The Chainflip team is rolling out an upgrade to prevent Bybit hackers from using its cross-chain decentralized exchange (DEX). In response to the $1.4 billion Bybit hack, Chainflip is implementing new measures to detect and block illicit transactions, ensuring that its liquidity providers (LPs) remain protected.
Why ChainFlip Is Taking Action
According to Chainflip Labs, there is a strong consensus among its ecosystem participants that allowing illicit funds to flow through the protocol could endanger liquidity providers and pose long-term risks. By implementing safeguards, the project aims to protect users, strengthen pricing mechanisms, and improve liquidity over time.
In a recent statement, Chainflip Labs explained:
“Going forward, Chainflip will not be useful to anyone whose wallet can be linked to any major incident, hack, fraud, or scam.”
This move aligns with a broader industry trend where DEXs are introducing compliance measures to reduce exposure to illicit activities.
The 1.7.10 Upgrade, How It Works
The 1.7.10 update introduces new tools to block transactions linked to Bybit’s attackers. Some key updates include:
• Enhanced screening tools for brokers to detect and reject deposits from flagged wallets.
• The ability for broker operators (including SwapKit and Rango cross-chain DEX aggregator) to prevent ETH and ERC-20 token deposits linked to suspicious activity.
• A protocol-wide rejection system to block attempts by malicious actors trying to launder funds.
At the time of the announcement, Chainflip confirmed that most of the upgrade’s code had been written, and testing was underway. The final deployment is expected within 24 to 72 hours.
ByBit Hackers Targeted Chainflip For Laundering Stolen Funds
On Feb. 22, Chainflip detected activity from the Bybit hackers, who attempted to swap stolen USDC using its protocol. In response, Chainflip put its front-end swapping platform into maintenance mode, temporarily disabling swaps to prevent further abuse.
This move reflects a growing industry focus on security following the Bybit attack, which was the largest crypto exploit in history.
The Aftermath: Stolen Eth Still Being Laundered
Three days after the attack, Bybit CEO Ben Zhou confirmed that the exchange had filled the gap in its ETH reserves through short-term loans, whale deposits, and ETH purchases.
Meanwhile, blockchain analytics firm EmberCN reported that:
• 89,500 ETH ($221.5 million) has been laundered in the past two and a half days.
• The hackers still hold 410,000 ETH, which they may attempt to swap for BTC, DAI, or other assets in the coming weeks.
What’s Next For ChainFlip?
Chainflip’s new security measures mark an important shift in the DEX landscape, where platforms are becoming more proactive in detecting and blocking illicit activity.
As more projects tighten their security measures, hackers will face greater obstacles when attempting to launder stolen crypto through decentralized protocols. Chainflip’s rapid response to the Bybit hack highlights its commitment to safeguarding its ecosystem and protecting liquidity providers from financial risks.
