Inside the $71 million freeze on Arbitrum that has the crypto world questioning what decentralization really means

In simpler terms, the concern is less about this specific case and more about precedent: If intervention is possible, where is the line drawn, and who decides?

That capability, now demonstrated in practice, raises broader questions about the boundaries of decentralization on Layer 2 blockchains, and the tradeoff between security and neutrality.

While the Security Council is elected by token holders, it is still a relatively small group capable of acting quickly and, in this case, decisively.

Patrick McCorry, the head of research at the Arbitrum Foundation and who coordinates with the Security Council, emphasized that this structure is by design.

The Security Council is “a very transparent part of the system,” according to McCorry; “You can see exactly what powers they have.” In addition, he said, “they’re elected by token holders… not hand-picked by us [Arbitrum Foundation + Offchain Labs].”

Currently, the Security Council is selected through recurring on-chain elections, with token holders voting every six months to appoint its 12 members

From that perspective, Arbitrum’s model reflects a different interpretation of decentralization, one where authority is delegated by the community, rather than eliminated entirely.

Some critics have argued that a decision of this magnitude should have gone through token-holder governance. But Goldfeder pushed back on that idea, arguing that speed and discretion were essential.

“The DAO cannot be consulted, because the second the DAO is consulted, that essentially means North Korea is consulted,” he said, referring to ongoing investigative efforts suggesting the attacker’s ties.

“If you say, ‘hey guys, should we move these funds?’ then you might as well do nothing," he said.

In that framing, the choice was not between decentralized and centralized decision-making, but between acting quickly or allowing the funds to disappear. Indeed, the attackers began moving and laundering the remaining stolen funds within hours of the Security Council’s intervention.

Supporters of the move say that reality highlights a different tradeoff, one between ideals and practical risk management. Without some form of emergency intervention, stolen funds in crypto are typically unrecoverable, and large exploits can cascade through the ecosystem.

From this perspective, the Security Council functions less as a centralized authority and more as a last-resort safeguard, designed to step in only under extreme conditions.

“We’re no more or less decentralized today than we were yesterday,” Goldfeder said.

Read more: Arbitrum freezes $71 million in ether tied to Kelp DAO exploit