What a Bitcoin ‘Reorg’ Is and What Binance Has to Do With It

What began with a single tweet shortly become an escalating debate Wednesday when the CEO of one of many world’s largest cryptocurrency exchanges appeared to entertain the concept of encouraging revisions to the bitcoin blockchain.
Following Wednesday’s revelation that crypto alternate Binance was robbed of seven,000 BTC (price about $40 million), a proposal was floated to conduct a transaction “reorg” on the bitcoin blockchain, sparking a fiery debate and group uproar.
The concept was recommended just a few hours after the world’s largest crypto alternate by quantity was hacked when developer Jeremy Rubin, who has labored on bitcoin and Stellar’s core code, tweeted to the founder and CEO of Binance:
“[Changpeng Zhao] in the event you reveal your non-public keys for the hacked cash… you possibly can decentralized-ly at zero price to you coordinate a reorg to undo the theft.”
Rubin primarily recommended that by getting a majority of miners onboard, the transaction historical past may very well be adjusted in order that the funds are as an alternative damaged up and despatched to them as an alternative. This “reorganization” would come at some price, however it will forestall the 7,000 BTC from staying within the arms of the hackers. Additional, it wouldn’t have constituted a pure rollback, or a reversal of the transaction historical past writ-large.
The concept was subsequently raised throughout an ask-me-anything session held by Binance CEO Changpeng Zhao, sparking a spherical of hypothesis that ended with Zhao finally dismissing the concept.
Because the tweet caught consideration, the dialog shortly boiled over given the subject of debate – there have been only a few adjustments to the bitcoin blockchain’s transaction historical past in its 10 years of operation, as doing so has been reserved for dire emergencies through which there could also be important consensus failures.
“To make clear, the proposal by [Rubin] and [James Prestwich] is to assemble a [transaction] that may maintain all different transactions and simply distribute the hacker cash to miners,” tweeted Zhou. “It’s not: a rollback of any transaction, neither is it reverting funds again to Binance.”
The proposal prompted an uproar on social media. As developer Udi Wertheimer tweeted in response:
“The concept this rollback of days would even be sensible in any respect for anybody concerned is insane. A day of mining prices 1800 BTC. Rolling again 4 days prices greater than the hack itself.”
Others appeared to agree that the sheer monetary incentives for such a feat would merely be infeasible.
“The losses are nonetheless at a minimal [7,250] BTC,” wrote developer Jimmy Track about tough prices for Binance to sufficiently incentivize miners to rewrite a part of the transaction historical past of the bitcoin community.
On the similar time, infeasibility and impossibility are two separate issues. When explaining why Binance would finally not be pursuing a sequence reorganization or “reorg” as recommended by Rubin, Zhou listed 4 separate causes none of which had something to do with the financial price.
“1. We could injury credibility of BTC. 2. We could trigger a cut up in each the bitcoin community and group…three. The hackers did show sure weak factors in our design and person confusion that was not apparent earlier than. four. Whereas it was a really costly lesson for us, it’s nonetheless a lesson,” listed Zhou on Twitter.
Zhou’s reasoning highlighted a key concern many have voiced prior to now in relation to blockchain immutability not simply on bitcoin however all proof-of-work (PoW) blockchains.
A thought experiment?
“If you happen to bribe 51 % of the miners, they may change the ledger for you. [This] tells you simply how little irreversibility there may be in PoW cash,” tweeted Cornell College professor and researcher in blockchain consensus protocols Emin Gün Sirer.
A 51% assault on the blockchain community isn’t a brand new assault vector for PoW blockchains. Nonetheless, as highlighted by Gün Sirer, it’s additionally not likely an assault vector. On very particular situations, the vast majority of self-interested miners on PoW blockchains have voluntarily agreed to change a transaction historical past to undo important conditions.
Whereas the state of affairs isn’t totally the identical, prior to now, blockchain networks have seen their histories altered within the wake of important moments. This occurred on the ethereum blockchain again in 2016 when over $60 million price of cash have been siphoned off from the now-defunct sensible contract The DAO. It additionally occurred on the vericoin blockchain again in 2014 after $eight million price of cash have been hacked.
Whereas controversial, each selections have been supported by the first developer group who launched system-wide upgrades or exhausting forks to allow in any other case infeasible amendments to the blockchain transaction historical past.
But these decisions weren’t with out their repercussions; the ensuing ethereum fork resulted in two distinct chains, ethereum and ethereum traditional, respectively.
A powerful no
Nonetheless, many within the bitcoin group took to social media to deride the concept as each infeasible as nicely in opposition to the philosophical underpinnings of the know-how.
In Binance’s specific case, distinguished members of the bitcoin group level out that bitcoin being the world’s largest blockchain is a very distinctive case with a popularity to uphold.
“Discuss of forking or reorganizing the blockchain is near heresy,” tweeted billionaire bitcoin investor Michael Novogratz. “When the ethereum group did it the challenge was like 5 months outdated. A child. Bitcoin now has $100bn market cap and is a official retailer of wealth.”
It might even be unfair in response to Adam Again – CEO of bitcoin growth startup Blockstream – on condition that the most recent Binance hack is nowhere close to as extreme as earlier hacks suffered on the bitcoin blockchain.
“A Bitcoin reorg is simply not occurring, and I doubt any Bitcoin trade, miners nor builders thought-about it both. Recall 2014 $473mil, 2016 bitfinex hack $72mil, 2019 binance $40mil and many others. #NotHappening,” tweeted Again.
Binance picture through Shutterstock

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