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.
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.
You can even sign batches of txns with the old utxos paying miners with different locktimes to make it a permanent reward to unwind this hack.
Cheaper than losing all 7000
— jeremy rubin (@JeremyRubin) May 8, 2019
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.
cons: 1 we may damage credibility of BTC, 2 we may cause a split in both the bitcoin network and community. Both of these damages seems to out-weight $40m revenge. 3 the hackers did demonstrate certain weak points in our design and user confusion, that was not obvious before.
— CZ ???? Binance (@cz_binance) May 8, 2019
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.
evaluating a suggested option is wrong in itself, especially under the circumstances. And under all circumstance, freedom of thought is not a crime.
3. we did not want to do it.
4. we couldn't do it.Bitcoin is secure. Onwards, lots to do…
— CZ ???? Binance (@cz_binance) May 8, 2019
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.”
A reorg to recover exchange losses is like a bail-out for a bank mismanaging risk.
Fortunately, it's so hard to pull off and so likely to fail that unlike banks, there won't be a bailout here.
Those who fail security get to eat the cost. #NotYourKeysNotYourCoins
— Andreas (aantonop) (@aantonop) May 8, 2019
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.
Some of my thoughts/insights on Binance hack
– $41M is peanuts for Binance – they can make it back in 47 days
– It was the sixth largest exchange hack in history and the total amount stolen from exchanges is now $1.35 billion
– reorg was a stupid idea that wouldn't work pic.twitter.com/K8rBuFggZm— Larry Cermak (@lawmaster) May 8, 2019
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.
If you're handwringing about whether or not it would be 'acceptable' for Binance to create a massive double-spend transaction to get their funds back from the hack via massive reorg, then you've forgotten how this *permissionless*, *amoral* network called #bitcoin operates. /1
— Mario Gibney (@Mario_Gibney) May 8, 2019
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.
There’s difference, @alpacasw gave a good explanation, but I don’t think it has anything to do with finality. There’s no absolute finality in bitcoin. There may be some “practical” finality but I see no compelling reason to believe it’s at 100 blocks
— Udi Wertheimer (@udiWertheimer) May 8, 2019
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.
In the future, I'd like consider a standard way of dealing with a hack to be to, within 6 blocks, reorg the attacked funds to a transaction which pays out on a long term timelocked schedule to future miners.
That way at least these hacks can secure the future of bitcoin :p
— jeremy rubin (@JeremyRubin) May 8, 2019
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.
1/ Back of the envelope math for doing a 58 block reorg (current confirmations for the tx that took money from binance):
Minimal cost: 58 * 12.5 btc = 725 BTC (assumes every miner would get roughly the same tx fees in the new chain and that 100% of miners go with this scheme)
— Jimmy Song (송재준) (@jimmysong) May 8, 2019
