Harmony proposes closing down Layer 1, which has been operational for 7 years
Harmony proposed shutting down Layer 1, which had been operational for seven years, and re-releasing ONE as Ethereum ERC-20, citing threats from state actors and artificial intelligence.
9/7/20264 min read
The September 10th deadline and what cannot be moved.
The most pressing operational element in the proposal for current Harmony users is the September 10th deadline for transferring smart contract positions. The snapshot and free distribution mechanism works smoothly for tokens held in externally owned account wallets, in staking delegations, in validator accumulation rewards, and in centralized exchange balances, because each of these corresponds to an identifiable address or account holder that the migration script can credit on Ethereum.
Multi-signature vaults, liquidity pools, and other deployed applications don't work that way. A liquidity pool holds tokens on behalf of multiple depositors, where their individual interests are recorded in the pool contract's internal accounting, not in the on-chain balance at their individual address. A multi-signature vault is controlled by a contract with a signer configuration that exists on Harmony and has no equivalent implementation at the same address on Ethereum. Accurately recreating those positions on another chain would require rebuilding the state of each contract, which the migration plan doesn't do.
The practical consequence is that any user holding ONE or other assets deployed within the Harmony smart contract who does not withdraw their funds before September 10th will face the risk of those positions becoming inaccessible as validators begin shutting down nodes and the network stops creating blocks. Harmony has committed to publishing the ERC-20 contract, governance repository contract, snapshot calculations, and airdrop scripts for public audit before the transition is implemented.
Compensation scheme for verifiers
Harmony has established a one-time compensation fund of $1.372 million, payable over four quarters, to validators and their delegates if they shut down nodes on time, sign the necessary agreements, retain their stake, and act as administrators in the new project. The team also plans to compensate validators for the difference in reward issuance between the time a node is shut down and the last block of the network, aiming to address the economic gap that early node shutdown would create for validators who cooperated on schedule.
According to the proposal, validators are given three options: shut down the node and withdraw, continue participating as an administrator in the new structure, or switch to the AI video initiative as a moderator. One authorized and unclaimed staking rewards will be transferred to each administrator's inventory under the proposed structure instead of being distributed directly.
Under Harmony's current governance rules, elected validators can create proposals, unelected validators can vote, and voting rights are weighted according to total shareholding. To pass a proposal, 51% of total shareholding and 66.7% support after the voting period are required. Harmony has not clarified whether the closure proposal will undergo that governance process or will proceed on a different basis, and all proposals include a non-binding disclaimer stating that all plans are subject to change.
What were the security reasons, and are they still in effect?
Harmony's stated reason for the shutdown was that protecting the network from state-sponsored and AI actors had become too costly and difficult for the network's remaining operations. Security records support the hypothesis that Harmony had become an unusually frequent target of attacks. The Horizon bridge attack in June 2022 resulted in a loss of approximately $100 million and was attributed by the FBI to the Lazarus Group and APT38, along with North Korean units responsible for the Ronin bridge attack. An infinite token generation bug in late 2023 affected approximately 150 million ONE tokens. The authentication attack in August 2026 generated over 3 trillion unauthorized tokens.
The pattern across these three incidents is noteworthy because two of them involved unauthorized token creation rather than the theft of existing funds, suggesting a recurring vulnerability in Harmony's supply-issue controls that the 2023 fix did not fully address. The August 2026 undo, reversing over 109,000 transactions and 315 staking operations to restore the August 11 state, was itself controversial because reorganizing the chain at that level would invalidate legitimate user activity along with the attacker's transactions.
Assessment and Conclusion
Harmony's proposed shutdown is one of the first instances of a Layer 1 blockchain with a significant usage history voluntarily deciding to cease operations and migrate its tokens to another chain rather than continue operating in decline. Loopring's shutdown of the decentralized exchange zk-rollup in early 2026 and BounceBit's decision to shut down its Evmos-based chain following a delegation vulnerability exploit are similar precedents, albeit on a smaller scale.
The structural argument implicitly made in this proposal is that operating a standalone Layer 1 blockchain requires a minimum security cost that doesn't diminish as network activity declines. A chain must be protected against sophisticated attackers regardless of the value it protects, and the economics of such protection become unfeasible when the protected value drops too low. For a network that once peaked at nearly $4 billion in market capitalization and now stands at around $11 million, the security costs required to counter state-sponsored attacks outweigh the economic viability of the network's remaining operations.
Whether Harmony's specific shift toward AI-powered video creation is a coherent business strategy or simply an attempt to tie a devaluationd token to a currently popular narrative is a separate question that the implementation of the proposal will answer. The plan is not yet binding, no final block date has been set, and Harmony has not confirmed whether this decision has passed the governance process of its validators.
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