Sacrilegious Binance Reorg Would ‘Erode’ Bitcoin: Blockstream

Sacrilegious Binance Reorg Would ‘Erode’ Bitcoin: Blockstream 1

By CCN: Blockstream CEO Adam Back told the What Bitcoin Did podcast that the block reshuffling proposed by Binance CEO Changpeng Zhao would raise “geopolitical issues” had it been attempted.

Accept That Bitcoin Is Final

Back explained why the idea of a chain reorganization as a means to punish hackers or rescue lost bitcoins is a terrible idea.

“You just have to accept that Bitcoin is final because a whole bunch of factors which we can get into, but it’s basically, you know, all of the infrastructure is set up to automatically just continue consuming and finalizing transactions. And there’s a lot of inertia and equipment that’s just running away, mining transactions, so it’s very hard. The software is not designed to undo things. The infrastructure isn’t designed to undo it. And there’s all kinds of side-effects if you did. And the side-effects are both technical and economic.

“In game theory, if you can undo something, the attacker can do other things. And people who disagree with the reorg can do other things. People are very incentivized to see it not happen because they’ve seen other coins have this happen and suffer a great loss of credibility as a result. And there are also geopolitical issues that, you know, you would establish a precedent that would erode one of the major benefits of Bitcoin, being censorship-resistance, which ties back to this kind of finality of the network.”

All For One, One For All

The Bitcoin “reorg” idea floated by Changpeng Zhao in the wake of his exchange’s 7,000 BTC loss was quickly withdrawn as community scorn centered on the embattled CEO. Zhao made clear that the idea didn’t originate with him, but his team had considered it and reached out to potential conspirators including Jihan Wu.

Bitcoin chain reorganizations have, of course, taken place throughout the blockchain’s life. The system is designed to tolerate them so long as there is consensus following a reorganization, although a lack thereof would lead to continued reorganizations. The reason that Bitcoin isn’t in a state of constant chaos is that those who have the hashpower abide by the same rules, and many use the same implementation of Bitcoin for their mining nodes.

Core developer Bryan Bishop spoke of a potential scenario where an exchange and a thief essentially battle it out with miners, trying to pay them to accept their preferred version of the blockchain.

As Back said, there are, of course, economic issues associated with a purpose-driven Bitcoin chain reorganization. The “erosion” he speaks of would extend beyond the idea of censorship-resistance and immutability.

People would question how decentralized the network truly is, and whether their coins could ever be safe in a system where such rollbacks are possible. Understandably, such a “precedent” might create the first real window for other coins to rise in history.

Gratefully, we still don’t know what happens if an individual, influential actor works to his own benefit at the expense of the network’s credibility. In the grand scheme of things, the Binance hack is quite small by comparison to other major hacks. Back points out that it’s about 100 times smaller than the Mt. Gox losses, which rocked crypto markets and overwhelmingly contributed to the first extended bear market.

Listen to the interview below.

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CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin29,778 0.18 % 0.77 % 2.37 %
Ethereum1,960.8 0.09 % 0.62 % 6.41 %
Tether0.9996 0.14 % 0.02 % 0.09 %
BNB328.51 0.35 % 0.41 % 7.17 %
USD Coin0.9989 0.16 % 0.08 % 0.04 %
XRP0.4086 0.51 % 0.04 % 6.96 %
Binance USD0.9996 0.12 % 0.20 % 0.18 %
Cardano0.9566 0.22 % 0.68 % 6.96 %
Solana48.60 0.18 % 1.89 % 15.36 %
Polkadot10.00 0.34 % 1.69 % 9.49 %

Bitcoin (BTC) $ 29,776.00
Ethereum (ETH) $ 1,957.07
Tether (USDT) $ 1.00
BNB (BNB) $ 328.21
USD Coin (USDC) $ 1.00
XRP (XRP) $ 0.407738
Binance USD (BUSD) $ 0.999314
Cardano (ADA) $ 0.517742
Solana (SOL) $ 48.54
Polkadot (DOT) $ 10.00