Bybit Hack: Will Ethereum Roll Back the Blockchain to Help Out the Exchange?

BitMEX co-founder Arthur Hayes has suggested that Ethereum roll back, essentially cancelling out stolen funds, in the aftermath of the Bybit hack.

BitMEX co-founder Arthur Hayes has suggested that Ethereum should roll back, essentially cancelling out the stolen funds, in the aftermath of the Bybit hack. He points out that Ethereum did a similar action back in 2016 when a hard fork was created to counteract a major security breach. Such a rollback after the Bybit breach would seem reasonable, given that the amount of stolen funds is the largest in crypto history.

In what has been described as a black swan event, Bybit lost around $1.4 billion worth of Ethereum on Friday. Although all the details are yet to emerge, online investigator ZachXBT claimed that the wallets used in the attack are connected to wallets used by North Korea’s hacking group Lazarus.

Arthur Hayes, an Ethereum holder, has asked Vitalik Buterin on X whether a rollback would be possible to help out the Bybit exchange. Ben Zhou, Bybit CEO, has also reached out to Buterin and asked whether there is anything that the Ethereum Foundation can do to minimize the impact of the breach. Zhou concedes that any actions would have to be asked of the Ethereum community so that they can approve of any changes.

Zhou was asked on February 22, at an online event, whether he supported an Ethereum rollback. He replied:

“I’m not sure if it’s one man’s decision. Based on the spirit of blockchain, maybe it should be a voting process to see what the communities want, but I am not sure.”

The 2016 DAO attack stole around $60 million worth of Ethereum. This prompted the hard fork, which essentially rolled back the blockchain.

Many Ethereum developers are against the rollback option because it violates the principles of decentralization and immutability. If Buterin decides to rollback Ethereum without involvement from other developers or community members, that may be seen as a change in underlying principles.

However, Ethereum may need leadership now more than ever and less reliance on consensus. After all, part of the breakdown with Bitcoin happened as a result of an overfocus on consensus and less focus on leadership. As the saying goes, too many cooks spoil the broth. Further, Buterin has indicated a shift in policy by refusing to break his moral code regarding online casinos, even if there is widespread support for crypto gambling.

Bitcoin advocate Jimmy Song claims the comparison between Bybit and the DAO hack is a false one, pointing out that in the event of 2016, a 30-day intervention period existed, whereas with Bybit, the hack has already been finalized.

“I know people are expecting the Ethereum Foundation to roll back the chain, but I suspect it’s already too much of a mess to do it cleanly,” said Song.

There is still debate about the exact details of the DAO hack, specifically the percentage of funds stolen by the hackers, yet the end result is agreed on: a hard fork splitting the ETH token into Ethereum classic and Ethereum.

Furthermore, the term “rollback” was not used in 2016. The developers instead referred to the event as an “irregular state transition.” The event still raises questions regarding the immutability of blockchains.

Other factors that may influence the Ethereum community to embrace a rollback are the possibility of North Korea using the funds to proliferate nuclear weapons and the sheer magnitude of the hack, surpassing all of the top hacks of 2024.

Shortly after the attack, multiple transactions were made to move assets off the Bybit platform. The mETH protocol released a post-mortem report detailing the hack, revealing that mETH was used to swap stolen tokens. The mETH token is on the Ethereum network and allows users to stake their ETH tokens and receive mETH in return.

The mETH report reveals that 8,000 mETH were swapped for ETH, and 15,000 cmETH were attempted to withdraw. However, the mETH protocol refused the withdrawal. The protocol had an 8-hour withdrawal delay, which prevented the attackers from withdrawing the token. The mETH team blacklisted the attackers’ address and placed the recovered 15,000 cmETH into a safe address.

Bybit users panicked after the attack and started withdrawing their funds. This event brought back traumatic memories of the FTX scam and left many crypto holders concerned about their tokens. Despite the magnanimity of the breach, the crypto community seems to be used to these events and is responding quickly with concrete actions.