Bybit Uncovers 16 Blockchains Capable of Freezing User Funds

A security research team from the prominent cryptocurrency exchange Bybit has discovered 16 blockchain networks that possess the technical capability to freeze or restrict user funds.

Key Takeaways

Bybit identified 16 blockchains with the ability to freeze user funds, analyzed through their Lazarus Security Lab.
The report highlighted three freezing mechanisms used by these blockchains at the protocol level.
Ten of the identified blockchains can utilize configuration-based freezing managed through files accessible to a few authorized parties.
The presence of these freezing mechanisms raises concerns regarding censorship and centralized control in otherwise decentralized systems.

Bybit finds 16 blockchains with power to freeze user funds

Bybit’s Lazarus Security Lab, in a recent report, evaluated how the ability to freeze funds might affect various blockchain networks, analyzing a total of 166 of them. Their investigation utilized AI-based analysis along with manual assessments, revealing that certain networks, like the Binance-supported BNB Chain, come with built-in freezing functions. Additionally, they noted that the Cosmos chain is among 19 networks that could adopt freezing capabilities with relatively minor changes to their protocols.

Detailed Findings

Three Distinct Freezing Mechanisms

The Lazarus Security Lab report classified the freezing capabilities into three main mechanisms at the protocol level:

Hardcoded Freezing Method (Public Blacklist)
Configuration File-Based Freezing Method (Private Blacklist)
On-chain Smart Contract-Based Freezing Method

Source: Bybit’s Lazarus Security Lab

According to their findings, 10 out of the 16 blockchains that can freeze funds utilize config-based freezing. This system involves local configuration files, like YAML, ENV, or TOML, which are generally only accessible to validators, the founding teams, and core developers. Within this category, notable layer-1 blockchains mentioned include Aptos, Eos, and Sui.

Among the five blockchains where freezing capabilities are hardcoded directly into their source code, Bybit’s analysts pointed out BNB Chain, VeChain, Chiliz, Viction, and XinFin’s XDC Network. The report referenced their GitHub repositories to demonstrate the hardcoded freezing functionalities.

Source: Bybit’s Lazarus Security Lab

The report noted that the Heco chain, or Huobi Eco Chain, uniquely employs an on-chain smart contract to manage its blacklist.

Potential Risks with Cosmos Ecosystem

Focusing on the 19 identified blockchains that could potentially adopt fund freezing features, Bybit's researchers emphasized the importance of module accounts within the Cosmos ecosystem. Unlike standard user accounts, module accounts are governed by module logic instead of private keys, which could facilitate transaction restrictions.

The report thoughtfully noted, “This function could, in theory, be modified in the future to add a hacker’s address, but so far none of the blockchains in the Cosmos ecosystem have used it in this manner.”

Bybit’s researchers cautioned that while these freezing mechanisms are often intended to prevent hacking and theft, they also raise significant concerns regarding censorship and centralized control within blockchain networks.

Implications for Decentralization

These findings add to the ongoing discussion about whether blockchain networks, despite being branded as “decentralized,” truly embody that nature in practice. Numerous projects are increasingly integrating emergency controls, compliance modules, and admin-centric privileges, which can blur the line between essential security features and centralization.

This report comes just months after Bybit experienced a $1.5 billion cold wallet hack, marking one of the most significant security breaches in the cryptocurrency sector. With coordinated action from partners such as Circle, Tether, THORchain, and Bitget, the community successfully froze $42.9 million of the exploited funds, while mETH Protocol managed to recover nearly $43 million in cmETH tokens.

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