Dubai-based cryptocurrency exchange Bybit suffered a shocking security breach on February 21, 2025, with hackers stealing around $1.5 billion in Ethereum (ETH) from the exchange. Today it is known as the biggest cryptocurrency heist in history
According to initial reports, the attackers gained access to one of Bybit’s cold wallets and moved more than 400,000 ETH to unknown addresses. Blockchain analytics firms Arkham Intelligence and Elliptic have attributed the attack to North Korea’s Lazarus Group, responsible for other major cybercrimes in the past.
The Controversial Rollback Proposal by Arthur Hayes
Arthur Hayes, co-founder of the crypto exchange BitMEX and one of the largest holders of ETH, proposed a radical solution in the aftermath of the hack: rolling back the Ethereum blockchain in order to undo the effects of the theft. Hayes wrote directly to Ethereum co-founder Vitalik Buterin on social media, wondering if he would
“advocate to roll back the chain to help @Bybit_Official.”
He backed up his proposal by pointing to the 2016 DAO hack in which Ethereum successfully executed a hard fork and recovered $60 million in stolen funds—the fork that also created Ethereum Classic. And since the community has previously voted against immutability, it could vote similarly in this case, he argued.
Community’s Firm Rejection
Hayes’s proposal was swiftly and overwhelmingly rejected by the Ethereum community. Core developers and community members argued that a rollback of this type would directly contradict the fundamental reasons why Ethereum exists: decentralization and immutability.
Gautham Santhosh is the co-founder of Polynomial, emphasizing the challenges a rollback would present as the Ethereum ecosystem has grown too interconnected since 2016, with countless bridges, stablecoins, Layer 2s, and real-world assets that could be disrupted by a rollback.
The Technical Impracticalities of a Rollback
In addition to philosophical objections, technical challenges make a rollback unfeasible. Ethereum uses an account-based model, in which balances for each account are stored directly on the blockchain. Reversing transactions would need the agreement of the whole network and could potentially throw out millions of legitimate transactions since the hack. Rollback is infeasible due to the complexity and potential for widespread disruption.
Bybit Response and Assurance
Following the breach, Bybit CEO Ben Zhou reassured users that the exchange was solvent and all customer assets were backed 1:1. He also stressed that regardless of whether the stolen funds are returned or not, Bybit can afford to absorb the losses, noting that it has $20 billion worth of assets from customers. According to Zhou, there had been an influx of withdrawal requests in the wake of the incident, but conditions have stabilized since then as the exchange is working through requests as quickly as they can.
The DAO Hard Fork
A historical precedent is the 2016 DAO hack, wherein the Ethereum community implemented a hard fork to return stolen funds, resulting in the formation of Ethereum Classic. But these past nine years, the ecosystem has grown and become more complex around the world, making these interventions far more complicated and contentious.
The general view seems to be that no fork or reverse of a previously existing state would be feasible or even desirable since it would expose the whole chain to problems of permanent loss of funds (we all know HT from Ethereum) or crazy OS like Bitcoin Cash.
Reinforcing Security Protocols
This unfortunate event highlights the urgent necessity for stricter security measures in the cryptocurrency sector. To address this challenge, exchanges and platforms need to focus on building robust security infrastructures, leveraging multi-signature wallets and hardware security modules, and conducting regular security audits, as cyber threats are becoming increasingly sophisticated.
This ratification of a rollback by the community just goes to show that following a decentralized model is imperative and must be actively enforced to sustain against vulnerabilities that may potentially be exploited for such breaches.
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Frequently Asked Questions
1. Is it possible for the blockchain network to undo transactions and refund stolen funds?
Because of the network’s decentralized nature, no, it will not be possible to reverse transactions. Changes need to be agreed upon, or they will endanger trust and security and upset billions of legitimate transactions.
2. Cost. Why are developers and users opposing the rollback proposal?
Rollback violates decentralization, immutability, and credibility. There’s a new disabled smart contract and a new scenario of manipulation; this sets up a dangerous precedent that erodes trust in blockchain security and governance in general.
3. Have they ever changed anything after a significant hack?
Yes, there was a hard fork after the 2016 DAO hack, which was highly controversial and led to two versions, one as original and one as classic.
4. What impact does this debate have on decentralization and security?
This reaffirms a focus on immutability, highlighting the weaknesses of centralized avenues and pushing exchanges to enhance security and provide improved risk management practices.
Glossary of Key Terms
1. Rollback: A rollback is reversing blockchain transactions to a prior state, usually after a catastrophic exploit or mistake.
2. Hard Fork: An upgrade to a blockchain protocol that is non-backward-compatible, where nodes must upgrade their software or they end up on a different chain.
3. Decentralization: This is the concept that there will be no single “singularity” controlling the blockchain, which is what makes it secure, transparent, and less susceptible to manipulation.
4. Smart Contracts: contracts that are self-executing on top of a blockchain and automatically enforce agreements without the need for intermediaries.
5. Blockchain Immutability: Unable to change or delete transactions after they have been added to the blockchain.
6. Proof of Stake (PoS) is a consensus method in which validators pledge cryptocurrency as collateral to increase the network’s safety and validate transactions.
7. Lazarus Group: A state-sponsored hacking group from North Korea, responsible for widespread cryptocurrency theft.
8. Ethereum Governance: The broad, decentralized process by which developers, validators, and stakeholders decide on Ethereum’s protocol upgrades and rule enforcement.
