Bybit Hack and Ethereum Rollback: What It Means for Blockchain Immutability

Key Takeaways

• Hackers stole 401,000 ETH ($1.5 billion) in the Bybit hack, making it one of the largest crypto thefts in history.
• The FBI attributed the attack to the Lazarus Group, a North Korean-backed hacking organization.
• A rollback proposal sparked a major debate on Ethereum’s immutability.
• The incident raises security, governance, and regulatory concerns, pushing for stronger protections.

​Bybit, a prominent cryptocurrency exchange, suffered a significant security breach on February 21, 2025, resulting in the theft of approximately 401,000 ETH, valued at $1.5 billion. 

A few days later, the FBI attributed this attack to the Lazarus Group, a North Korean cybercriminal organization known for targeting cryptocurrency platforms. ​

This incident is part of a series of increasingly sophisticated, state-backed cybercrimes that raise concerns about funding illicit activities, including weapons development. 

The Ethereum blockchain also became a focal point in the aftermath, as discussions emerged about whether the network should consider a rollback to recover the stolen funds. 

Ethereum’s response to the hack sparked a debate about immutability, decentralization, security trade-offs, and comparisons to the 2016 DAO attack, which led to Ethereum’s controversial hard fork. The event split the network into Ethereum (ETH), which reversed the hack, and Ethereum Classic (ETC), which kept the original chain: one side prioritized fund recovery, and the other defended immutability. 

Ethereum later switched from proof-of-work (PoW) to proof-of-stake (PoS) in the Merge upgrade, mainly due to environmental concerns. Meanwhile, Ethereum Classic still uses the PoW consensus mechanism. 

Similar arguments resurfaced after the Bybit hack, raising questions about whether reversing transactions could undermine Ethereum’s principles or serve as a necessary measure to protect users.

This article explores how the Bybit hack occurred, its connection to the idea of an Ethereum rollback, and the broader implications for the crypto industry.

How the Bybit Hack Happened

Investigators believe the attack began with phishing and social engineering, allowing hackers to obtain credentials and manipulate the transfer of funds from a cold wallet. 

Once access was gained, the stolen funds were rapidly laundered through a series of intermediate wallets, mixers, and off-chain addresses.

Reports confirm that hackers sent some of the stolen funds through Tornado Cash, a crypto mixer sanctioned in 2022 in the U.S. for obscuring transactions.

The attack exposed critical weaknesses, primarily within the wallet provider’s (Safe, formerly Gnosis Safe) multi-signature infrastructure. The hackers bypassed approval layers and gained access to wallets that should have been secure. 

Bybit quickly froze the affected accounts, using blockchain analytics to trace the stolen ETH. 

However, recovery was nearly impossible due to the sophistication of laundering methods and the scale of the attack.

The incident sparked concerns about centralized exchange security and the risks associated with the security of crypto reserves.

What Is a Rollback?

A rollback in blockchain refers to reversing transactions to restore a previous network state. This process erases certain transactions from the chain as if they never happened. 

Rollbacks challenge the principle of immutability in blockchain, which ensures that a transaction cannot be changed once a transaction is recorded. As a result, they are a very debatable measure.

Should Ethereum Reverse Transactions? The Rollback Controversy

It is not surprising that rolling back Ethereum has emerged as a controversial idea in the community as an attempt to restore the lost funds. The proposal has been inevitably linked to the DAO hack, reigniting arguments about security versus blockchain immutability.

Supporters of a rollback view it as necessary, while critics argue that it could undermine trust in blockchain immutability.

Arguments Supporting Ethereum Rollback

The debate extended beyond Ethereum supporters and reached the wider crypto community, including its competitors. As known on X as “Raj,” the co-founder of Solana publicly called for an Ethereum rollback, setting a precedent for those backing the idea. 

His post on X intensified discussions about immutability and Ethereum’s core principles.

The main arguments supporting this idea are that a rollback:

• Protects users: Reversing the theft would prevent innocent users from losing funds and strengthen trust in Ethereum’s security.
• Stops future attacks: If stolen transactions are reversed, hackers lose their incentive, making future attacks less profitable.
• Prevents wider damage: If hackers sell large amounts of ETH, it could destabilize decentralized finance (DeFi) platforms and the market. A rollback could help stop bigger losses.
• Reduces reckless risks: Supporters say a rollback would hold exchanges accountable.

Arguments Against Ethereum Rollback

The debate surrounding a rollback goes both ways.

The main arguments against this idea consider that a potential rollback:

• Erodes trust: Rolling back transactions would prove Ethereum is not truly immutable, damaging its credibility.
• Weakens decentralization: Critics argue that giving developers or miners the power to undo transactions goes against Ethereum’s decentralized nature.
• Technically complex and risky: A rollback is difficult to execute and could cause new issues, such as double-spending or unintended errors.
• Raises fairness concerns: Who decides which hacks deserve a rollback? This could lead to bias and selective intervention.
• Strengthening Blockchain Security: What Comes Next?

The Bybit hack has raised serious concerns about exchange security and blockchain resilience. Both centralized platforms and decentralized systems must adopt stronger protections to prevent future attacks.

Stronger Security Measures for Exchanges

Exchanges handle large amounts of crypto, making them a prime target for hackers. Strengthening security can reduce risks and prevent major losses. Some possible measures to prevent future attacks include:

• • Multi-signature wallets: Requiring multiple approvals for transactions can reduce risks.
  • Cold storage adoption: Storing most funds offline minimizes exposure to hacks.
  • Stricter access controls: Enhanced employee verification and security audits can prevent internal breaches.
• Stricter protocols: Since the Bybit attack targeted the wallet, exchanges must implement stronger protections for smart contract logic, transaction approvals, and key management to prevent similar breaches.

Decentralized Recovery Mechanisms

Some also suggest new blockchain-based solutions to help recover stolen funds without needing rollbacks. For example:

• On-chain insurance protocols: Users could opt into decentralized coverage for stolen funds.
• On-chain forensic tools: Advanced blockchain tracking can trace stolen funds, even after laundering, helping law enforcement and recovery teams identify and freeze assets.
• Social recovery models: Blockchain-based mechanisms allow trusted entities to help restore assets without rollbacks. One example is recovery guardians, which would include using smart contracts to create custody solutions where a user’s assets are protected by a network of trusted “guardians.”

Whatever the solution is, it must balance security, decentralization, and user protection. In a system where immutability is a core principle, rollbacks may not be the answer, but stronger security measures and innovative recovery tools could redefine how blockchain addresses security risks in the future.

Conclusion

The Bybit hack sparked one of the biggest recent debates in crypto, not just about security but also about Ethereum’s core principles. Some argue that a rollback could protect users, prevent systemic risks, and hold bad actors accountable. 

Others warn that undoing transactions would weaken trust in Ethereum in particular and in blockchain technology in general, set a dangerous precedent, and shift control away from decentralization.

This debate is not just about the technical or ethical aspects of a rollback—it has also become a wider discussion on governance, influence, and the future of blockchain itself. Even Ethereum’s competitors, like Solana’s co-founder, have weighed in, showing how this issue affects the entire crypto space, not just Ethereum.

At the center of it all is immutability, one of blockchain’s defining characteristics. A rollback would challenge the idea that transactions are final and cannot be changed. While the discussion continues, one thing is clear—any decision on this issue will shape Ethereum’s future and set the tone for how the industry responds to major crises.

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