Talk of A Bitcoin ‘Reorg’ Following Binance Hack Sparks Uproar
A proposal to have a transaction “reorg” conducted on bitcoin’s blockchain has sparked uproar and fiery debate within the bitcoin community.
The suggestion followed a security breach on major crypto exchange Binance that saw hackers allegedly steal bitcoins worth $40 million.
On Wednesday, a few hours after Binance revealed the security breach, a tweet by a developer who has worked on the core codes of both the bitcoin and Stellar blockchains, went viral within crypto circles.
Jeremy Rubin’s tweet to Binance CEO Changpeng Zhao suggested that if Zhao revealed the private keys to the hacked coins, then it is possible to “decentralized-ly, at zero cost […] coordinate a reorg to undo the theft.”
What Rubin was suggesting essentially meant that getting the support of a majority of all bitcoin miners could allow for adjustments to the network’s transaction history. The ‘reorganization’ would break up the hacked funds and transfer them to miners.
With this, a “reorg,” though costly, would see the 7,000 BTC taken from the hackers. However, the move does not constitute a rollback or a complete reversal of bitcoin’s transaction history.
The Binance CEO responded on the question of a “reorg” in an ask-me-anything (AMA) session, an idea that he ultimately dismissed.
The debate centered on the huge cost implication, with one developer, Udi Wertheimer, tweeting:
“The idea that this rollback of days would even be practical at all for anyone involved is insane. A day of mining costs 1800 BTC. Rolling back four days costs more than the hack itself.”
Developer Jimmy Song called it infeasible but not entirely impossible that Binance could seek to incentivize miners so as to have them rewrite that section of bitcoin’s network history. Zhou went on to list four reasons not associated with the monetary costs that make such a “reorg” unnecessary.
According to him, the rewrite could possibly “damage” bitcoin’s credibility as well as split both the network and the community. The third reason is that the hack had “demonstrate[d] certain weak points” in not fathomed before.
Zhou tweeted that, although the hacking provides a “very expensive lesson for us, it is nevertheless a lesson,” that the whole bitcoin community needs to learn.
Zhou’s views reflect a wider concern most people have when in relation to blockchain immutability of proof-of-work (PoW) networks.
Emin Gün Sirer, an expert in blockchain consensus algorithms, expressed this concern and noted that there is very “little irreversibility” in proof-of-work coins because all it takes would be a bribe to “51 percent of the miners” to have the ledger changed.
51% attacks aren’t entirely new attack vectors for PoW blockchain networks, but as the Cornell University professor highlighted, it really doesn’t come down to that alone.
There have been instances, special cases for that matter when a majority of PoW miners have voluntarily settled on a decision aimed at modifying certain transaction records to reverse critical situations.
A good example is the 2016 Ethereum decision to alter the blockchain history when the DAO smart contract was breached leading to a loss of coins worth over $60 million. The miners agreed to a hard fork that enabled an otherwise infeasible system-wide upgrade.
Notable, however, is that that decision saw the blockchain split into Ethereum (ETH) and Ethereum classic (ETC).
But talk of a similar move on the bitcoin blockchain won’t be entertained going by the resounding opposition the idea has generated.
Most commentators on the issue have said bitcoin has a reputation that must be upheld. And billionaire crypto investor Mike Novogratz has likened any such proposal as being “close to heresy.”
Blockstream CEO Adam Back noted that a “reorg” should not be entertained as the Binance hack doesn’t come close to other major hacks in the past.
In 2014, Mt Gox revealed it had been hacked and 850,000 bitcoins worth over $450 million stolen. The Bitfinex breach of 2016 saw hackers make off with over $72 million worth of coins.
According to Adam, “a bitcoin reorg is just not happening,” and it is doubtful whether anyone from the bitcoin community, its miners or developers have had that idea.
This hack marks the second time in the recent past that Binance has been exploited. Last year, Binance accounts were compromised to manipulate altcoin markets (Syscoin (SYS)) although a hack was never confirmed.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.