmony's security and raised concerns about the project's ability to protect user assets across sharded and bridged environments. The new exploit, involving the minting of supply on the network itself, is a different kind of attack but reinforces challenges facing the system.

Mixed market and community reaction

Market reaction to the proposal has been mixed. Some users view a migration to Ethereum as a way to preserve value and gain access to deeper liquidity, while others see it as an admission that Harmony's independent layer-1 chain is no longer viable. The proposal has also raised questions about the token's future utility, governance rights, and what role validators will play after migrating to Ethereum.

If the plan moves forward, Harmony would no longer be a separate blockchain in the traditional sense. The governance token would continue to exist on Ethereum, but network validators would have no sharding infrastructure to secure, no blocks to propose, and no cross-chain bridge to monitor. Rather than maintaining an independent layer-1, Harmony would likely function as a name, a community, and a portfolio of ideas, including the proposed AI-video project.

Still, the transition is far from certain. The proposal lacks several critical details: who will decide the final block, how the snapshot date will be confirmed, what will happen to the network's NFT ecosystem, and whether delegators will have a direct vote on the plan. The 51 percent participation threshold could also be difficult to meet in a short time frame, especially if many token holders have lost confidence after the exploit and are not actively tracking ballots.

The road ahead and pending questions

If Harmony does migrate, the process would involve coordinating with centralized exchanges to re-list or swap ONE tokens, updating smart contracts and wallets, and educating users on how to move funds. Exchange support was explicitly mentioned in the proposal, according to Harmony. The team said the snapshot would include centralized exchange balances, suggesting that exchanges would need to cooperate with Harmony to ensure those balances are represented on Ethereum.

No final block timestamp has been proposed, though Sept. 10 has been identified as the earliest date for validator node shutdowns. Validators are only eligible for the $1.372 million compensation pool if they stop their nodes on time, retain their stake, and agree to serve as governors. The plan also states that users should exit all smart contracts before Sept. 10, because contracts like multisig safes and liquidity pools cannot be mirrored on Ethereum.

Harmony's own governance rules would require a formal proposal with significant participation and support before the chain could be officially retired. Yet the team has not stated whether it will proceed through that process. Community members are waiting for more clarity on the next steps, while validators are being asked to make decisions about node shutdowns by Sept. 10.

Whether the network actually reaches a final block or simply remains in limbo after the proposed migration is still unknown. Harmony has positioned the plan as a way to move users to a more liquid ecosystem and avoid the long-term costs of maintaining an independent chain after a serious incident. If it succeeds, ONE would become one of many tokens that have migrated from a native layer-1 to Ethereum after encountering security and adoption hurdles. If the proposal fails to gain enough support or does not go through governance, the network could face a more difficult road, with a compromised supply schedule and lingering questions about its future.

Source:Cointelegraph News