The Bitcoin community has reiterated the immutability of the Bitcoin project by dismissing the idea of soliciting consensus among Bitcoin mining pools to re-org its blockchain.
The controversy was first sparked when Bitcoin core contributor Jeremy Rubin suggested to Binance CEO Changpeng ‘CZ’ Zhao that he may be able to coordinate a “decentralised” re-org to undo the theft of the recently hacked 7,000 BTC if CZ revealed the private keys of the hacked wallets that had their funds compromised.
@cz_binance if you reveal your private keys for the hacked coins (or a subset of them) you can decentralized-ly at zero cost to you, coordinate a reorg to undo the theft.
— jeremy rubin 🥪 (@JeremyRubin) May 8, 2019
The Binance CEO revealed in a live AMA session (on the same day as the hack) that a re-org may potentially be viable, before later admitting that he would “not pursue the approach” to recover the stolen funds.
So how does it work?
In simple terms, the game theory compares the size of the breach (in this case 7,000 BTC) to the ongoing block reward that new miners receive for processing transactions on Bitcoin’s immutable layer. At the time of writing, miners collectively earn around 75 BTC an hour, or 1,800 freshly minted Bitcoins a day.
If the victim (Binance in this case) can incentive miners with a portion of the Bitcoin stolen to subsequently make up for the loss of block rewards earned since the hack, it may be economically feasible for the incident to be re-org’ed and the ‘hack’ transaction to be undone if the victim can gain consensus among all the major mining pools.
Social value in immutability is much higher
The approach was obviously rejected. I believe that the main factor was due to people realising that if the immutability in the Bitcoin blockchain is compromised, the value of the project and token could take an economic hit that far outweighs the potential gains from recovering a portion of the hacked funds.
Most mining pools have the interest of miners at heart, who in turn sit on hundreds of millions of dollars worth of mining hardware and have such a vested interest in the project that a blow to the immutability factor is just too dangerous.
Another factor to add to this is if the victim of the attack tries to gain consensus over miners, the hacker could also provide their own incentives (gained from the hack) to counter-incentivise the miners to do ‘nothing’.
Outrage across crypto Twitter and a “UASF-style” proposal
Just the mere mention of this idea seemed to spark a crypto Twitter storm, particularly among those who believe in the immutability of the Bitcoin blockchain and who wish to prevent this type of ‘attack’ on the sanctity of the BTC chain. It was also repeatedly mentioned that this approach has previously been rejected following other major exchange hacks that have compromised Bitcoin holdings.
Cypherpunk Adam Back went as far as to propose a “UASF-style re-org rejection code” to automate nodes to reject any such immutability attacks because the “game theory is complex, and it is easier for people to see a tool and explicit threat”.
“Hodlers and the ecosystem will run this if you try,” added the Blockstream CEO.
Another well-known Bitcoin evangelist, Andreas Antonopoulos, compared the idea of a re-org to recover exchange losses to a “bailout for a bank” that is “mismanaging risk”. He went on to point out that “it’s so hard to pull off and so likely to fail that unlike banks, 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 Team) (@aantonop) May 8, 2019
Before ending his tweet with the popular hashtag for self-sovereign individuals (#notyourkeysnotyourcoins), he signed off with the message that “those who fail security get to eat the cost”.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.