Crypto “Kill Switch” Exposed: Bybit Warns 16 Blockchains Can Freeze User Funds
A brand new report from Bybit’s Lazarus Security Lab has revealed that 16 blockchain networks possess built-in mechanisms that may freeze or limit consumer funds, questioning how decentralized they are surely.
The report, published on Tuesday, analyzed 166 blockchain networks utilizing a mix of AI-driven detection and handbook code evaluation.
It discovered that main chains, together with Binance-backed BNB Chain, VeChain, Chiliz, Viction, and XinFin’s XDC Network, have hardcoded freezing features, permitting builders or validators to halt transactions or lock particular wallets.
BNB Chain, Aptos Among Networks With Built-In Freezing Mechanisms
Bybit’s researchers categorized these management mechanisms into three primary varieties: hardcoded freezing, configuration-based freezing, and on-chain contract freezing.
Ten of the 16 blockchains depend on configuration recordsdata like YAML, ENV, or TOML to handle personal blacklists accessible solely to validators or foundations.
Examples embody Aptos, EOS, and Sui, which may freeze funds through validator-level configuration modifications.
Another 5 networks, together with BNB Chain, embed freezing options of their supply code, permitting blacklisted wallets to be blocked on the protocol stage.
They famous that the Heco Chain (Huobi Eco Chain) stands out as the one community utilizing a sensible contract-based blacklist, executing freezes by means of an on-chain contract.
Though designed for safety, a few of these mechanisms introduce new dangers of centralization and censorship.
“The existence of fund-freezing features, even when applied for safety functions, challenges the notion of full decentralization,” Bybit’s researchers wrote.
The Lazarus Security Lab additionally recognized 19 further blockchains that would introduce comparable capabilities with minor protocol modifications.
Among them are a number of constructed on the Cosmos ecosystem, which makes use of “module accounts,” addresses managed by on-chain logic fairly than personal keys.
Module accounts might theoretically freeze addresses by exhausting fork changes. Though no Cosmos-based chains have finished so but.
“This operate might, in concept, be modified sooner or later so as to add a hacker’s deal with,” the report mentioned.
A Debate Over Security vs. Decentralization
The findings add gas to an ongoing debate within the crypto business over whether or not blockchains ought to have the facility to intervene in consumer transactions.
Supporters argue that such options are important for responding to hacks or legal exercise, whereas critics warn that they undermine the foundational ideas of decentralization and censorship resistance.
Advocates of freezing mechanisms level to the rise in crypto-related crimes, the place court-authorized freezes can recuperate or include stolen property.
Fund-freezing capabilities also can assist forestall cash laundering or terrorist financing and supply safety for traders in circumstances of fraud.
Opponents, nevertheless, argue that such powers create central factors of management, permitting foundations or validators to dam transactions arbitrarily.
This, they are saying, erodes belief in blockchain immutability and opens the door to censorship. Once a sequence has a “kill swap,” even when unused, it might not be thought-about permissionless in follow.
The timing of Bybit’s analysis is noteworthy. It comes simply months after the trade suffered a $1.5 billion cold wallet hack, one of many largest within the business’s historical past.
In that incident, coordinated efforts with companions resembling Circle, Tether, THORchain, and Bitget led to the freezing of $42.9 million in stolen funds, whereas the mETH Protocol recovered a further $43 million price of tokens.
The occasion confirmed either side of the fund-freezing argument. While the intervention helped recuperate tens of hundreds of thousands of {dollars}, it additionally strengthened how centralized the facility to freeze property has grow to be, even on networks marketed as decentralized.
The report stops in need of making coverage suggestions however urges better transparency round such options.
“Blockchains that embody freezing capabilities ought to disclose them clearly,” the authors wrote, warning that undisclosed intervention factors might mislead customers concerning the diploma of management they honestly maintain over their funds.
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