Ethereum Just Lost Its Spot in the U.S. Digital Asset Stockpile
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Cliff-Notes:
- Attackers exploited Ethereum's smart contract architecture by disguising a malicious contract upgrade as a standard transfer request, tricking the exchange’s signers into unknowingly approving it.
- Over $1.4 billion in stolen ETH and staked ETH derivatives is now likely being laundered and funneled into North Korea’s weapons program.
- Bitcoin doesn’t have this problem. No contract upgrades, no governance exploits, no hidden changes—just private keys and absolute finality.
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Bybit just lost $1.4 billion in Ethereum, and it wasn’t a brute-force attack, a private key compromise, or some basic phishing scam—it was something far worse. The exchange, which had its funds secured in a multi-signature Ethereum wallet using industry-standard security practices, was drained because Ethereum’s own smart contract model allowed an attacker to rewrite the rules mid-game. That’s the risk of “smart” contract flexibility: in practice, it turns security into a moving target, and if a hacker can manipulate that target with enough precision, they can bypass every protection layer without ever needing to brute-force a key.
Bybit’s security team wasn’t negligent. They were using Safe, Ethereum’s most widely adopted multisig smart contract, which requires multiple signatures before funds can move. The CEO himself was one of the signers who approved the transaction. The system did exactly what it was designed to do—except the transaction wasn’t what it appeared to be. The attackers manipulated the user interface, so while the signers thought they were approving a normal internal transfer, they were actually approving a contract upgrade, rewriting the rules of how the wallet functioned and transferring full control of the funds to the attackers in a single step.
This wasn’t a failure of cryptography or password security; it was a failure of Ethereum’s entire approach to smart contracts. In bitcoin, multisig is set in stone from the moment it’s created, requiring multiple keyholders to sign a transaction that follows hardcoded, non-upgradable rules. Ethereum, on the other hand, allows upgradeable contracts to be modified after deployment, introducing a level of complexity that expands the attack surface and creates opportunities for social engineering attacks like this one. It doesn’t matter how many signers are required if every signer can be tricked into approving a transaction that modifies the fundamental logic of the wallet itself.
The outcome was inevitable. Once the malicious transaction was signed, it was over. The wallet, which had been a cold storage vault just minutes prior, was suddenly controlled by North Korean hackers, and 401,000 ETH, along with staked assets like stETH, cmETH, and mETH, was drained within hours.
Ethereum’s developers treat upgradability like an innovation, a way to iterate on contract functionality without needing to deploy an entirely new contract. But in practice, it’s a security risk that has now been exploited at the highest possible level, proving that any multisig setup relying on Ethereum’s smart contract model is vulnerable to a well-executed social engineering attack.
Think about it this way: bitcoin’s security model is based entirely on cryptographic signatures and private keys, while Ethereum’s security is based on the assumption that all contract upgrades will be properly verified and never manipulated. One model is deterministic, the other is based on trust. And trust, when dealing with nation-state-level attackers like the Lazarus Group, is a liability.
If North Korea is able to steal billions of dollars worth of Ethereum just by tricking an exchange into approving a contract update, why would the United States, or any other sovereign entity, consider ETH a viable reserve asset? A national digital asset stockpile needs to be built on an unbreakable foundation, and Ethereum’s upgradability, while useful for developers looking to iterate on applications, is a fundamental security flaw when the goal is long-term, untouchable asset storage.
Every time a major exchange or DeFi protocol gets exploited, the same narratives emerge: “This was an isolated incident,” “User funds will be reimbursed,” “Security will be improved going forward.” But this time, it’s different. The money stolen from Bybit wasn’t just taken by some anonymous DeFi hacker looking to arbitrage bugs in smart contracts—it was taken by a state-sponsored cybercrime organization with direct ties to North Korea’s ballistic missile program.
Lazarus Group isn’t new to this game. They’ve been behind some of the largest crypto thefts in history, with stolen funds routinely being laundered through mixers like Tornado Cash before disappearing into North Korea’s state-controlled economy. The U.S. government has already sanctioned individuals and entities linked to Lazarus, but as long as Ethereum continues to offer attack surfaces like upgradable contracts, these kinds of exploits will keep happening. The only question is who the next target will be.
If the United States is serious about building a digital asset reserve that can be trusted at the sovereign level, Ethereum can’t be part of it. The risks are too high, the attack vectors are too numerous, and as this Bybit hack proves, all it takes is one well-executed social engineering attack to drain an entire treasury.
Ethereum advocates like to talk about flexibility, but flexibility is a liability when security is the priority. Bitcoin doesn’t have upgradable contracts. It doesn’t have mutable logic. It doesn’t have an ever-expanding attack surface that gets more complex with every protocol upgrade. What it does have is an unchangeable set of security assumptions that have held up for 16 years, and an architecture that is completely resistant to social engineering attacks like the one that just took down Bybit.
If you don’t have the private keys, you don’t have the bitcoin. No UI spoofing, no contract modifications, no hidden permissions. That’s what security looks like.
Ethereum just failed the test, and the consequences go beyond Bybit’s balance sheet. A national digital asset stockpile needs to be built on an unshakable foundation, and Ethereum’s own security model just proved why it can’t be trusted at scale.
Bitcoin stands alone. No backdoors, no exploits, no exceptions.
Take it easy,
Joe Consorti
Theya is the simplest way to take full control of your bitcoin. With our flexible multi-sig vaults, you decide how to secure your keys.
Whether you prefer keeping all keys offline, shared custody with trusted contacts, or robust mobile vaults across multiple devices, it's always Your Keys, Your Bitcoin.