Chainflip has announced a protocol upgrade to prevent the movement of funds linked to the Bybit hack. The company confirmed that its upgraded 1.7.10 screening tool is in the final testing phase and will be deployed within 24 to 72 hours.
This decision follows discussions with the Chainflip team, community, liquidity providers, key interfaces using the protocol, and most validator operators.
Protocol upgrade to block illicit transactions
The cross-chain platform is implementing new measures to prevent illicit transactions from flowing through its network. Chainflip Labs emphasized that allowing stolen funds to move through the protocol poses risks to liquidity providers. The firm stated that its ecosystem strongly supports efforts to protect legitimate users and maintain network integrity.
After detecting suspicious flows from the Bybit hack, Chainflip swiftly disabled access to its primary interface on February 22. The company has since collaborated with other service providers to prevent unauthorized transactions from reaching its protocol. The new upgrade will provide enhanced security by enabling brokers to reject high-risk Bitcoin transactions automatically. If a flagged deposit is detected, it will be returned to the user’s specified refund address. Similar screening tools have already been applied to Ethereum and ERC-20 tokens.
Enhanced security measures and industry partnerships
Although the new screening system strengthens security, Chainflip acknowledged that some brokers might still bypass restrictions by creating new accounts. Not all brokers currently have access to advanced screening tools, which could create loopholes in blocking illicit funds. To mitigate these risks, Chainflip has partnered with SwapKitPowered and Rango Exchange. These companies can reject transactions flagged as high-risk, ensuring that the network remains secure.
Chainflip also works with blockchain analysis firms, including Elliptic and Chainalysis, to monitor suspicious activities. The company uses data from the Bybit API and other investigative sources to build stronger defenses against fraudulent transactions. Moving forward, Chainflip aims to create a safer environment where wallets linked to criminal activities are automatically excluded from using the protocol.
Impact on liquidity providers and future plans
The upgrade process will be followed by a 24 to 72 hour scheduled maintenance of swap.chainflip.io. The restoration of liquidity through this step would benefit the platform because providers withdrew after expressing security fears about the platform. The firm validated its platform maintenance decision by referring to security requirements needed to prevent one of the biggest cryptocurrency thefts from affecting the network.
Chainflip focuses on security enhancement to create safer conditions for liquidity providers together with better market liquidity and pricing solutions. Chainflip seeks to promote anti-financial crime measures to other decentralized finance platforms while pursuing the development of security initiatives. Chainflip declared to the Bybit hackers that its network will refuse to support their stolen funds.