Arthur Hayes, the co-founder of BitMEX and a prominent holder of ether (ETH), has made a controversial proposal to Ethereum co-founder Vitalik Buterin. He suggests rolling back the Ethereum network to assist Bybit, an exchange that suffered a staggering loss of nearly $1.4 billion in ether due to a recent hacking incident.
The Proposal to Rollback Ethereum
In a post on social media platform X, Hayes expressed his concerns about the state of Ethereum, stating, “Will you advocate to roll back the chain to help @Bybit_Official? As a significant $ETH holder, I believe $ETH ceased being money after the DAO hack hard fork in 2016. If the community is open to doing it again, I would support it since we previously voted against immutability in 2016.” As of the time of writing, Buterin has not publicly responded to the proposal.
Details of the Bybit Hack
The hack at Bybit came to light on Friday when on-chain analyst ZachXBT reported suspicious outflows exceeding $1.4 billion from the exchange. The attacker quickly moved to swap stolen assets, including mETH and stETH, for ether using a decentralized exchange. According to Gautham Santhosh, co-founder of Polynomial.fi, the hacker distributed the stolen ether across multiple addresses, splitting 10,000 ETH into 39 different wallets and another 10,000 ETH into nine others.
In a statement, Bybit CEO Ben Zhou confirmed that the hacker gained access to a specific ETH cold wallet and transferred all its contents to an unidentified address. Despite the significant loss, Zhou reassured users that the exchange remains solvent.
Understanding Blockchain Rollbacks
One proposed solution to address hacking incidents is to perform a rollback of the blockchain. This process involves reverting the blockchain to a state prior to the hack, effectively erasing any malicious transactions and restoring lost or stolen funds. However, implementing a rollback requires consensus among network participants and is fraught with challenges.
Historical Context: The DAO Hack
A notable precedent for such actions occurred in 2016 when the Ethereum network was rolled back following the theft of $60 million in ether from The DAO. This hard fork resulted in a split of the blockchain into two distinct entities: Ethereum and Ethereum Classic.
In 2019, following a $40 million hack of Binance, CEO Changpeng Zhao contemplated a similar rollback on the Bitcoin network. However, this proposal faced backlash, as many in the Bitcoin mining community viewed it as a violation of the core principles of decentralization and immutability that underpin blockchain technology.
The Immutability Dilemma
Immutability is a key feature of blockchain that ensures data cannot be altered once recorded, providing a trustworthy and tamper-proof environment. Concerns have been raised about the potential implications of a rollback on Ethereum’s integrity. Santhosh commented, “While I wish we could roll back for the Bybit hack, I am not opposed to the idea. However, the DAO hack represented only 15% of ETH with a clear recovery path. Today, a rollback would disrupt bridges, stablecoins, L2s, RWAs, and much more. The ETH ecosystem is far too interconnected for a straightforward solution like in 2016.”
A Balancing Act for Ethereum
Sina 21st Capital weighed in on the situation, stating that Ethereum is currently facing a significant dilemma. “Ethereum is at a crossroads. They can choose to roll back the chain and undermine their decentralization claims, or they can allow malicious actors to retain $1.4 billion of ETH, leading to ongoing internal conflict. Either choice poses serious risks.”
Market Reactions
In the wake of the hack and the ensuing discussions, ether’s value has dropped nearly 3% within 24 hours. Nevertheless, it continues to trade within a range of $2,600 to $2,800, as indicated by data from CoinDesk. The market’s response underscores the volatility and uncertainty surrounding Ethereum’s future in light of such significant security breaches.
