Cetus stolen funds recovered "Decentralization" concessions for user interests

Jessy, Golden Finance

On May 22, the Sui ecosystem DEX Cetus was hacked, resulting in the theft of $223 million in funds. Of this amount, only $60 million was converted to ETH through a cross-chain bridge and went into the hacker's pocket, while the remaining $162 million was frozen by nodes coordinated by the Sui Foundation.

On May 27, community voting began to decide whether to implement the protocol upgrade to recover funds frozen in accounts controlled by hackers. The protocol upgrade was ultimately successful, and 162 million in funds were successfully recovered.

The Sui Foundation's quick response to this theft incident and the rapid deployment of solutions have sparked considerable controversy within the community. On one hand, it has recovered most of the funds and protected the interests of the affected users, while on the other hand, the method of recovery involved forcibly altering asset ownership through node consensus, marking the first time "keyless asset transfer" has been implemented at the blockchain level.

In the face of users' interests, this "daring" operation that goes against the "spirit of decentralization" has been overlooked.

How is asset transfer without a private key achieved?

On May 22, the Sui ecosystem DEX Cetus was hacked due to a low-level coding error, resulting in a loss of $223 million. After the incident, $162 million of the stolen funds were frozen by the Sui Foundation in coordination with the validating nodes.

On May 27, the Sui Foundation promoted a community vote aimed at deciding whether to implement a protocol upgrade to recover funds frozen in accounts controlled by hackers. Ultimately, within 48 hours, 114 nodes participated in the voting, with 99 votes in favor, 2 votes against, and 2 abstentions, resulting in a 90.9% approval rate for the proposal.

The proposal also signifies an upgrade to the Sui protocol, which will allow a specific address to represent the hacker's address for two transactions to facilitate the recovery of funds. These transactions will be designed and announced once the recovery address is finalized. The recovered assets will be stored in a multi-signature wallet controlled by trusted auditors OtterSec from Cetus, the Sui Foundation, and the Sui community.

On the protocol upgrade level, the feature of address aliasing is introduced. Specifically, rules are defined in advance at the protocol layer: to disguise specific governance operations as "legitimate signatures of hacker accounts," and then the validating nodes recognize this forged signature after the upgrade, legitimizing the transfer of frozen funds. This allows for the forced modification of asset ownership through node consensus without touching the private keys (similar to a central bank freezing a bank account and transferring funds).

How was the earliest frozen assets achieved? Sui itself supports the functionality of Deny list (frozen list) and Regulated tokens (regulated tokens), this time directly calling the freezing interface to lock the hacker's address.

The technical risks of left-behind strong power interventions

Although this move has recovered most of the frozen assets, it inevitably raises concerns, as the upgrade of the protocol has forcibly modified the ownership of assets through node consensus, which also suggests that the Sui officials can replace any address to sign, thereby transferring the assets within.

The constraint on whether the Sui official can do this is not the smart contract code, but the voting rights of the nodes. And who holds the results of the node voting? It is simply the large nodes controlled by the foundation with capital! In other words, the stakeholders of the Sui official hold the most significant voice, and even voting is just a formality.

The user's private key is no longer an absolute proof of control over the assets; as long as the consensus of the nodes is agreed upon, the protocol layer can directly override the permissions of the private key.

On the other hand, this achieves an efficient asset recovery, with assets being quickly frozen, thanks to the built-in regulatory features of Sui, allowing for rapid loss mitigation. The voting was completed within 48 hours, and the upgrade of the protocol was implemented.

However, in the author's opinion, the address aliasing function has created a dangerous precedent—protocol layers can forge "legitimate operations" of any address, laying a technological groundwork for authoritarian intervention.

The recent series of operations by Sui to recover funds was simply a decision made from the perspective of user interests when there was a conflict with the principles of decentralization. Whether this violates the principle of decentralization seems to be unimportant for both users and Sui; after all, when questioned, they can respond by saying it was a "vote" decision.