- Binance’s funds were hacked on May 7
- CZ backed off from the idea of re-orging the network to recover funds
Binance announced on May 8 that the firm had been hacked and suffered a loss costing them 7000 bitcoins. CEO Changpeng Zhao (aka “CZ”) declared that they are not re-orging the Bitcoin network after taking advice from several eminent members of the crypto community.
Binance’s funds were hacked on May 7 when a single bitcoin transaction moved approximately 7,074 BTC out of the exchange.
Initially, CZ was considering re-orging the Bitcoin network. He announced in his AMA session that:
“We’ve been working with other exchanges to block deposits from those hacked addresses.”
“[On] the other topic of ‘do we want to issue a rollback on the Bitcoin network’… Because right now, the 7,000 BTC is far higher than if we distribute that to miners. It would be far higher that what they got paid for the last few blocks. To be honest, we can actually do this probably within the next few days. But there are concerns if we do a rollback on Bitcoin network at that scale. It may have some negative consequences in terms of destroying credibility for Bitcoin. So, again, the team is still deciding that, and we’re running through the numbers and checking everything.”
Reactions from the crypto-community
Vortex:
1/Even if a friendly blockchain reorg was possible to specifically target the stolen funds it would absolutely set a terrible precedent in #bitcoin. The perception of immutability and digital gold would be lost entirely.
WhalePanda:
No one is going to re-org the Bitcoin blockchain over this.
1) no bailout should ever be done, this isn’ Ethereum
2) 7000 BTC isn’t that much for Binance (if they were honest about how much they are making)
3) play stupid games, win stupid prizes.
Jimmy Song:
1/ Back of the envelope math for doing a 58 block reorg (current confirmations for the tx that took money from binance):
Minimal cost: 58 * 12.5 btc = 725 BTC (assumes every miner would get roughly the same tx fees in the new chain and that 100% of miners go with this scheme)
Jeremy Rubin had originally pitched the idea of re-orging the network to recover funds in his tweets after the announcement by Binance:
@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.
You can even sign batches of txns with the old utxos paying miners with different locktimes to make it a permanent reward to unwind this hack. Cheaper than losing all 7000
CZ’s Decision
Later CZ announced in his series of tweets that he will not be going ahead with that decision. He said:
After speaking with various parties, including @JeremyRubin, @_prestwich, @bcmakes, @hasufl, @JihanWu and others, we decided NOT to pursue the re-org approach. Considerations being:
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
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. We should own up it. We will learn and improve. As always, thank you for your support!
would be very hard to pull off anyway, not for $40m. Most miners will not “centralize” together just for that. But it was suggested by some great minds, we learned, considered, and decided not to pursue further.
To put this to bed, it’s not possible, bitcoin ledger is the most immutable ledger on the planet. Done.
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