- Chainflip Labs upgrades its protocol to block illicit funds from the Bybit hack fast.
- New upgrade extends the screening mechanism to Ethereum and ERC20 tokens to block high-risk trades.
- Whitelisted entities would have access to advanced screening tools and can reject any deposits.
Chainflip Labs is rolling out security upgrades to block illicit cryptocurrency flows through its protocol. This move is following the detection of funds from the recent Bybit hack moving through their system. The decision comes after extensive consultation with validators, liquidity providers, and interface operators across the Chainflip ecosystem.
The upgrade, version 1.7.10, expands the protocol’s existing broker-level screening tools beyond Bitcoin to include Ethereum and all ERC20 tokens. This move allows brokers, who play a state chain role for interfaces to interact with the network, can identify and reject high-risk transactions using any screening tools.
The security measures were accelerated after Chainflip detected funds from the Bybit hack moving through their protocol on Saturday morning. The team promptly placed their main interface, swap.chainflip.io, into maintenance mode while developing a more permanent solution.
Strengthened security architecture
The new security framework introduces a multi-layered approach to screen transactions. While brokers can currently implement their own detection tools, the upgrade addresses two key vulnerabilities in the existing system. One is the potential for malicious actors to evade screening by creating new brokers and uneven access to advanced screening capabilities across the broker network.
To resolve these issues, Chainflip Labs has partnered with SwapKit and RangoExchange, both of which have access to sophisticated screening tools. These entities, along with Chainflip Labs, will be whitelisted in the network and granted the authority to reject any deposit facilitated by any broker, regardless of which broker initially processed the transaction.
This broker monitoring system will be implemented in coordination with blockchain analytics firms Elliptic and Chainalysis, as well as with the Bybit API and other investigative resources. With all these advancements in the system, Chainflip is aiming to provide a risk-free environment for liquidity providers.
Related: Bybit Recovers Stolen ETH, Clashes With eXch Over Security
The implementation of these security enhancements is expected to happen within 24-72 hours. Once deployed and confirmed operational by all brokers, Chainflip will reopen access to swap.chainflip.io and encourage liquidity providers who withdrew funds to provide quotes.
In their announcement, Chainflip emphasized that the decision to implement these measures was reached through broad consensus among network participants. With 150 validator slots and dozens of liquidity providers, the protocol remains one of the largest decentralized cross-chain services in the cryptocurrency space. Chainflip has also noted that “none of our network participants have any interest in supporting criminal activity.”
The team believes these measures will create a more secure environment for liquidity providers, allowing them to commit more capital with reduced risk exposure. The announcement concluded with a direct message to hackers: “Don’t bother. Take your stolen money elsewhere – we don’t want it.”
