Bybit’s $5.5 Billion Bank Run: A Turning Point for Crypto Security?
In the volatile world of cryptocurrency, security is paramount. But when a major exchange suffers a billion-dollar hack, it sends shockwaves through the industry.
This is exactly what happened to Bybit, one of the largest crypto exchanges, which recently faced a $1.5 billion hack, followed by an even more alarming $4 billion "bank run"—bringing total outflows to $5.5 billion.
This incident has raised critical questions about crypto security, fund custody, and even the possibility of rolling back the Ethereum blockchain.
Breaking Down the Bybit Hack
The Security Breach
Bybit suffered a major security breach that resulted in the loss of $1.5 billion, primarily from its Ether cold wallet. The attack was so significant that cybersecurity analysts suspect the Lazarus Group, a North Korean hacker organization notorious for targeting crypto firms.
Bybit CEO Ben Zhou later confirmed that 70% of their users' Ether was drained, forcing the exchange into immediate damage control.
The Bank Run That Followed
Once news of the hack spread, panic withdrawals began. In what’s being compared to a traditional financial "bank run," users rushed to withdraw their funds from the platform.
Within hours, Bybit saw over $4 billion in withdrawals, leading to a total of $5.5 billion in outflows.
Zhou revealed that while Bybit had reserves to cover these withdrawals, it faced a critical issue:
$3 billion worth of USDT was stored in a Safe wallet.
Safe, a decentralized custody provider, temporarily shut down smart wallet functionalities to investigate security risks.
This unexpected shutdown froze billions in reserves, forcing Bybit’s engineers to scramble and write new software to manually access and transfer the funds.
How Bybit Responded
In an emergency response:
✅ Bybit secured a loan to cover immediate withdrawals.
✅ The team worked overnight to manually verify and move funds.
✅ Bybit moved assets off Safe cold wallets to prevent further issues.
✅ Authorities, including Interpol and blockchain forensic firms, were engaged to track the stolen funds.
But the biggest controversy was yet to come...
Should Ethereum Be Rolled Back?
One of the most debated responses to the hack was the idea of rolling back the Ethereum blockchain to recover lost funds.
Some industry players, including BitMEX co-founder Arthur Hayes, suggested that the Ethereum community should consider a rollback to undo the hacker’s transactions.
Zhou confirmed that Bybit even consulted Vitalik Buterin and the Ethereum Foundation on whether such a move was feasible.
But here’s the problem:
🔹 A rollback would require massive community consensus.
🔹 It could lead to a contentious hard fork, splitting Ethereum into two networks.
🔹 It goes against the fundamental principle of blockchain immutability.
While Bitcoin has been rolled back before (after the infamous 2010 overflow bug), Ethereum's complex smart contract structure makes such an event highly unlikely.
The Bigger Picture: What This Means for Crypto Security
Bybit’s crisis highlights a growing concern in the crypto industry:
🔹 Cold wallets aren’t invincible. Even major exchanges can suffer catastrophic losses.
🔹 Third-party custody solutions (like Safe) add risks. If they freeze operations, user funds can become inaccessible.
🔹 The importance of rapid response. Bybit’s ability to recover its reserves prevented a complete collapse.
The incident also raises the question:
👉 Should exchanges hold user funds in multiple custody solutions to prevent a single point of failure?
Final Thoughts
Bybit survived the largest "bank run" in crypto history, but the event will leave a lasting impact.
For users, the lesson is clear: Not your keys, not your crypto.
For exchanges, it's a wake-up call to rethink security protocols and fund custody strategies.
And for Ethereum? The idea of a rollback is likely off the table—but it won’t be the last time the crypto community debates how to handle billion-dollar breaches.