Security and decentralization are essential elements of how blockchains operate. These principles sometimes conflict, as when hidden code allows blockchains to freeze their users’ funds.
Blockchains Capable of Freezing Their Users’ Funds
The cryptocurrency sector is constantly torn between a historical drive toward decentralization and an increasingly necessary need to strengthen user security. This latter requirement can sometimes take rather unexpected forms, according to the latest report from the cryptocurrency exchange platform Bybit.
Indeed, experts from its Lazarus Security Lab have just released a comprehensive report on the ability of certain leading blockchains to freeze their users’ funds. An in-depth investigation conducted using AI across 166 different blockchains reveals surprising findings.
The issue at hand: a “capability to intervene in user transactions to contain security incidents such as hacks or exploits,” which reportedly exists in several distinct forms, divided into three categories:
- A freezing capability built directly into the blockchain’s code;
- An option managed via validator or foundation settings;
- A freeze executed using on-chain contracts.
In practice, the analysis tool developed by the Lazarus Security Lab examined the codebases of these various blockchains in search of modules enabling blacklisting, transaction filtering, or dynamic configuration updates. The data was then analyzed by experienced developers to ensure its accuracy.
Greater transparency is needed
The report’s findings identify 16 popular blockchains capable of effectively and operationally freezing their users’ funds, including 5 with this functionality directly built into their code. Another 19 involve potential implementations that could be introduced in the future.
Blockchains capable of freezing their users’ funds
According to Bybit’s Head of Risk and Security, David Zong, only true transparency can build the necessary trust. This is why he aims to “encourage open dialogue and better governance across the industry” on this specific issue.
Blockchain is based on the principle of decentralization—yet our research shows that many networks are developing pragmatic security mechanisms to respond quickly to threats. As crypto becomes more professional, clearer and more transparent mechanisms will help build lasting trust between users and institutions.
David Zong
According to the study’s conclusion, clearer communication regarding these emergency intervention mechanisms should “become a central pillar of blockchain governance.” Indeed, it seems essential to have effective visibility into the capacity and resources available that blockchains have put in place to intervene in on-chain activity.
