"Is this really decentralized?"...Arbitrum's $100 Million Freeze Aftermath

▲ Cryptocurrency Hacking ©

Arbitrum has frozen $100 million in DeFi hacking funds, preventing further market shock. This incident, where a decentralized network intervened in an emergency, has reignited the debate about the balance between security and decentralization.

According to cryptocurrency media outlet CCN on April 21 (local time), Arbitrum froze approximately 37,066 ETH, valued at about $100 million, linked to the KelpDAO hack. This is the largest response by a major Layer 2 network to date, occurring just two days after the hack.

The frozen funds were moved from the hacker's address to a secure intermediary wallet and are currently inaccessible. Arbitrum stated that this measure was limited to specific addresses and did not affect network users or applications.

This decision was made under the emergency powers of the Security Council within Arbitrum's DAO structure. While decisions are normally made by token holder votes, the Security Council acts swiftly in crisis situations. However, the final disposition of the funds will be determined by a future DAO vote.

The incident originated from the KelpDAO hack on April 18. The attacker exploited a vulnerability in the LayerZero-based rsETH bridge, siphoning off approximately 116,500 rsETH, about 18% of the total supply, with an estimated damage of around $292 million. The hacker then borrowed approximately $236 million worth of assets using the stolen funds as collateral, distributing some to the Ethereum mainnet (approximately $178 million) and Arbitrum (approximately $100 million).

Experts evaluated this incident as another case revealing DeFi risks. They pointed out that the combination of liquidity shortages and structural vulnerabilities caused the market to lose its normal price-forming function, leading to an imbalance where only some large investors could exit first. Meanwhile, additional attack attempts were blocked when KelpDAO activated an emergency pause function within 46 minutes.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*