Core Question

What are the freeze command dangers and why doesn't every cryptocurrency have it?

Stablecoins

Stablecoins like USDT and USDC are probably the most well-known and prominent example. They also account for a big portion of all frozen crypto assets. The issuer like Tether or Circle has a backdoor freeze command in their smart contract so that they can freeze any wallet with USDC or USDT at any government request. They also do it during exploits and protocol hacks in order to prevent user funds from being stolen and transferred out by the attackers.

Memecoins (the danger)

This is the very dangerous one. When you launch your own token whether on SOL, BSC, or ETH, you write the code. That means you can do whatever you want. Now, there are malicious actors out there that will create a new token, hype it up and everything, and then sell their tokens they created/took as they launched for pure profit. However, before dumping their tokens, they first very quickly freeze everyone's wallet. They then sell to an instant exchange before anyone knows what is happening. They effectively performed a rug-pull, while using the frozen wallets to prevent any sort of market price movement and any other selling pressure.

There are also other reason they do this. By first making a quick buck through hype, when they perform a rug-pull, they can't be tracked as easily. That is because falsely hyping up a token like that with malicious intentions, called Pump and Dump, is highly illegal. So scammers perform a rug pull by essentially stopping all token activity. 

That is why you should always research any memecoin. That way, you can be sure if there are any malicious smart contracts, and they don't even have to be freeze. They could also add another command like an admin-only mint command, where the creator can create more tokens. This would be used when the price climbs and hype is growing, that way they make more money. This is even more detrimental in a fixed-supply token, as suddenly, there are extra tokens nobody knows about.

Why some have it

You may also wonder why some tokens have a freeze command (stablecoins, RWA) while other tokens do not. 

It all comes down to structure. Stablecoins and RWAs (Real World Assets) are issued by a centralized authority. They must therefore include a freeze command as they are backed by an asset in real life. For example, stablecoins are backed by cash reserves and government bonds. RWAs like PAXG and any Ondo products are also backed by stuff in real life like gold or bonds.

However, a token is different in that there is nothing behind it. No one regulates it/issues it, which also means that it is impossible for someone to be able to freeze wallets. It is also impossible to add a freeze command to an already established crypto like BTC, ETH, and SOL. That is because it would require updating the core code, creating a hard fork. Since pretty much everyone would not want this, the update would never get downloaded by nodes and operators no matter how hard you tried, effectively putting a natural barrier.

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