Should validators be able to reject transactions?

Ever heard the phrase “Governable Decentralization?” Most people probably haven't, but every blockchain runs on governable decentralization if the networks are indeed decentralized with upgradability built-in.

It should be expected that running blockchain-based economies will be challenging, especially considering the complex nature of not just systems that powers it but the ideologies that's promoted alongside its growth and evolvement.

When it comes to what blockchains are, we have various terms like decentralization, immutability, irreversibility and phrases like censorship-resistant, consensus-based algorithms, etc, that shape the way people view or perceive these networks, but sometimes, when you think about it, people oftentimes fail to completely understand these words or group of words.

Let's take a phrase not earlier mentioned, but somewhat popular and explore it:

“Code Is Law”

"Code is law" is a concept popularized by Lawrence Lessig, a Harvard Law professor, in his 1999 book Code and Other Laws of Cyberspace. It means that in digital environments—especially on the internet and in software systems—the code (i.e., the software and algorithms that define how a system works) can regulate behavior just as powerfully as traditional legal systems. — ChatGPT

I've personally never looked up the history of the phrase, but from how it's been used across the cryptocurrency ecosystem, the popular understanding of it has been very clear.

Code is law in the blockchain ecosystem simply means that the code guarantees the outcome. Meaning that if I make a transaction, the only thing I can trust is that what happens to that transaction will be what's permitted by code.

So if the code says that my TXs goes from point A, being my address, to point B, the specified recipient, provided I've signed with the appropriate private key and validators or witnesses are able to confirm this otherwise it fails, that is exactly what's going to happen.

The problem however is that people seem to lack the understanding that every law has loopholes, even in digital economies.

For instance, validators or witnesses are not forced by code(said law) to validate your transactions, they can quite literally ignore it and they wouldn't be penalized for it.

Secondly, the law, enforced by code, can also be amended, through upgrades that validators have to voluntarily embrace.

This means that each soft or hard fork is an amendment or an introduction of a new law for the blockchain. And this could mean that funds can be moved from my address to any other if the upgraded code permits.

Yet, people don't quite get it.

Now I know that you must be wondering what this is about so let's jump right into it.

1. Sui validators freeze majority of stolen funds in $220M Cetus hack

Cetus, a decentralized crypto exchange (DEX) built atop the Sui blockchain network, said $162 million of over $220 million stolen in a May 22 hack has been frozen.

"A large number of validators identified the addresses with the stolen funds and are ignoring transactions on those addresses until further notice. The Cetus team is exploring paths to recover those funds and return them to the community.” — Cointelegraph report May 22, 2025

2. Sui community passes vote to repay $162M to Cetus exploit victims

Sui validators approved a governance proposal to return $162 million in frozen assets linked to a recent exploit of the decentralized exchange Cetus, marking a key step toward full user repayment.

In a governance vote concluded on May 29, Sui validators passed the recovery proposal with 90.9% voting in favor, 1.5% abstaining and 7.2% not participating, according to the network’s official governance page.

“With this result, the impacted funds will be moved to a multisig wallet and held in trust until they can be returned to users according to the plan led by Cetus,” Sui said in a May 29 X post. — Cointelegraph report May 30, 2025

Now there are primarily two big questions here:

How can validators freeze funds?

And

How would the transfer of funds back work?

For the second question, an upgrade to the network will occur for the funds to be moved from wherever it is to a multisig wallet, yeah, that's actually possible via an upgrade and they wouldn't be the first people to do this, Ethereum did same in the past and similar discussions came up following Bybit’s hack this year.

And for the first question, the reality is that funds aren't frozen traditionally as one would think when the word is mentioned, rather, validators just simply have said addresses blacklisted so their transactions never get added to blocks, which essentially gets funds stuck.

Now this event has got a lot of people questioning the decentralization of the SUI blockchain, as someone who's never looked into SUI prior to this, I really cannot comment on its decentralization but I can say that everything that it's done following this event is something quite literally any blockchain permits.

The upgradability of the code that governs our ecosystems is the greatest factor to our networks. If enough people come to a consensus, then literally anything can be done to a blockchain.

Now the question of if validators should be able to reject transactions, seeing that it can be a tool to censor anyone begs a reassessment of what “validation of transactions” should really be like.

Generally, validator’s jobs involve two major processes, and the first one is where censorship happens. The first is selecting transactions, for chains with dynamic fee designs, it's common for validators to prioritize transactions with high fees over those with low fees during peak volumes and that can be consumed partial censorship.

The second process is determining if the selected transactions are valid, that is everything from the availability of the funds being moved, fees and the private key signing said transaction being valid.

To eliminate the power validators currently have in censoring transactions would require upgrades to blockchains that takes away their autonomy to pick and choose.

Of course, most approaches to do this will mean more work for the validations, potentially less TXs fee-side income and more network load, generally.

The bottom line is that working around validators autonomy isn't something worth doing. The only reasonable thing anyone can do is ensure they are investing in networks that are not controlled by a small group of people because generally speaking, the autonomy enabled and upgradability of blockchains means that anything can be done, but a truly decentralized network of participants will ensure that every decision taken, even the crazy ones, are consensus-based for no interest of a small group of people.

The fact that these flexibilities exist is what makes decentralized economies governable.

Posted Using INLEO