Community Condemns Talk of Bitcoin Roll Back Following Binance Hack
In case you missed it, Binance, one of the largest crypto exchanges on the planet was hacked this week to the tune of 7,000 Bitcoin, or over $41 million at the time of writing. In response to the hack, a suggestion to roll back the Bitcoin blockchain to “revenge” hackers and dissuade future attempts at similar security compromises appears to have been taken serious by Binance.
Understandably, the mere suggestion was greeted by fury from the Bitcoin and wider crypto community. Whilst some stated that such a course of action would be hugely damning for the fledgling space others scoffed at Binance execs for even believing it to be economically viable.
After Consideration, CZ Decides Not to Attempt a Bitcoin Roll Back
News broke this week that an absolute giant of the crypto world has had its security compromised. Hackers were able to make off with an impressive 7,000 BTC from some of Binance’s hot wallets in the heist.
Following the hack, several big names from the crypto universe have offered their help to the leading exchange. Controversial Bitcoin bull John McAfee Tweeted:
[email protected]_binance – if I can help at all please let me know. Underneath my clown suit is still one of the most experienced cybersecurity experts on the planet. I’ve been doing it for 51 years. I am at your service.
— John McAfee (@officialmcafee) May 8, 2019
Meanwhile, Justin Sun offered to help pay for all the damage caused to the exchange. CZ graciously declined this stating, “We are hurt, but not broke.” Since Binance has been putting away funds each month to help pay for any security compromises, external help will not be necessary. The SAFU (Secure Asset Fund for Users) was started last year by Binance, when it started putting 10 percent of profits away for such an eventuality.
Despite apparently having the situation all in order, during an Ask-Me-Anything on Wednesday, intended to put customers minds at ease following the hack, CZ revealed that he and the Binance team were considering acting on a suggestion made by Bitcoin developer Joseph Rubin to rollback the Bitcoin blockchain. This would essentially reverse transactions made during the hack and return the funds to the exchange. He did go on to admit that it might [definitely would] have negative consequences for Bitcoin’s credibility:
“To be honest, we can actually do this probably within the next few days. But there are concerns that if we do a rollback on the bitcoin network at that scale, it may have some negative consequences, in terms of destroying the credibility for bitcoin.”
Naturally, those with a vested interest in Bitcoin met this suggestion with more than a little scorn. In a multi-post Tweet discussing the idea, Udi Wertheimer argues that CZ is out of touch if he thinks that such a rollback is even possible:
1/ Waking up to see that @cz_binance suggested rolling bitcoin back (in the next few days lol!!) to recover his lost funds.
He now wants to put this bad idea to sleep, but I won’t. Here’s a thread. Read it, because it’s *your* job to defend bitcoin from this crap pic.twitter.com/KHjfw2kjXx
— Udi Wertheimer (@udiWertheimer) May 8, 2019
The next post in the thread from the experienced Bitcoin coder stated:
“First off, the idea that this rollback of *days* would even be practical at all for anyone involved is insane. A day of mining costs 1800 BTC. Rolling back 4 days costs more than the hack itself, even before you consider how badly miners would be punished for attempting this.”
He then goes on to state how vast the impact would be on companies and individuals using Bitcoin would be. Such a rollback would open potentially huge numbers of transactions up to be spent twice and destroy the network’s credibility.
He concludes by positing that a reorg of the blockchain is frankly ridiculous for a 7,000 Bitcoin hack. However, he does go on to suggest some examples of scenarios in which such a dangerous rollback might be more likely to succeed:
“So again, realistically this isn’t a concern, no one would reorg days for 7000 BTC.
“But here’s what you should be concerned about:
* what if 500,000 BTC gets stolen?
* what if exchange won’t be able to make users whole?
* lovable influencer says “we should reorg”?
“I’d argue it would still be impossible, but the drama could be real and painful. That’s why we must learn from this, stay vigilant, and not cut people some slack when making these suggestions in “test runs” like this one.”
Arguing along similar lines to was Francis Pouliot, a crypto entrepreneur based in Canada:
Anybody who thinks reorging Bitcoin is even possible doesn’t understand Bitcoin and anybody who is “thanking” @cz_binance for realizing this is as foolish as those who can think they can pull it off.
Read the whitepaper
— Francis Pouliot (@francispouliot_) May 8, 2019
Another one of the many Bitcoin proponents horrified by the suggestion to even consider a Bitcoin blockchain reorg was Mike Novogratz of Galaxy Digital. He Tweeted:
I am shocked that @cz_binance even went there. Talk of forking or reorganizing the blockchain is close to heresy. When the ethereum community did it the project was like 5 months old. A baby. Bitcoin now has $100bn market cap and is a legitimate store of wealth. https://t.co/pXSqiUcq0i
— Michael Novogratz (@novogratz) May 8, 2019
Equally irritated by the suggestion was WhalePanda, a long-term Bitcoin-proponent and self-proclaimed maximalist:
While we’re at it, can we please undo the Bitfinex hack and MtGox as well?
Fuck it, let’s just reset everything and start from 0.
— WhalePanda (@WhalePanda) May 8, 2019
After being lambasted by a huge section of the Bitcoin and wider crypto community, CZ Tweeted the following earlier today:
To put this to bed, it’s not possible, bitcoin ledger is the most immutable ledger on the planet. Done. https://t.co/rKLBCEZmgp
— CZ Binance (@cz_binance) May 8, 2019
In a different post, he outlined the reasons why the decision was ultimately made to can the potentially destructive and arguably impossible plan:
After speaking with various parties, including @JeremyRubin, @_prestwich, @bcmakes, @hasufl, @JihanWu and others, we decided NOT to pursue the re-org approach. Considerations being:
— CZ Binance (@cz_binance) May 8, 2019
In a follow up post to the above Tweet, the Binance executive stated the apparent arguments in favour of the idea:
“pros: 1 we could “revenge” the hackers by “moving” the fees to miners; 2 deter future hacking attempts in the process. 3. explore the possibility of how bitcoin network would deal with situations like these.
As well as the weightier negative consequences:
“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.
“cons: 4 While it is a very expensive lesson for us, it is nevertheless a lesson. it was our responsibility to safe guard user funds.”
It looks like the suggestion has been put to bed, for now at least. However, the issues that Wertheimer raises about the plan should resonate with anyone with a vested interest in keeping the Bitcoin blockchain the most immutable decentralised public ledger on the planet.
The Ethereum community split following the Ethereum hard fork that created Ethereum Classic because part of them were opposed to compromising the immutability of the chain and others were keen to see hacked funds returned to their owners. Since Bitcoin is a much more established network (Ethereum had only just been launched when the DAO hack occured) and is home to far more economic activity, the fallout from such a plan being attempted on the Bitcoin network was presumably be exponentially greater.
Related Reading: No, Binance Won’t Be Rolling Back The Bitcoin Blockchain
Featured Image from Shutterstock.
The post Community Condemns Talk of Bitcoin Roll Back Following Binance Hack appeared first on algo investing.