A recent report from Bybit's Lazarus Security Lab has revealed that 16 major blockchains possess built-in mechanisms to freeze user funds. This discovery has reignited discussions about the true nature of decentralization in the cryptocurrency space, as these capabilities allow for intervention in user transactions.
Key Takeaways
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16 major blockchains have active fund-freezing functions, with 19 more capable of implementing them via minor protocol changes.
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Three primary freezing mechanisms exist: hardcoded, configuration-based, and on-chain contract freezing.
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Notable blockchains like BNB Chain, Sui, Aptos, and VeChain have utilized these functions to mitigate hacks and recover stolen assets.
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The report emphasizes the need for greater transparency regarding these emergency controls.
Understanding Fund Freezing
Fund freezing occurs when a blockchain's foundation or governance group can lock a user's assets without their explicit consent. Once an address is blacklisted, tokens within it become inaccessible until removed by the controlling entity. Bybit's study analyzed 166 blockchains, employing AI-assisted scanning and manual validation to identify these functionalities.
Mechanisms of Fund Freezing
The report identifies three distinct methods for freezing funds:
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Hardcoded Freezing: Embedded directly into the blockchain's core code, allowing swift blocking of malicious addresses. Examples include CHILIZ, VIC, XDC, BNB Chain, and VeChain.
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Configuration-Based Freezing: Managed through configuration files or settings controlled by developers and validators. This method allows for private blacklisting without public disclosure. At least ten blockchains, including One, Vic, Aptos, Supra, EOS, Rose, Waxp, Sui, Linea, and Waves, utilize this approach.
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On-Chain Smart Contract Freezing: This method blocks malicious addresses directly through a smart contract, eliminating the need to restart nodes. It is the rarest method, identified only on HECO Chain (Huobi Eco Chain).
Real-World Applications and Implications
These fund-freezing tools have been employed in several high-profile incidents. Sui froze $162 million in stolen assets after the Cetus DEX hack, and Aptos later introduced similar blacklisting functions. BNB Chain used its hardcoded blacklists to limit the impact of a $570 million bridge exploit, while VeChain first used this capability in 2019 following a $6.6 million hack.
While these interventions serve as emergency safeguards to protect users and limit fallout from major hacks, they also raise concerns about centralization. The ability for a small group to control funds challenges the foundational principle of decentralization. Bybit's Head of Group Risk Control and Security, David Zong, stated, "Blockchain was built on the principle of decentralization — yet our research shows that many networks are developing pragmatic safety mechanisms to respond quickly to threats." He stressed that transparency in these mechanisms is crucial for building trust within the industry.
The report also identified 19 additional blockchains that could potentially support fund-freezing capabilities, including ATOM, DYDX, KAVA, LUNA, MANTRA, and SEI. Bybit advocates for clear and transparent safety mechanisms, urging projects to publicly disclose their intervention capabilities and establish robust governance standards for their use.
Sources
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16 Major Blockchains Can Freeze User Funds: Bybit Report, DailyCoin.
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Bybit’s Lazarus Security Lab Reveals Hidden Fund-Freezing Functions Across 16 Major Blockchains — TradingView
News, TradingView. -
Lazarus Security Lab uncovers top blockchains with freeze backdoors, Cryptopolitan.
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Blockchain Freeze Functions Revealed in New Bybit Security Report, CoinLaw.
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Bybit Report Reveals Blockchains That Can Freeze Your Crypto — TradingView News, TradingView.
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