The CEO of Binance, Changpeng Zhao (CZ) stated that after consultation with Jeremy Rubin, James, Prestwich, Brandon Curtis, Hasu, and Jihan Wu, Binance has decided not to re-organize the Bitcoin network since it could have damaging effects on BTC’s credibility.
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
CZ Not Going Through With Bitcoin Re-org Following Binance Hack
CZ’s cryptocurrency exchange, Binance, suffered a security breach yesterday, May 7. The trading platform lost 7,000 BTC (approximately $40 million) from its hot wallets in the process. Following the hack, CZ had considered re-organizing the BTC network as a way of getting back at the hackers and stopping future attacks.
However, he will not be going through with that plan after discussing the issue with some influential people within the Bitcoin ecosystem. According to CZ, the re-org approach would be revenge against the hackers since they would be moving the fees to miners. Also, it would help deter future hacking attempts and explore the possibilities of how the BTC network could deal with situations like this in the future.
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.
— CZ Binance (@cz_binance) May 8, 2019
Despite the positive impacts the re-org approach could have, the adverse effects would be much more significant. The Binance CEO stated that they had to disregard Bitcoin re-org due to four main reasons.
The first is that it would damage Bitcoin’s credibility as it would set a terrible precedent with the cryptocurrency. Secondly, the re-org approach might lead to a split in the Bitcoin network, which would ultimately affect the community at large. CZ noted that both these damages would be more catastrophic than the $40 million Binance lost.
The third and final point saw CZ take some responsibility in safeguarding against attacks. He stated that the security breach showed specific vulnerabilities in Binance’s design and user confusion. The flaws were not visible prior to the attack, and the exchange would work towards patching up those weaknesses in its system.
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!
— CZ Binance (@cz_binance) May 8, 2019
Re-org Would Have Done More Harm Than Good for BTC
While the cryptocurrency community sympathizes with Binance over its loss of funds, most people are not in support of the blockchain re-org. According to a cryptocurrency enthusiast, Vortex, a re-org to recover Binance’s stolen funds would have set a bad precedent in Bitcoin since the perception of its immutability and as a digital gold would be destroyed.
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.
— Vortex (@theonevortex) May 8, 2019
Vortex adds that it would be insane for a re-org to be considered over $40 million as Binance probably has insurance funds to replace the stolen BTCs. Cryptocurrency exchanges have been suffering from security breaches since the early days of Bitcoin, and it looks like it will continue that way for now. Vortex points out that it is one of the ways security improves.
The hackers accessed the API, private keys and other vital information of traders on Binance. Vortex stated that the hack is a lesson to traders and investors to hold their own private keys and not store their funds in exchanges. Vortex mentioned Proof of Keys, a movement that encourages investors to withdraw their funds from centralized exchanges. Maybe, storing funds outside of exchanges could reduce the amount of attacks these trading platforms suffer.
