Flow Abandoned Rollback Plans for ‘Phase Two’ Recovery After $3.9M Exploit
Following a partner revolt led by bridge operators, Flow replaces its controversial chain rollback with a targeted asset freeze to address the $3.9M December exploit.
The Flow Foundation has officially pivoted to “Phase Two” of its recovery strategy following a $3.9 million execution layer exploit on December 27, scrapping an initial plan to roll back the blockchain after severe pushback from ecosystem partners. The network is now executing a targeted cleanup of counterfeit assets rather than rewriting chain history.
FLOW struggled to reclaim the $0.10 mark (-1.2% in 24h) early Tuesday, remaining nearly 45% down from its pre-exploit trading range of $0.17.
The Rollback Revolt
Immediately following the breach, Flow developers proposed a chain rollback, essentially resetting the ledger to a point before the attack. While this would have erased the attacker’s minting of 150 million counterfeit FLOW, it immediately triggered an outcry from cross-chain infrastructure providers who warned of systemic risk.
Alex Smirnov, co-founder of deBridge, publicly stated that bridge operators were “blindsided” by the proposal, noting that a rollback would create “double-spend” scenarios where users who bridged assets out during the window would effectively duplicate their funds, leaving liquidity providers with unbacked deficits.
The Isolated Recovery Plan was chosen specifically to avoid reconciliation risk for off-chain custodial systems and cross-chain protocols maintaining independent state. Flow Technical Post-Mortem
Phase Two: Surgical Extraction
Instead of a hard reset, the network initiated a “Height Coordinated Upgrade” (HCU). This mechanism grants the Community Governance Council temporary, validator-approved permissions to surgically identify and burn the counterfeit tokens still sitting in suspended accounts.
According to the foundation’s post-mortem, the attacker laundered the stolen funds through THORChain and Chainflip, but the majority of the counterfeit supply (including 87.96 billion invalid FLOW) remained trapped on-chain or frozen by centralized exchange partners.
Institutional Context
The reversal highlights a critical governance friction in Layer-1 blockchains: the tension between immutability and recovery. While a rollback offers a “clean” fix for the protocol, it imposes catastrophic reconciliation costs on bridges and exchanges (like LayerZero and Celer) that finalized transactions based on the now-discarded history. Flow’s shift to Phase Two signals a concession to the reality that in an interconnected chain capability, “undo buttons” are effectively obsolete.
Flow expects to fully restore EVM functionality within 24 hours, barring unforeseen blockers.
