Key Points
Ethereum developer Tim Beiko has clarified why it’s not possible for the network to “rollback” transactions. This is in response to the recent theft of $1.4 billion from Bybit.
Historical Cases Vs. Current Challenges
Beiko compared the present situation to two historical instances where blockchain reversals were feasible. In 2010, Bitcoin successfully rolled back transactions after a bug led to the creation of 184 billion BTC. This was possible due to the network’s small size and a clear violation of protocol rules.
In a similar vein, the recovery of Ethereum’s 2016 The DAO hack was successful because the stolen funds were frozen for 30 days. This freeze allowed for community coordination.
The Bybit hack, however, presents different challenges. The theft occurred through a compromised multisig interface, making the malicious transactions appear legitimate. From Ethereum’s perspective, these transactions adhered to all protocol rules, leaving no technical grounds for intervention.
Interconnectedness and Irregular State Changes
Beiko also highlighted that the modern cryptocurrency infrastructure has become more complex. The stolen funds were immediately mobile and could be transferred through decentralized exchanges, lending protocols, and cross-chain bridges.
This interconnectedness implies that any attempt to reverse transactions would cause disruption across the ecosystem. This could potentially impact legitimate trades and settlements.
Although Ethereum can theoretically implement “irregular state changes” when funds are frozen and isolated, the last such proposal in 2018 faced strong opposition. The attempt to recover 500,000 frozen ETH from a Parity wallet bug was rejected due to concerns about centralization and precedent.
Recent developments have further emphasized these technical limitations. Crypto mixer platform eXch has declined Bybit’s request to assist in tracking the stolen funds. Blockchain security firm SlowMist reports that hackers have already begun laundering the ETH through eXch, converting it into Bitcoin (BTC), Monero (XMR), and other cryptocurrencies.
SlowMist’s founder has cautioned that eXch has a history of hostile behavior towards security researchers. He recommended that exchanges increase risk controls for funds originating from the platform.
The rapid movement of assets through mixing services demonstrates why technical solutions like rollbacks are no longer viable for major thefts in today’s crypto ecosystem.