David Schwartz defends Arbitrum freeze by citing Bitcoin’s 2010 rollback

Ripple CTO David Schwartz has defended Arbitrum’s decision to freeze more than 30,000 ETH linked to the recent KelpDAO exploit. 

He said the move was comparable to Bitcoin’s response to the 2010 value overflow bug, when the network accepted a rollback after an attacker created billions of coins.

The comments came after Arbitrum’s Security Council intervened to freeze 30,766 ETH tied to the exploiter. The action secured the funds without changing the broader state of the network, but it also renewed debate over decentralization and emergency control.

Schwartz links Arbitrum action to Bitcoin history

Schwartz said Arbitrum’s response should not be seen as a break from decentralized principles. He argued that communities can reject a network state they view as invalid and take steps to correct it.

He pointed to Bitcoin’s 2010 overflow incident, when an attacker minted more than 184 billion BTC because of a bug. Satoshi Nakamoto and early developers released a patch, and node operators adopted it, which led to a rollback of the chain.

In a post on X, Schwartz said, ”This is exactly what bitcoin did in response to the overflow incident.” He said node operators at the time rejected the database state produced by the existing rules and chose to change those rules.

Schwartz added that no one was forced to accept that earlier state of the blockchain. He said that process showed how decentralized networks can act when users no longer accept the outcome produced by consensus.

Arbitrum freeze drew criticism over centralization

The Arbitrum Security Council froze 30,766 ETH after the KelpDAO exploit. Supporters said the step helped secure stolen funds quickly and avoided broader damage to the ecosystem.

Critics said the move raised concerns because the council can upgrade smart contracts on Ethereum’s base layer without requiring every node operator to download a new software fork. That power led some users to question how decentralized the network remains in practice.

One critic, identified as Nakamoto in the report, said, ”The Security council has the power to upgrade the smart contract on the L1, effectively a coercion mechanism that has absolutely nothing to do with decentralisation.”

That criticism focused on whether emergency powers held by a small group can fit within a decentralized model. The issue has become a recurring point of debate across blockchain networks after major exploits.

KelpDAO exploit pushed governance questions back into focus

The KelpDAO exploit set off a wider discussion about how networks should respond when stolen funds move quickly across chains. In Arbitrum’s case, the council acted to freeze the ETH without waiting for a broader governance process.

Schwartz said the Arbitrum community faced a network state it considered illegitimate, and the council responded to restore order. He said the action reflected a choice by the community rather than a rejection of decentralization.

His defense placed Arbitrum’s decision within a long-running crypto debate. On one side are those who support emergency intervention to recover funds. On the other are those who argue that such powers weaken the core idea of decentralized control.