The Myth of Decentralization: 16 Major Blockchains Can Freeze Your Funds (Bybit Report)

Bybit’s Shocking Report That Shakes Certainties

Since the advent of blockchain, the promise of decentralized, transparent, and free finance has captivated millions of investors, notably within the Muslim community concerned with ethics and justice. However, a recent report published by Bybit Research disrupts this idyllic vision by revealing that 16 major blockchains—among the most popular—actually incorporate mechanisms that allow them to freeze users’ funds. This finding raises a fundamental dilemma: how to reconcile enhanced security against hacks and fraud with the potential for censorship and loss of individual control?

At Crypto P2P Club, we analyzed this report through an ethical lens, particularly according to the principles of Islamic finance, which values trust (amanah), justice (adl), honesty (sidq), and the common good (maslaha). This article delves into the technical mechanisms revealed, concrete cases of fund freezing, ethical and religious implications, as well as recommendations for investors keen to act in accordance with their values.

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The Veil Lifts: What Does the Bybit Report Reveal?

Titled "Blockchain Freezing Exposed: Examine The Impact of Fund Freezing Ability in Blockchain", the Bybit Lazarus Security Lab report, published in November 2025, is the first comprehensive study analyzing fund-freezing capabilities built into blockchains.

Key Data

• 166 blockchains analyzed using a methodology combining artificial intelligence and human review, enabling the identification of hidden or official freezing modules.
• 16 blockchains currently have active mechanisms that allow funds to be blocked.
• 19 others could easily integrate these functions with simple updates.

Three Types of Mechanisms Identified

This categorization is essential to understanding the nature of control exercised by the teams behind these blockchains and the implications for investors.

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The Giants Under Watch: Who Are the 16?

Among the 16 blockchains equipped with these mechanisms, several major names emerge, impacting millions of users and billions of dollars in assets.

Partial List of Affected Blockchains

• BNB Chain (Binance Smart Chain) – Hardcoded
• VeChain – Hardcoded
• Sui – Configuration-Based
• Aptos – Configuration-Based
• HECO (Huobi ECO Chain) – On-Chain Contract
• WAX
• Kava
• Cronos
• Cosmos (with modular design allowing future interventions)
• Others not publicly specified

Concrete Cases of Use

These examples illustrate that while these mechanisms can protect the crypto community from massive losses, they also raise questions about control and governance.

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The Ethical Dilemma: Should Freedom Be Sacrificed for Security?

The revelation of these mechanisms sparks a fundamental debate about the trade-off between security and freedom at the heart of blockchain philosophy.

User Protection: A Realistic Imperative

In the face of increasing attacks and exploits, blockchain teams justify these mechanisms as rapid response tools to protect users and the ecosystem:

• Possible recovery of stolen funds.
• Limiting financial and reputational damage.
• Prevention of money laundering through blacklists.

The Cypherpunk Dream: Absolute Decentralization

For decentralization maximalists, these mechanisms represent a betrayal:

• Loss of individual control over one’s funds.
• Possibility of arbitrary censorship or external interference.
• Illusion of decentralization when “backdoors” exist.

Pragmatic Perspective: A Necessary Evil?

Some adopt a more pragmatic stance:

• Blockchain is not perfect; compromise is necessary.
• Collective security sometimes takes precedence over total freedom.
• These mechanisms must remain transparent and subject to clear governance.

Critical Analysis

• Concentrated control can be a point of failure and corruption.
• Lack of transparency exacerbates distrust.
• Trust relies on open governance, not hidden rules.

This debate is especially crucial for Muslim investors, for whom the ethical dimension transcends mere technical aspects.

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Islamic Finance Perspective: Transparency (Amanah) vs. Control

Islamic finance is based on strict ethical principles that guide the legitimacy of financial instruments. Let’s apply them to the case of freezing mechanisms.

Amanah (Trust / Responsibility)

• Developers and blockchain teams have a moral responsibility for transparency.
• Concealing freezing mechanisms constitutes a violation of this trust.
• Prior disclosure is essential to respect amanah.

Adl (Justice)

• Justice requires that all rules be known and fair to all participants.
• Unilateral freezes without consent violate this principle.
• Governance based on consultation (shura) is preferable.

Sidq (Honesty)

• The principle of honesty condemns hiding backdoors or secret capabilities.
• Users must be fully and honestly informed.

Maslaha (Common Good)

• A balance must be found between protecting the community (against hackers) and respecting individual rights.
• Collective protection must not become a pretext for arbitrary censorship.

Figure 5: Application of Islamic principles to blockchain governance

Summary

From an Islamic perspective, the presence of freezing mechanisms is not intrinsically haram or forbidden, but must be accompanied by:

• Full transparency.
• Just and participatory governance.
• Informed user consent.

Without this, it risks falling into gharar (uncertainty) and injustice.

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Industry Reaction: Between Denial and Calls for Transparency

In response to the Bybit report revelations, industry reactions vary, oscillating between denial and calls for reform.

VeChain: A Defensive Response

• VeChain denied being a hidden "kill switch."
• The company claims the blacklist used in 2019 was not secret and was communicated.
• It advocates a transparent approach, though evidence remains debated.

Bybit: A Call for Governance and Transparency

• Bybit urges projects to publicly disclose their intervention mechanisms.
• David Zong, head of security, emphasizes the need for an open dialogue to strengthen trust.
• The general trend pushes towards better governance and clearer security mechanisms.

In short, the industry is beginning to recognize that decentralization alone is no longer enough if not accompanied by transparency and accountability.

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5 Lessons for the Ethical Investor

Faced with these challenges, what recommendations should investors concerned with ethics and Islamic compliance keep in mind?

1. Never trust blindly, always verify (DYOR)
   Analyze code, governance, and hidden mechanisms before investing.

2. Understand a blockchain’s governance
   Who controls updates? Is there a transparent and participatory model?

3. Diversify beyond centralized blockchains
   Favor a balance between centralized and decentralized protocols.

4. Prioritize transparent projects
   Those that clearly communicate their intervention capabilities and limits.

5. Demand accountability: the community has power
   Encourage the establishment of decentralized governance mechanisms (DAOs) and regular consultation.

These principles allow reconciling security, freedom, and ethics in line with Islamic values.

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Conclusion: Towards an Ethical and Responsible Blockchain

The Bybit report highlights a frequently ignored reality: decentralization is a spectrum, not an absolute. Many major blockchains today hold the power to freeze funds, revealing a more centralized control than it seems.

For the Muslim and ethical crypto community, this situation calls for increased vigilance, a demand for transparency, and deep reflection on network governance. Islamic finance teaches us that trust (amanah), justice (adl), and honesty (sidq) are non-negotiable, even in innovations as disruptive as blockchain.

It is urgent for the industry to embrace a responsible approach where security does not sacrifice freedom, and where the community can rely on clear and just rules. At Crypto P2P Club, we call for a blockchain aligned with these values, for a sustainable, transparent, and ethical ecosystem.

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Sources

• Bybit Lazarus Security Lab. Blockchain Freezing Exposed: Examine The Impact of Fund Freezing Ability in Blockchain. November 2025.
  Link to the report

• PRNewswire. Bybit Publishes Groundbreaking Study on Blockchain Freezing Mechanisms. November 12, 2025.
  Link to the press release

• LinkedIn Post by Naquib Mohammed. Reflections on the Bybit Report and Decentralization. November 18, 2025.
  Link to the post