Bybit Report Reveals Blockchain Fund Freezing Capabilities Sparking Decentralization Debate
Blockchain technology promises decentralization and financial freedom. However, a recent study challenges this notion. Bybit’s Lazarus Security Lab analyzed 166 blockchain networks and discovered that 16 major blockchains contain built-in fund-freezing capabilities. The finding has ignited intense discussions about the balance between security and decentralization.
The report titled “Blockchain Freezing Exposed: Examining the Impact of Fund Freezing Ability in Blockchain” examined codebases using AI-assisted analysis combined with manual validation. The results revealed something many crypto holders never anticipated: their chosen networks might possess the power to lock their assets without consent.
Understanding Blockchain Fund Freezing Mechanisms
Fund freezing occurs when a foundation or governance body can lock user assets without their permission. Once an address gets blacklisted, tokens become inaccessible to the original owner. Only removal by the foundation or governance group can restore access.
The research identified three distinct freezing methods across different networks. Hardcoded freezing embeds the capability directly into blockchain code. This approach allows foundations to swiftly block malicious addresses and prevent stolen funds from moving. BNB Chain, VeChain, CHILIZ, VIC, and XDC currently employ this method.
Configuration-based freezing uses files managed by developers and validators to control blacklists. This technique allows private address blocking without public disclosure. Ten blockchains, including Aptos, Sui, EOS, Rose, Waxp, Linea, and Waves, utilize this approach.
The rarest method, on-chain smart contract freezing, blocks addresses directly through contracts without requiring node restarts. HECO Chain remains the only network identified using this mechanism.
Major Networks Can Implement Blockchain Freezing Quickly
Beyond the 16 networks with active freezing functions, the research uncovered another concerning fact. An additional 19 blockchains could add fund-freezing features with minor protocol updates. This revelation suggests the capability might become more widespread than previously understood.
Notable networks with current freezing mechanisms include Ethereum, Solana, BNB Chain, and Polygon. These platforms rank among the most popular blockchain networks by market capitalization and user adoption.
Blockchain Fund Freezing Used During Security Incidents
The interventions demonstrate how fund-freezing tools serve as emergency safeguards to protect users and limit fallout from major hacks. Several high-profile cases show these mechanisms in action.
Sui froze $162 million in stolen assets following the Cetus hack. BNB Chain used hardcoded blacklists to limit damage from a $570 million bridge exploit. VeChain took early action in 2019 by freezing funds from a $6.6 million breach.
These real instances demonstrate that blockchain fund freezing capabilities serve practical security purposes. Networks can respond rapidly to protect users from losing assets to hackers and exploiters.
Blockchain Security Versus Decentralization Principles
David Zong, Head of Group Risk Control and Security at Bybit, acknowledged the tension between founding principles and practical security needs. “Blockchain was built on the principles of decentralization, but our research shows that many networks are developing pragmatic security mechanisms for rapid threat response,” he noted.
Community reactions revealed divided opinions. Some users expressed outrage at discovering blockchains could freeze their funds. One observer compared the situation to expecting decentralization but receiving “smart contract with parental controls.”
However, not everyone views these capabilities negatively. The ACY Securities team described the findings as “scare tactics,” arguing that the code represents publicly verifiable governance features necessary for major updates rather than sinister plots.
Transparency Around Blockchain Freezing Capabilities Required
Experts urged projects to adhere to transparency principles and disclose all information regarding emergency intervention capabilities. At Bybit, transparency builds trust, and the goal is to encourage open dialogue and better governance across the industry.
The research team constructed an AI-assisted detection framework specifically for this analysis. The system scanned blockchain codebases for blacklisting tools, transaction filtering modules, and other control mechanisms. Human researchers validated each flagged instance to ensure accuracy.
Conclusion
The Bybit report highlights a fundamental tension within blockchain technology. While fund-freezing mechanisms provide critical safeguards against theft and exploitation, they challenge core decentralization ideals. The crypto community must now grapple with whether security justifies centralized control capabilities. Transparent governance frameworks and public disclosure of these powers will determine whether blockchains can maintain user trust while protecting against threats.
