The thrilling night of $1.4 billion ETH, what impact does the Bybit security incident have on Ethereum and the crypto industry

Author: Frank, PANews

Crypto exchanges have reappeared major security incidents, and Bybit exchanges have been stolen. On the evening of February 21, 2025, on-chain detective ZachXBT issued an alarm on the X platform, saying that it had detected an abnormal capital outflow at the associated address of Bybit exchange, involving an amount of up to US$1.46 billion. After confirmation by security teams such as Slow Mist, PeckShield and other security teams, this incident was a hacker who used UI spoofing attack to control Bybit's ETH multiple cold wallets and stole 491,000 ETH (calculated at the price of the day is approximately US$1.4 billion). After the news was exposed, the market quickly fell into panic: users ran and withdraw coins, ETH price plummeted by 8%, and contracts across the network exceeded US$400 million - an FTX-style collapse seemed to be close.

Fortunately, Bybit's official moves quickly and explains the hacking incident. It is an ETH cold wallet that was stolen, and other categories of assets are not affected, and it is guaranteed that there is sufficient funds to meet users' withdrawal needs. Adding Bitget, Binance and other exchanges transferred more than $4 billion to deal with the crisis. The theft incident was temporarily calmed down, and the Ethereum price returned to above $2,700 after a day of diving.

The ripples of the incident have not subsided, but the hacker theft once again sounded the alarm for the industry, especially as the FTX incident is about to come to an end and the payment has begun. As the main asset that was stolen this time, what profound impact will the Ethereum ecosystem have? Perhaps it is something that the industry needs to think further next.

Cross-chain bridge fund pool is limited, and hackers may find it

difficult to sell coins in a short period of time

The market conditions are the most impactful part. Before the news broke, ETH price rose to $2,845. Catalyzed by market panic, ETH price fell 8% in a short period of time, and the entire network liquidation exceeded US$400 million. Thanks to Bybit's rapid response and liquidity assistance from exchanges such as Bitget and Binance, ETH prices recovered lost ground within 24 hours, and the market panic was temporarily alleviated.

But after all, most of the funds stolen by the hackers have not been sold. For some time, the hackers urgently needed to whitewash this batch of funds through on-chain and exchange them for other currencies. Therefore, there is still a certain test on the digestive ability on the ETH chain.

In addition, according to the analysis of multiple security companies, the initiator of this time is the North Korean hacker group. If this inference is true, then the possibility of capital recovery is very slim.

According to artemis data, ETH's on-chain outflows were only US$196 million in the past seven days, and the inflows were approximately US$149 million. If the hacker chooses to transfer these funds to other chains in a short period of time, the amount of funds outflows on ETH on-chain may increase by about tenfold in a short period of time. The reality of depth on the ETH chain being under pressure for some time in the future will be inevitable.

Most cross-chain bridge liquidity pools cannot bear such a large amount of capital transfer alone. Take the chainflip cross-chain bridge used by hackers to transfer funds on February 22 as an example. The total liquidity in the liquidity in its liquidity is about US$17 million. Other cross-chain bridges also seem to be difficult to afford such a capital.

On the other hand, the ETH ecosystem may be the most decentralized public chain besides Bitcoin. Hackers may not transfer their funds to the ecosystem of other public chains. From this perspective, hackers may still focus on mixing coins in a short period of time and will not conduct large-scale capital conversions on the chain. Therefore, the in-depth test on the chain may not be achieved overnight, and the impact on the market will be limited if gradual digestion is performed.

Reflecting on the "complexity premium" of smart contracts, whether

Ethereum will move towards simplification

In addition to market influence, Ethereum's technology route may also be affected by this and make some changes. Looking back at a similar hacker attack in 2024, the hackers also stole ETH tokens during WazirX's stolen process.

The reason is that on the one hand, ETH is the second largest token with market value besides BTC. Its market depth will not collapse due to one or two attacks, and it is an asset type that preserves value for hackers. On the other hand, it is also related to Ethereum's complex smart contract functions. Compared with other new public chains such as Solana, Ethereum's Turing completeness gives smart contracts infinite possibilities, but also leads to complex contract interaction levels (such as Multi-sign wallets rely on multiple proxy calls to Safe contracts), and the attack surface is much larger than Bitcoin's UTXO model or Solana's native account model.

Therefore, as more and more security attacks occur in Ethereum, Ethereum's technical route may think about how to simplify smart contracts or increase the application level of multi-sign wallets to confirm with biometrics or similar hardware devices. Technological changes.

From an ecological perspective, those projects that improve security through hardware in the Ethereum ecosystem may usher in certain opportunities. Including the Safe used in this event, "quadratic semantic verification" may be forced to be introduced in the future (such as visual verification of transaction content verification) and a physical confirmation mechanism similar to a hardware wallet.

Of course, the premise for the above potential changes is that the Ethereum ecosystem will regard this incident as a wake-up call. After all, in the state of poor data performance, security has become the last moat of the Ethereum ecosystem. If security is lost, it may usher in the market's disappointment in the larger scope of the Ethereum ecosystem.

The industry’s alarm bell, it’s time to build a hacker firewall

Of course, in this incident, there is a more profound potential impact on the entire crypto industry ecosystem. For example, the exchange's asset management methods may require more reforms.

Or, will this lead to the sale of exchange insurance business? The previous FTX crash has caused exchanges to pay attention to asset transparency and have disclosed their asset size. From a certain perspective, the widespread implementation of this measure has become an important reason why Bybit has not repeated the same mistakes today. On the other hand, another reason why this hacker incident failed to cause a large-scale run was that multiple exchanges and industry institutions extended a helping hand in a timely manner and quickly stabilized market sentiment.

Judging from the previous FTX thunder, the last straw that overwhelmed camel was the run. Fortunately, Bybit received assistance from his peers, but in any case, this assistance is essentially an artificial factor after weighing the pros and cons. If another exchange encounters the same crisis in the future, if it does not receive assistance from its peers after evaluation, will the market be brought into the FTX cycle? Therefore, perhaps exchanges or third parties have more motivation to promote the development of exchange insurance business through this matter.

In addition, North Korean hackers have been suffering for a long time. In order to avoid similar incidents, on the one hand, the industry will further strengthen their respective security levels. On the other hand, whether the crypto world will launch a wave of anti-hacking firewalls has become a topic worthy of attention in the entire industry. For example, each project party establishes a unified firewall to prevent the flow of funds from hackers? Of course, this process will be much more complicated, and how to complete such a measure without sacrificing the degree of decentralization may become the main topic of discussion. Just as CZ suggested that Bybit stop withdrawing coins after the incident, it also caused a lot of controversy.

But the establishment of a hacker firewall may be more important than to avoid another exchange falling, but users who are frequently plagued by hackers but no one pays attention. After all, they are unable to let the entire network cooperate to stop hackers, and every attack on retail investors The impact is greater.

Although the Bybit incident did not eventually evolve into a systematic collapse, its exposed cold wallet interaction vulnerabilities, liquidity bottlenecks across chain bridges and the temporary nature of the industry mutual aid mechanism have sounded the alarm for the Ethereum ecosystem and even the entire crypto industry - only Only by building an underlying structure that resists attacks and an institutionalized risk buffer mechanism can we truly transform crises into evolutionary driving force. ****