Several blockchains incorporate fund-freezing mechanisms to enhance security after major hacks, but these tools challenge the core principles of decentralization and user control, as revealed in a comprehensive analysis of 166 networks.
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Hardcoded freezing logic exists in networks like BNB Chain and VeChain for direct address blocking.
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Configuration file controls allow developers or validators to toggle freezing on newer chains such as Sui and Aptos.
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On-chain smart contract execution enables instant wallet freezes in systems like HECO and Klaytn, with 16 networks featuring direct capabilities and 19 more via minor adjustments, according to the Bybit Lazarus Security Lab report.
Discover how blockchain fund freezing tools balance security and decentralization amid rising hacks. Explore mechanisms, impacts, and future governance in this in-depth analysis. Stay informed on crypto innovations today.
What Are Blockchain Fund Freezing Mechanisms?
Blockchain fund freezing mechanisms are built-in features in certain networks that allow administrators to temporarily block access to specific wallet addresses or tokens, primarily to prevent the movement of stolen funds following security breaches. These tools, categorized into hardcoded logic, configuration controls, and smart contract executions, were identified in a study by Bybit’s Lazarus Security Lab examining 166 blockchain projects. While they provide essential safeguards against fraud, they introduce centralized elements that can undermine the decentralized ethos of blockchain technology.
How Do Fund Freezing Features Impact Decentralization?
Fund freezing features can significantly alter the balance between security and decentralization by granting select entities—such as developers or validators—the authority to intervene in transactions. For instance, after the Cetus decentralized exchange hack on Sui earlier this year, the Sui Foundation froze over $160 million in stolen tokens, demonstrating the practical benefits but also sparking debates on control. The Lazarus Security Lab report highlights that such interventions, while effective in asset recovery, risk eroding user autonomy and censorship resistance, key pillars of blockchain design.
The analysis underscores that older, permissionless networks like Bitcoin and Ethereum avoid these mechanisms entirely to preserve full decentralization. In contrast, enterprise-oriented blockchains increasingly adopt them to comply with regulatory demands, such as Anti-Money Laundering (AML) standards. Experts from the Lazarus team emphasize the need for transparency: “Freezing powers should be governed collectively, not by a single authority, to maintain trust in the ecosystem.” This structured approach ensures users can scan for critical risks, with data showing 16 networks with direct freezing and 19 adaptable via protocol tweaks.
Frequently Asked Questions
Which Blockchains Have Built-In Fund Freezing Capabilities?
Several blockchains, including BNB Chain, VeChain, Sui, Aptos, HECO, and Klaytn, feature fund freezing mechanisms. The Bybit Lazarus Security Lab’s review of 166 networks confirmed 16 with direct tools and 19 more enabling them through simple changes, often added post-hack to secure assets without external intervention.
Why Do Blockchains Add Freezing Tools After Hacks?
Blockchains introduce freezing tools after hacks to halt the transfer of stolen funds and aid recovery, as seen in VeChain’s 2019 update following a $6.6 million theft and BNB Chain’s response to a $570 million exploit in 2022. These measures protect users and comply with financial regulations while addressing vulnerabilities in real-time.
Key Takeaways
- Three Core Freezing Types: Hardcoded logic in BNB Chain and VeChain; configuration files in Sui and Aptos; smart contracts in HECO and Klaytn provide varied control methods.
- Post-Hack Implementations: Many features emerged after incidents like the Sui Cetus hack, freezing millions to prevent further losses but highlighting centralization risks.
- Balancing Act Required: Networks must ensure transparent, limited use of freezing to uphold decentralization—consider community governance for future protocols.
Conclusion
Blockchain fund freezing mechanisms offer vital security against hacks and fraud, yet they pose ongoing challenges to decentralization, censorship resistance, and user sovereignty in networks analyzed by Bybit’s Lazarus Security Lab. As the industry evolves, particularly in enterprise applications, striking a balance through transparent governance will be essential. Investors and developers should monitor these developments closely to navigate the shifting landscape of blockchain control and stay ahead in the crypto space.
Several blockchains added fund-freezing tools after major hacks, raising questions about control and decentralization in such networks.
Key Highlights
- The report identifies three types of freezing systems: hardcoded, config file controls, and smart contract methods.
- Many freezing features were added after major hacks to stop stolen funds, raising concerns about central control.
- Researchers say the industry must balance security and decentralization, ensuring that such powers are transparent and not held by one authority.
Bybit’s Lazarus Security Lab revealed that several blockchain networks feature built-in functions that can freeze funds, casting doubt on decentralization, censorship resistance, and user control.
The results again raise questions about decentralization, censorship resistance, and how much control users really have over their assets.
After reviewing 166 blockchain networks, researchers found that 16 blockchains have direct fund-freezing features and another 19 could enable similar functions by way of small protocol changes. These mechanisms range from hard-coded logic and configuration-based permission to contract-level control.
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Different types of freezing
The report, titled “Blockchain Freezing Exposed,” categorizes these systems into three main types: hard-coded logic, configuration file controls, and on-chain contract execution.
Hardcoded logic means the power to block wallet addresses is baked directly into the blockchain software itself. The arrangement is already available on networks like BNB Chain and VeChain.
A second approach, configuration file controls, grants the developer or validator the ability to enable or disable freezing via configuration files. Newer chains like Sui and Aptos use this approach.
The third category is the on-chain contract execution model, which depends on smart contracts that allow administrators to freeze or unfreeze wallets instantly through special commands. HECO and Klaytn are among the networks using this model.
Lessons from recent hacks
The Lazarus team started its investigation after the Sui Foundation froze more than $160 million in stolen tokens following a major hack on the Cetus decentralized exchange earlier this year. The move was widely viewed as a success for protecting investors, but it also triggered difficult questions about who really holds power on “decentralized” networks.
Most of the other blockchains added freeze functionalities only after multimillion-dollar hacks. VeChain added its blacklist system in 2019 after a $6.6 million theft, and BNB Chain added similar functionality after it suffered a $570 million exploit in 2022.
While these tools aid in the recovery of funds from theft, they also enable different entities to interfere with steps that make them slowly drift from security towards centralization.
Security vs. Decentralization
The report points out that freezing tools can protect users and help combat fraud, but they also risk undermining one of blockchain’s core values: freedom from centralized control.
More recently developed enterprise-focused blockchains are adding in such controls for meeting regulatory or compliance needs, but old ones like Bitcoin and Ethereum remain completely decentralized and do not provide a freeze function.
Some developers maintain that these systems are necessary to combat Anti-Money Laundering (AML) and fraud, while others see them as emergency tools. The Lazarus team maintains that the development of such powers must be made transparent and collectively governed, not at the discretion of any single authority.
AI behind the research
To perform the research, the researchers employed AI tools that could scan open-source blockchain code on GitHub for freeze-related functions, blacklists, and validator permissions. A total of 166 projects were scanned, after which human experts manually confirmed the results.
This process showed that while some freezing functions were public, others were hidden deep within code repositories, indicating that not all users know just how much control network operators have.
The future of blockchain governance
The report points to a growing divide between open, permissionless blockchains that run purely on community consensus, and permissioned networks that give certain groups some control for security or compliance.
As blockchain moves deeper into finance and enterprise use, that gap is only getting wider. Developers now face a tricky question: how do you build systems that stay secure without giving up decentralization?
The study suggests that while decentralization is still a core value for most projects, there’s a slow but steady shift toward more controlled governance. It says the real challenge is making sure that kind of control stays transparent, limited, and used only when truly needed.
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