In May 2019, Binance lost over 7,000 bitcoins, valued to over $40 million.
The CEO of Binance Changpeng Zhao (CZ) demonstrated that after talking to different parties, he chose to not pursue the re-org strategy for “revenge” on the hacker(s) that was able to steal money from the cryptocurrency exchange
The hack included one trade that transferred roughly 7,074 BTC from Binance’s hot wallet. While CZ thought that reversing the Bitcoin blockchain was possible, he confessed it would not be worthwhile to do this, even for its $40 million which were stolen.
The re-org would observe miners essentially collude to make an alternative continuation of their blockchain rooting out of prior to the block which comprised the hackers’ transaction. This alternative continuation would have to grow quicker than the present one to possess more proof-of-work and watch all of Bitcoin customers re-org for this, accepting it as legitimate.
In its set of experts for doing so, CZ mentioned it might dissuade future hacking efforts, and start looking into how the Bitcoin system would cope with this type of circumstance. The outcome would probably be the end of this, as it might ruin the cryptocurrency’s immutability, and influence consumers’ confidence in it.
Presently, Bitcoin is regarded as a store-of-value and also a kind of electronic gold. Employing the cryptocurrency, whales can move tens of thousands of dollars for exceptionally tiny quantities in fees, which makes BTC a superior asset that is also helpful for remittances and regular transactions.
However, what if miners were to create a cartel to pull a 51% attack on the Bitcoin blockchain to undo trades? This is basically what was at stake if CZ chose to rollback the blockchain, and could most likely hurt Bitcoin’s reputation. Who’d wish to transfer millions using BTC in case the blockchain was not immutable?
Since Nic Carter, a partner at investment firm Castle Island Ventures in Boston, place it through a Telegram message, Bitcoin’s value proposition is based on miners not colluding, like they do this they could”selectively censor, invalidate, or interfere with transactions.” He said :
More to the point if this kind of behavior becomes mainstream — deep reorgs to reverse valid transactions — then Bitcoins settlement assurances are impaired. People will lose confidence in Bitcoin’s ability to settle large transactions.
The Ethereum Precedent
The ones who are involved in the crypto area for some time know that blockchain trades have been reversed before. As soon as the DAO applications on Ethereum watched a hacker stealing 3.6 million ether (worth ~$70 million at the time), the Ethereum blockchain had to perform a hard fork in order to please everyone and to move on after the hack.
At the moment, the Ethereum blockchain was rather young, but even so, it was a controversial move. Some viewed the hack an unethical, but legitimate movement, and opposed regaining the funds. This saw the community divide, with a few staying on the first blockchain, now called Ethereum Classic (ETC) and fans of ETC chain’s immutability.
Ever since then, various Bitcoin fans have remained away from Ethereum entirely. Commenting on the recent proposal to rollback the Bitcoin blockchain Vitalik Buterin, the Ethereum co-founder, noted that rolling back wasn’t even an option.
Ethereum did a surgical irregular state change. We never even considered actually rolling back the chain to undo the hack; the collateral damage from that (reverting a day of *everyone’s* transactions) would have been huge and possibly fatal.
The billionaire founder of Galaxy Digital Michael Novogratz said that bitcoin is currently viewed as a legitimate shop of riches, which also has a market cap of over $100 billion. Affecting its immutability and standing could see its worth dip.
Some think CZ chose against the rollback since he would not have the ability to pull it off. Miners about the Bitcoin blockchain understand that if they had been to create a cartel to hinder trades, the value of BTC would plummet.
This might signify that the 7,000 BTC they’d get paid will be worth a great deal less than $40 million if they would perform a roll back the Bitcoin blockchain. Needless to say that this would impact their company in the long term. As another result of a theoreticall rollback, would be a fall of the hashrate, which makes it much easier for bad actors to pull on a 51% onto it and double-spend coins or mess with all the blockchain.
Even though it is possible, messing with the base of hope on which Bitcoin sits, could put a stop to this flagship cryptocurrency. The simple fact that the most significant cryptocurrency exchange considered a rollback of the Bitcoin blockchain and realised it wasn’t possible, it’s a positive indication of Bitcoin’s immutability.