Arbitrum Freezes $71M ETH Linked to Kelp Hack, Sparks Decentralization Debate

• Given that the freeze was imposed by a council ordinance, some X users voiced their disapproval of Arbitrum and raised concerns.
• Blockchain crypto freezes are a contentious topic in the cryptocurrency industry, with some saying they undermine the technology’s intended use.

Arbitrum, the layer-2 blockchain of Ethereum, froze over 30,000 Ether, or over $71.2 million, in a wallet linked to the recent Kelp protocol exploit on Monday.

On Monday, Arbitrum said that a 12-member security committee chosen by the Arbitrum community had taken “emergency action” to seize 30,766 Ether from a wallet linked to the Kelp vulnerability. It went on to say that the original holding address could no longer access the ETH since it had been transferred to “an intermediary frozen wallet”; only further action by Arbitrum governance could restore access to the funds.

On Saturday, the LayerZero-powered bridge of the liquid restaking protocol Kelp was hacked for a minimum of $293 million. LayerZero has since accused North Korea of being responsible for the assault. The attackers borrowed cryptocurrency on the Aave lending platform using stolen Kelp tokens, resulting in millions of dollars’ worth of “bad debt” in the intricate crypto lending market.

Decentralization Debate

Blockchain crypto freezes are a contentious topic in the cryptocurrency industry, with some saying they undermine the technology’s intended use and others saying they improve security and keep networks running smoothly.

Given that the freeze was imposed by a council ordinance, some X users voiced their disapproval of Arbitrum and raised concerns about its decentralization. Arbitrum Security Council member Griff Green wrote on X that the committee deliberated this issue for several hours, debating all aspects of it from a technical to a practical to an ethical and political perspective. Although Green could not provide any further information, but did mention that nine out of the twelve council members decided to freeze the funds.

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