Is Rolling Back the Bitcoin Blockchain Possible and What Would it Do to Bitcoin?

Earlier this month, digital asset exchange Binance was hacked for little over 7,000 bitcoins, worth over $40 million. To stop the hackers from getting away with the stolen BTC, an attempt to rollback the Bitcoin blockchain was considered. Lets take a look at why the consideration caused such controversey.

The CEO of Binance Changpeng Zhao (CZ) revealed that after speaking to various parties, he decided not to pursue the re-org approach to get “revenge” on the hacker(s) that managed to steal funds from the exchange.

The hack involved a single transaction that moved approximately 7,074 BTC out of Binance’s hot wallet. While CZ believed rolling back the Bitcoin blockchain was possible, he admitted it wouldn’t be worth it to do so, even for the $40 million that were stolen.

The re-org would see miners essentially collude to create an alternate continuation of the blockchain rooting from before the block that contained the hackers’ transaction. This alternate continuation would need to grow faster than the current one to have more proof-of-work and see all Bitcoin clients re-org to it, accepting it as valid. The $40 million worth of Bitcoin would be paid out to miners if recovered, like a bounty.

In its list of pros for doing this, CZ noted it could deter future hacking attempts, and look into how the Bitcoin network would deal with such a situation. The result would likely be the end of it, as it would destroy the cryptocurrency’s immutability, and affect users’ confidence in it.

Currently, bitcoin is seen as a store-of-value and a form of digital gold. Using the cryptocurrency, whales can move millions of dollars for extremely small amounts in fees, making BTC a superior form of gold that’s also useful for remittances and everyday transitions.

But what if miners were to form a cartel to pull a 51% attack on the Bitcoin blockchain to reverse transactions, for whatever reason? This is essentially what was at stake if CZ decided to rollback the blockchain, and would almost certainly damage Bitcoin’s reputation. Who would want to move millions using BTC if the blockchain wasn’t immutable?

As Nic Carter, a partner at investment firm Castle Island Ventures in Boston, put it through a Telegram message, Bitcoin’s value proposition relies on miners not colluding, as if they do so they could “selectively censor, invalidate, or otherwise interfere with transactions.” He added:

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

Those who have been in the crypto space for a while know that blockchain transactions have been reversed in the past. When the DAO software on Ethereum saw a hacker take about 3.6 million ether– at the time worth about $70 million – from it, the Ethereum blockchain underwent a hard fork to recover the hacked funds.

At the time, the Ethereum blockchain was quite young, and even then the move was controversial. Some saw the hack as an unethical, but valid move, and opposed recovering the funds. This saw the network split, with some remaining on the original blockchain, now known as Ethereum Classic (ETC) and supporters of ETC pride the chains intact immutability.

Since then, various Bitcoin supporters have stayed away from Ethereum altogether. Commenting on the recent proposal to rollback the Bitcoin blockchain Vitalik Buterin, an Ethereum co-founder, noted rolling back the chain wasn’t even considered.

As the billionaire founder of Galaxy Digital Michael Novogratz stated, bitcoin is now seen as a legitimate store of wealth, and has a market cap of over $100 billion. Affecting its immutability and reputation could see its value plunge.

Some believe CZ decided against the rollback because he wouldn’t be able to pull it off. Miners on the Bitcoin blockchain are aware that if they were to form a cartel to interfere with transactions, the value of BTC would likely plummet.

This would mean the 7,000 BTC they would get paid would be worth a lot less than $40 million by the time they received it, and would affect their business in the long-term. This could see BTC’s hashrate drop significantly, making it easier for bad actors to pull a 51% on it and double-spend coins or otherwise mess with the blockchain.

Even if it was possible, messing with the foundation of trust Bitcoin sits on could, effectively, put an end to the flagship cryptocurrency. The fact that the largest cryptocurrency exchange considered a rollback but realised it was not possible is a positive sign for the future immutability of Bitcoin.

'We Are All Satoshi' Says Early Bitcoin Miner Calling out Craig Wright

Francisco Memoria

An unknown bitcoin miner has signed a message on the Bitcoin blockchain with over 140 different wallets, calling self-proclaimed Satoshi Nakamoto a “liar and a fraud” and singing off with “we are all Satoshi.”

The message was then spread on a debian with a list of 145 different BTC addresses and their corresponding signatures. Verifying several addresses shows the signatures match, which does mean the miner owns all of the listed addresses and has the private keys to sign a message with them. The message itself reads:

Craig Steven Wright is a liar and a fraud. He doesn't have the keys used to sign this message. The Lightning Network is a significant achievement. However, we need to continue work on improving on-chain capacity. Unfortunately, the solution is not to just change a constant in the code or to allow powerful participants to force out others. We are all Satoshi

The addresses can notably be found in a list of thousands Craig Wright claimed to own in the case against the estate of the late Dave Kleiman. Kleiman’s lawyers have, however, recently said Wright has access to his BTC fortune but won’t access it because he knows its contents “will include partnership records.”

Wright has failed to prove the ownership of these addresses on several occasions, as he has not signed a message with the private keys to these addresses yet. Last year, a post on Memo.Cash signed a message for another address owned by Wright, saying it did not belong to him and he is a “liar and a fraud.”

This recent messages echoes one sent from Satoshi Nakamoto’s email address back in 2015, claiming he is not Craig Wright and “we are all Satoshi.” On social media users have been speculating the message was sent by Satoshi Nakamoto himself over the similarities.

Did Satoshi Send the Community a Message?

Users have been relying on the analysis of the “Patoshi” pattern to identify whether an address is associated with Satoshi Nakamoto himself. The analysis gained fame earlier this month after a miner moved coins mined in 2009, sparking discussions Satoshi was active once again. Blockchain analysis does indicate it was unlikely Satoshi moved his coins then, and it’s unlikely he signed this recent message.

It’s worth noting, however, the early miner that signed these messages has advanced knowledge and was very careful. Every address independently checked by CryptoGlobe has received a Coinbase reward of 50 BTC and hasn’t moved the funds since they were mined. All of the transactions date back to 2009 and 2010.

It’s unlikely the miner never used bitcoin – or the bitcoin cash airdropped in 2017 to these addresses – after holding onto it for over a decade. Instead, it’s likely the miner chose addresses from which the funds haven’t been moved to avoid being identified by sleuths.

Featured image via Pixabay.