These Cryptos Can FREEZE Your Wallet!!

"Specifically, the Cosmos SDK has special accounts called module accounts. These aren't regular user accounts. They're controlled by the systems module logic rather than anyone's private key. Module accounts are unable to perform any kind of normal transaction. Instead, they're responsible for specific protocol functions such as staking, governance, and token distribution. Each module account has a function called blocked address, which is basically just a list of other module accounts. The idea is to prevent wallets, including other module accounts, from transacting with module accounts. and to help prevent any money being moved by module accounts in the event of a hack. The report notes that in theory, these module accounts could be tweaked to add other addresses to the blocked address function, essentially blacklisting them."

"the report notes that in theory, these module accounts could be tweaked to add other addresses to the blocked address function, essentially blacklisting them. But there is a huge caveat. None of the projects in the Cosmos ecosystem have ever actually used blacklisting in this way."

"For instance, the EU is rolling out a European digital identity wallet under its EID 2.0 framework. Simply put, this could become a mandatory bridge between real world identities and blockchain interaction. If other global players follow suit, regulators or intermediaries could start monitoring, restricting, or even blocking transactions based on identity, that would hit the privacy and censorship resistance hard and push us closer to a dystopian world where every move you make is tracked and controlled."

"Notably though, BNB didn't even have fund freezing capabilities until they added them in response to this attack."

"Decentralization makes networks harder to control, and privacy coins like Narrow, Zcash, and Dash let users keep their transactions shielded from surveillance. As regulators push for more oversight, these tools could become the last line of defense for financial privacy."

"However, Bybit's research revealed that unlike Sooie, which had public blacklisting features since April 2023, Aptos didn't implement theirs until July of this year, roughly 6 weeks after the Cedus hack."

"As such, they managed to freeze $162 million of the 223 million that was stolen. Not a bad result, but freezing funds only solved part of the problem. So the Suie team took it one step further. After a governance vote that passed with over 90% approval, the Sooi team recovered the funds directly from the hacker's address."

"In any case, the problem was quickly identified by the Vchain team, who managed to prevent the funds from being liquidated by blacklisting every address associated with the hacker, all 469 of them. Crazy stuff. In total, the hacker made off with 1.1 billion VET tokens, but thanks to the Vchain Foundation's quick response, they were able to freeze about 727 million of those tokens, according to reports at the time."

"Notably though, only the team's contract admin, which typically used either a multi-sig wallet or a governance account, had the permission to update the blacklist. This means that although Heko's blacklist method was efficient, it also placed an awful lot of power in the hands of just a few individuals. Come to think of it, this could be exactly why this method isn't more widely used."

"For example, in October of 2023, Tether froze 32 addresses linked to terrorism and warfare. Basically, Tether restricted the send USDT function of these wallets, resulting in over $800,000 in elicit USDT being frozen. Notably, this was a relatively small freeze. Back in May 2024, Tether froze $5.2 million in USDT across 12 wallets tied to fishing scams. They also froze $46 million of USDT from FTX when it collapsed in 2022 at the request of the DOJ."

"Like in May this year when it froze $58 million of USDC connected to the Libra memecoin scandal."

"For instance, the EU is rolling out a European digital identity wallet under its EID 2.0 framework. Simply put, this could become a mandatory bridge between real world identities and blockchain interaction."

"As regulators push for more oversight, these tools could become the last line of defense for financial privacy."