Harmony sets Sept. 10 deadline for ONE holders to exit DeFi

Harmony has told ONE holders to leave smart contracts by Sept. 10 because liquidity pools, multisig vaults and on-chain applications cannot move to Ethereum under its proposed network closure.

Harmony said users do not need to file a claim for replacement ONE tokens, but the automatic process only covers balances captured in the final blockchain snapshot.

The warning creates two different paths for holders. ONE kept in a standard wallet would be recorded and recreated on Ethereum, while tokens deposited into decentralized finance protocols may need to be withdrawn before the deadline.

Harmony has not disclosed when it will produce the final block or complete the airdrop. Sept. 10 is therefore an exit deadline for smart-contract users and the date from which validators may begin closing their nodes, not the confirmed date of the mainnet shutdown.

Why ONE holders must leave smart contracts

Under the proposal, Harmony would record ONE balances at the blockchain’s final block before issuing replacement tokens as ERC-20 assets on Ethereum. Covered balances include tokens in personal wallets, staking delegations, unclaimed validator rewards, and centralized exchange accounts.

The project said the new tokens would be sent to the same Ethereum-compatible addresses listed in the snapshot. Since Harmony uses addresses compatible with Ethereum’s format, holders would not need to complete a separate claim or submit personal information.

Smart contracts present a more complex problem. Although the snapshot can record how much ONE a contract holds, it cannot reproduce the full state, ownership rules, or functions of every application on Ethereum.

Liquidity pools may contain two or more assets and issue separate liquidity provider tokens representing each user’s share. Multisig vaults depend on contract rules that require several approved signers, while lending markets track collateral, loans, interest, and liquidation conditions. Harmony said such applications and positions cannot be copied automatically.

Users with funds in decentralized exchanges, lending services, or other Harmony applications must therefore interact with the relevant protocol and withdraw before Sept. 10. The project has not announced a separate recovery route for assets that remain locked in contracts after the deadline.

Removing liquidity may also require users to convert liquidity provider tokens back into their underlying assets. Any protocol-specific waiting period, withdrawal restriction, or unavailable interface could affect whether a user can complete the process before the cutoff.

Harmony has not published a complete list of affected applications. Holders will need to review their wallet activity and check whether any ONE or other tokens remain deposited in smart contracts rather than sitting directly at their addresses.

Exchange users will depend on platform support

ONE held on centralized exchanges is expected to qualify for the migration because Harmony plans to include exchange wallets in the final snapshot. The team said it would work with trading platforms to replace existing ONE balances and move listings to the ERC-20 version.

Individual customers would not control the migration process when an exchange holds their tokens. Each platform may set its own suspension schedule for deposits, withdrawals, and trading while it updates its wallet infrastructure.

Harmony has not named the exchanges supporting the move or released their operating schedules. Exchange users may need to monitor official notices to determine whether their platform will manage the conversion, require a withdrawal, or discontinue ONE trading.

Self-custody users face a different concern. The replacement tokens are supposed to arrive at the Ethereum address matching their Harmony wallet, so holders must retain access to the private key or recovery phrase controlling that address.

Sending tokens to another wallet before the snapshot would change which address receives the Ethereum allocation. Harmony has not yet announced the snapshot block, meaning users moving funds after leaving DeFi applications must continue tracking official updates.

The proposal would keep ONE’s total supply and issuance schedule unchanged. Harmony also plans to publish the Ethereum contract, snapshot calculations, and airdrop scripts for public review, although those materials were not available when the plan was announced.

As previously covered by crypto.news, the migration forms part of Harmony’s proposal to retire the Layer 1 network it launched in 2019. The team cited security threats from state-backed attackers and AI agents when explaining why it no longer wanted to operate an independent blockchain.

Validators can close nodes from Sept. 10

Validators may begin shutting down their nodes on Sept. 10 under a separate transition process. Harmony has allocated $1.372 million to compensate eligible validators and delegators, with payments scheduled over four quarterly installments.

Receiving compensation requires validators to stop their nodes within the stated period, sign an agreement, maintain their stakes, and continue working as governors. Harmony said the fund would also cover the difference between rewards earned at a validator’s last block and the network’s eventual final block.

Delegated ONE and unclaimed validator rewards would be placed into individual governor vaults rather than handled like ordinary wallet balances. The team has not explained how the $1.372 million will be divided or published the agreements that validators must sign.

Governors could later remain in the project’s decision-making structure or participate in Harmony’s proposed AI video business as operators or affiliates. Under the plan, future ONE issuance would support what the team calls a video “remix economy.”

Harmony said creators would publish prompts and other materials that users could modify, with AI agents producing additional video clips from each branch. Operators would manage video generation, distribution, and moderation, while staking and service uptime would affect their rewards.

The project has projected up to $1 million in combined operator revenue during the first year and plans to subsidize graphics-processing hardware. Harmony has also proposed a $10 monthly subscription and a recurring 30% commission for referred subscriptions, though neither figure represents confirmed revenue.

U.S. holders may need to preserve migration records

American holders may need records showing their original ONE purchases, withdrawals from Harmony applications, final snapshot balances, and receipt of the Ethereum tokens.

The IRS classifies digital assets as property and generally requires taxpayers to report sales, exchanges, and other disposals. Its digital asset guidance also requires taxpayers to answer a digital asset question on federal income tax returns.

Harmony describes the Ethereum asset as a replacement version of ONE with the same supply and emission rate. The IRS has not issued a decision on the tax treatment of this specific migration, leaving the result dependent on the transaction’s structure and each holder’s circumstances.

Closing a DeFi position before Sept. 10 could involve more than a wallet transfer. A user may need to exchange a liquidity provider token, repay a loan, remove collateral, or swap assets, and each action can create separate records relevant to U.S. reporting.

Exchange customers may receive transaction information through Form 1099-DA, where the reporting rules apply. The IRS states that taxpayers must still report taxable digital asset activity even when a broker does not issue the form.

Harmony deadline follows a disruptive August exploit

The deadline follows an August security incident in which attackers used a cross-shard verification flaw to create unauthorized ONE. Harmony’s later investigation found that more than 3 trillion tokens had been generated through six transactions.

One connected wallet attempted 534 transfers of 5 billion ONE within 106 seconds, according to the project’s reconstruction. Of that total, 477 transactions succeeded and moved 2.385 trillion tokens into wallets, exchanges, decentralized exchange routers, liquidity pools, bridges, and staking accounts.

Harmony initially proposed a two-shard blockchain rollback to checkpoints recorded at 11:25:37 p.m. UTC on Aug. 11. The plan would discard 141,628 shard 0 blocks containing 109,126 regular transactions and 315 staking transactions.

The network classified 104,545 of the regular transactions as automated activity, including almost 100,000 connected to decentralized exchange automation. Legitimate transactions completed after the checkpoints would also be removed under the rollback.

A separate staking flaw disclosed in December 2023 had previously created 146.28 million ONE across 74 delegator addresses. Harmony fixed that incident through an emergency hard fork at block 51,118,080.

In June 2022, attackers also stole about $100 million from Harmony’s Horizon Bridge after compromising keys controlling its multisig wallet. The project later revised its recovery plan after community opposition forced it to withdraw a proposal to mint 4.97 billion ONE for victim compensation.