Technical Analysis of the Frozen Stolen Funds Incident on the Sui Network

Recently, after a certain protocol was hacked, the Sui network took measures to freeze the hacker's address, recovering a significant amount of funds. This incident has sparked contemplation about the decentralized nature of blockchain. Let's analyze the ins and outs of this event from a Technical Analysis perspective.

After the attack occurred, the hacker quickly transferred part of the assets to other blockchain networks via a cross-chain bridge. This portion of funds is unrecoverable, as once they leave the Sui ecosystem, validators can no longer intervene. However, a significant amount of the stolen funds still remains in the hacker-controlled addresses on the Sui chain, and these funds have become the target for freezing.

According to official information, most validators have identified the addresses of the stolen funds and have begun to ignore transactions initiated by these addresses. This practice is essentially a form of transaction filtering at the validator level, which can be understood as the validators collectively "turning a blind eye":

1. Validators directly ignore transactions from hacker addresses during the transaction pool phase.
2. These transactions are technically valid, but the validators refuse to package them on the chain.
3. The result is that the hacker's funds are "soft locked" in the address and cannot circulate.

The object model of the Move language makes this freezing operation possible:

1. Asset transfers must occur through on-chain transactions: Although the hacker controls a large amount of assets in the address, to transfer these objects, a transaction must be initiated and confirmed by validators.
2. Validators hold the final decision-making power: If validators refuse to package the transaction, these objects cannot be moved.
3. Final result: The hacker nominally owns these assets, but cannot actually use them.

This situation is akin to holding a bank card, but all ATMs refuse to serve you. Although the funds are in the card, they cannot be withdrawn. Under the continuous monitoring and intervention of Sui validation nodes, the tokens in the hacker's address will be unable to circulate, and these stolen funds are effectively equivalent to being "destroyed," which may objectively create a certain deflationary effect.

In addition to temporary coordination among validators, Sui may have a built-in denylist feature at the system level. If this is the case, the process may be as follows: the relevant authority adds the hacker's address to the system blacklist, and validators execute based on this system rule, refusing to process transactions from blacklist addresses.

Whether it is temporary coordination or the execution of system rules, it requires the majority of validators to act consistently. This reflects that the power distribution of Sui's validator network is still too centralized, with a few nodes able to control key decisions across the entire network.

It is worth noting that the issue of validator centralization is not unique to Sui; most proof-of-stake networks, from Ethereum to other PoS chains, face similar risks of validator concentration, but Sui has made the problem more apparent this time.

This event has sparked deeper reflection: how can a supposedly decentralized network possess such a powerful centralized "freeze" capability? Even more confusing is that Sui officials have stated plans to return the frozen funds to the liquidity pool, but if the freeze was indeed achieved through validators "refusing to package transactions," then theoretically, these funds should be immovable. How is Sui able to return them? This further challenges the decentralized nature of the Sui network.

This situation inevitably raises suspicions about whether the authorities have superuser privileges at the system level, allowing them to directly modify asset ownership, aside from a few centralized validators rejecting transactions. This question remains unresolved until Sui provides more details on "freezing."

Regarding the trade-offs of decentralization, it is necessary for us to have a deeper discussion: Is intervening in emergencies and sacrificing a certain degree of decentralization necessarily a bad thing? In the face of hacking attacks, is it really in line with user expectations for the entire blockchain network to remain completely inactive?

It is understandable that users certainly do not want their funds to fall into the hands of hackers. However, the greater concern brought about by this practice is the "subjectivization" of freezing standards: how do we define "stolen funds"? Who has the authority to make such judgments? Where is the boundary? If we freeze hackers' funds today, will other people's funds be frozen tomorrow? Once this precedent is set, the core anti-censorship value of public chains may face collapse, inevitably damaging users' trust in the system.

Decentralization is not a black-and-white concept; Sui has chosen to seek a specific balance between user protection and decentralization. The core of the issue lies in the lack of transparent governance mechanisms and clear boundary standards.

At the current stage, most blockchain projects are making such trade-offs, but users have the right to know the truth and should not be misled by the label of "fully decentralized." This event provides a valuable opportunity for reflection across the industry on how to seek the best balance between security, efficiency, and decentralization, which will be an ongoing challenge on the path of blockchain technology development.