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Bitcoin Reorg Debates Stirred Up in Wake of Binance Hack

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Blockchain reorgs are generally cast as assaults, namely in the manner of a 51 percent attack.

Yet after the cryptoeconomy’s most popular exchange Binance was hacked out of a whopping 7,000 bitcoin this week, a reorg of the Bitcoin blockchain was floated as a way to potentially remedy the attack. The suggestion quickly generated controversy.

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The current round of reorg debates started after Jeremy Rubin, a cryptocurrency specialist and past contributor to Bitcoin Core, suggested in the early aftermath of the hack that Binance’s CEO Changpeng Zhao could explore reaching out to bitcoin miners to “coordinate a reorg to undo the theft,” i.e. to reorg the stolen BTC out of the attackers’ control.

Shortly after Rubin’s tweets, the suggestion was passed along to Zhao, who then mentioned the possibility of a “rollback” on a livestream update with the Binance community.

However, it didn’t take long for Zhao to leave the notion behind upon reaching out to knowledgeable stakeholders in the ecosystem. The Binance CEO cited the possibility of damaging the “credibility” of bitcoin as well as the impracticality of corralling the necessary support as reasons for not pushing for a reorg.

Yet even after Zhao seemed to put the matter to rest, debates about reorgs started picking up steam in the wider cryptocurrency ecosystem.

Even as Binance Nixes the Idea, Debate Kicks Up

One day after the hack, the reorg topic reached enough of a fever pitch that Zhao issued another comment on the episode, arguing that Rubin’s suggestion was briefly considered — nothing more — in the wake of an emergency.

Others were surprised the possibility of a reorg was publicly considered at all. Michael Novogratz, co-founder of the crypto bank Galaxy Digital, called such talk “close to heresy.” Responding to Novogratz’s comment, Ethereum co-creator Vitalik Buterin argued that a remedial rollback of everyone’s transactions would be “possibly fatal” for a project.

https://twitter.com/VitalikButerin/status/1126096874039988224

For his part, Andreas Antonopoulos, author and co-author of Mastering Bitcoin and Mastering Ethereum respectively, likened a remedial reorg as akin to a “bail-out for a bank,” adding that “there won’t be a bailout here.”

Others, like Larry Cermak of The Block, suggested a reorg was pointless because Binance would be able to generate revenue to make up for the lost funds within a matter of weeks. Moreover, the exchange already sets aside 10 percent of its trading fees for a fund to cover black swan events like hacks.

Not a Matter of “Should,” Rather a Matter of “Could”

As reorg chatter increased, many analysts and pundits in the space said Binance should not pursue the controversial strategy.

However, others highlighted that the strategy was totally permissible on a technical level and was thus one that could always be pursued, for better or for worse and whether anyone liked it or not.

On a related note, Bitcoin Udi Wertheimer highlighted in an associated thread that “There’s no absolute finality in bitcoin,” only practical finality. That is to say, there may be a block depth in the Bitcoin ledger that is too deep for any party to feasibly reach during a reorg, but it’s not a set number that can be readily known.

With that said, the aforementioned Jeremy Rubin later added he still thought a reorg “within 6 blocks” could be a “standard way of dealing with a hack” like the kind Binance was hit with this week.

Whether you think a remedial reorg is a good idea or bad idea, it’s clear such a move would be very expensive. In the early wake of the Binance hack, Bitcoin developer and entrepreneur Jimmy Song calculated that it would’ve already taken hundreds of BTC by that point to effectively pay for a reorg of the Bitcoin network.




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William M. Peaster is a professional writer and editor who specializes in the Ethereum, Dai, and Bitcoin beats in the cryptoeconomy. He's appeared in Blockonomi, Binance Academy, Bitsonline, and more. He enjoys tracking smart contracts, DAOs, dApps, and the Lightning Network. He's learning Solidity, too! Contact him on Telegram at @wmpeaster

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