In the ever-volatile world of cryptocurrency, Bybit exchange suffered a colossal setback on February 21st due to an egregious hack valued at around $1.4 billion, placing it among the most devastating hacks in the history of centralized cryptocurrency exchange. The hack, believed to be the brainchild of the infamous Lazarus Group, resulted in the disappearance of 400,000 ETH-related tokens along with other assets. Bybit CEO, Ben Zhou, has revealed that about 20% of these purloined funds have evaporated, with 77% still capable of being traced, and 3% successfully frozen.
The Exploitation of Decentralized Protocols- A Rising Concern
Zhou sounded a note of caution, stressing on the criticality of the upcoming weeks to thwart any attempts by the hackers to cash out via exchanges, peer-to-peer channels, and over-the-counter platforms. He also drew attention to the accelerated conversion of the looted ETH tokens into Bitcoin on Bybit and subsequent dissipation across a slew of wallets.
A significant chunk of this conversion activity, amounting to 72%, was carried out via the decentralized liquidity protocol, THORChain. This has resulted in a record surge in THORChain’s weekly transaction volumes, exceeding $4.5 billion, as per data collated by DeFiLlama.
However, the misuse of THORChain to facilitate such a colossal heist has sparked off intense debates regarding the role decentralized platforms play in abetting unauthorized transactions. This led to a key THORChain member, TCB disassociating himself from the protocol, expressing concerns over the extent of stolen funds being processed. Furthermore, a proposal to temporarily halt Ethereum transactions on THORChain has been put forth, awaiting a conclusive decision.
While other cross-chain platforms like Chainflip are taking swift measures such as the temporary suspension of swapping services upon detecting the hackers’ activities, and planning upgrades to impede the passage of stolen funds. This highlights the ongoing tussle between preserving the essence of decentralization and resolving practical risks arising from unrestricted fund flows.
Bybit’s Uphill Task of Recovering the Stolen Assets
Zhou had previously admitted that sizable chunks of the pilfered ether have become untraceable, including $79,655 worth of ETH processed via a non-KYC exchange known as eXch. An additional $100 million worth of ether was channeled through the OKX Web3 proxy.
Out of this, $65 million remains untraceable, pending further updates from OKX Web3. Meanwhile, FBI has appealed to exchanges and validators to strip the Lazarus Group of their access, labeling their operation as the “biggest money heist in human history.”
[FAQs]
What was the scale of the Bybit hack?
The Bybit hack resulted in the loss of approximately $1.4 billion worth of cryptocurrency, making it one of the largest in the history of centralized cryptocurrency exchange.
Which group was responsible for the hacking incident on Bybit?
The hack on Bybit exchange is attributed to the Lazarus Group, a recognized cybercrime organization.
How are decentralized protocols implicated in the Bybit hack?
The hackers of the Bybit incident exploited the decentralized liquidity protocol, THORChain, for most of the conversion activity. This has sparked debates about the role decentralized platforms play in facilitating unauthorized transactions.
What measures are being taken to recover the stolen funds from the Bybit hack?
Multiple measures, including tracing the stolen funds, freezing a portion of the stolen assets, and collaborating with law enforcement agencies like the FBI, are being undertaken to recover the stolen funds from the Bybit hack.
