Author Topic: Binance Considered Pushing for Bitcoin ‘Rollback’ Following $40 Million Hack  (Read 1406 times)

Online iam4liberty

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After hackers made off with 7000 bitcoin from numerous accounts, the largest crypto exchange is considering pushing miners to roll back the block chain.  This is very easy to do as so much control is concentrated in fewer and fewer mining cartels.  Decentralization of bitcoin is a myth.  A fullscale 51% attack takeover of the network is inevitable given the structure of the network.  The only question is how to do it in a manner that maximum value can be extracted.

https://www.coindesk.com/binance-may-consider-bitcoin-rollback-following-40-million-hack
Binance Considered Pushing for Bitcoin ‘Rollback’ Following $40 Million Hack

“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.”

The unprecedented step – which would have found a private business appealing to the distributed network of individuals who contribute to the operation of the cryptocurrency – was met with heavy criticism.

To try and roll back the network without an agreement between the entire industry and community would most likely be seen by many as effectively an attack on the bitcoin network, which is intended to be immutable.

However, the idea is not without context, as it has been brought up in the wake of exchange hacks in years past, and, on at least one smaller blockchain network, actually executed. Further, the conversation was initiated in part by Jeremy Rubin, a developer who has in the past contributed to bitcoin’s open-source code.

Online iam4liberty

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Dont think the other cryptocurrencies are much better.  For example, one miner now controls 40% of bitcoin cash and growing quickly. Reality: those who control the blockchain control the currency.

https://www.ccn.com/satoshi-nakamoto-is-mining-over-40-of-bitcoin-cash-sparking-fears-of-51-attack/amp
‘Satoshi Nakamoto’ is Mining Over 40% of Bitcoin Cash, Sparking Fears of 51% Attack

Offline FreeLancer

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CZ is delusional.  No way in hell this happens over $40 million.  It would be hard for $40 billion.

Any other altcoin?  Easy. They’ve done it before and will do it again.

Online iam4liberty

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CZ is delusional.  No way in hell this happens over $40 million.  It would be hard for $40 billion.

Any other altcoin?  Easy. They’ve done it before and will do it again.

$40 Billion?  Assuming all bitcoins could be traded at current transaction price, total value of bitcoin (BTC) market as a whole is $100 Billion.  In more realistic terms, it is unlikely liquidable (into traditional currency) at over $20 Billion.  Cryptos are very small markets.

Offline FreeLancer

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Not your keys, not your coins. Don’t keep anything on an exchange you can’t afford to lose. Bitcoin value accrues to those who respect and value the private keys.  If you want do-overs, stick with fiat or alts. 

Offline FreeLancer

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Poor CZ, he hung the “Kick me” sign on his own butt when he floated this reorg nonsense as a solution to his incompetence. And they’re digging up a prior tweet of his where he encouraged people to store their BTC on the Binance exchange because it’s so much safer than managing your own keys. Instant meme.

Jimmy Song ran the numbers on the costs involved with a reorg at different block lengths and levels of miner cooperation. I’ll see if I can post them later. In short, it would be a huge gamble for rogue miners to attempt reversing a 7000 BTC loss.

And nobody of any stature in this space wants to bail out an incompetent exchange.  This isn’t the corrupt US (or Chinese in CZ’s case) banking sector. You lose your keys you lose your coins.  We’ve been through worse thefts, but people don’t learn.

Offline FreeLancer

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Here's Jimmy's Medium article analyzing the reorg scenarios, from the 100% and 55% cooperation standpoints:  https://medium.com/@jimmysong/reorg-scenarios-binance-hack-edition-849fc7e7df07

Quote
Much like how a prolonged lawsuit really only benefits the lawyers, the only people that benefit in a reorg scenario are the miners. The money flows from the disputed transaction (Binance or the thief) to the miners. At a deep level, this is what the Bitcoin protocol was designed to be, very expensive to change.

There’s a reason people don’t go around trying to reorg, even in the aftermath of large thefts. A reorg doesn’t just hurt the thief, but it also hurts everyone else. There’s a huge collective incentive to not change history.


Something he brings out that I hadn't thought about before is the part that non-mining BTC stakeholders (including the Binance thief themself) can play in supporting the original chain over any attempt by Binance or anyone else to rollback balances to pre-theft times.  A 51% attack is a complicated and highly risky game to play, one that would have many shifting alliances and unintended consequences. 


Also, all this recent FUD notwithstanding, BTC is now back above the $6k mark as of a couple hours ago.

Offline David in MN

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Another consideration... There's been a ton of "lost" crypto. We've also seen disasters like Mt. Gox. And as much as Freelancer and I are the cruel kids saying "tough titties" it's been the policy of crypto users from day one. There's no FDIC and frankly doing so would damage faith in an independent system.

In one sense crypto is very much like precious metal: it's on you to store it.

Online iam4liberty

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A 51% attack or threat of attack is all but inevitable.  As more and more miners drop out, the concentration becomes severe.  The miners will position it as a necessary evil to save the currency.  They will use the cartel power to deny any transaction that doesn't pay a given rate they will set.  This is already being discussed by the major mining consortiums and there is growing acceptance for this plan

You can hold the keys to the encryption but that doesn't mean you can transact.  It is a ledger currency.  Those who control the ledger make the rules.  And no doubt about it, they will maximize their profits.

Many former Bitcoin owners realized this and have pulled out or taking chance holding to see if they can convert at less of a loss.  Don't forget, Bitcoin has lost 1/3rd of its value vs year ago and is still down 70% vs it's high. It interesting to see such exuberance because it gained 10% back of the 80% drop.  I know someone who lost $40K on Bitcoin.  He like many others is not coming back.  So the only way to retrace those levels is to convince new people to do the same.  Not likely, it is a damaged brand.

Offline FreeLancer

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This is already being discussed by the major mining consortiums and there is growing acceptance for this plan

Where are you getting that? 

The hashrate has rarely been as high or distributed as it is right now:  https://blockchair.com/bitcoin/charts/hashrate-distribution


You can hold the keys to the encryption but that doesn't mean you can transact.  It is a ledger currency.  Those who control the ledger make the rules.  And no doubt about it, they will maximize their profits.

Who do you think controls the BTC ledger?  Who controls ETH, BCH, or BSV?  It's much easier to find an answer for the last three. 

And while we're here, how did the hash war work out between BCH and BSV over the last 6 months?  What's the hash rate of those two SHA-256 currencies compared to BTC?  Why haven't we seen a successful 51% attack on those competing, but much more centralized, chains?


I know someone who lost $40K on Bitcoin.  He like many others is not coming back.  So the only way to retrace those levels is to convince new people to do the same.  Not likely, it is a damaged brand.

Does it suck to lose "a lot" (relative to one's net worth) of money on an investment?  Definitely. 

If you can't emotionally manage the inevitable large paper gains and losses you shouldn't be in crypto this early in the game.  Period.  Hodlers these last six years have weathered losses equal to multiples of their conventional fiat net worth in a matter of hours.  It's absolutely horrific!


Do a few hundred thousand of these gun-shy ex-bitcoiners doom a nascent technology with global reach?  Maybe.

But you have to remember this is still only a decade-long experiment with a tiny global market share, albeit one that has been stress-tested through multiple boom and bust cycles, exchange failures, hacks/thefts, and government intrusions.  The fact that today it's still pumping out blocks 5 years after the Mt Gox debacle (and at 6X the price!?) is absolutely mind boggling to me.

Online iam4liberty

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Where are you getting that? 

The hashrate has rarely been as high or distributed as it is right now:  https://blockchair.com/bitcoin/charts/hashrate-distribution


Who do you think controls the BTC ledger?  Who controls ETH, BCH, or BSV?  It's much easier to find an answer for the last three. 

And while we're here, how did the hash war work out between BCH and BSV over the last 6 months?  What's the hash rate of those two SHA-256 currencies compared to BTC?  Why haven't we seen a successful 51% attack on those competing, but much more centralized, chains?


Does it suck to lose "a lot" (relative to one's net worth) of money on an investment?  Definitely. 

If you can't emotionally manage the inevitable large paper gains and losses you shouldn't be in crypto this early in the game.  Period.  Hodlers these last six years have weathered losses equal to multiples of their conventional fiat net worth in a matter of hours.  It's absolutely horrific!


Do a few hundred thousand of these gun-shy ex-bitcoiners doom a nascent technology with global reach?  Maybe.

But you have to remember this is still only a decade-long experiment with a tiny global market share, albeit one that has been stress-tested through multiple boom and bust cycles, exchange failures, hacks/thefts, and government intrusions.  The fact that today it's still pumping out blocks 5 years after the Mt Gox debacle (and at 6X the price!?) is absolutely mind boggling to me.

The distribution has four entities together making up over 50%. And this is with the Chinese miners pulling back.  That is why a reorg was even on the table. The only reason it didnt happen was because what the miners would lose in mined coin and transaction fees was about equivalent to what Binance could offer in compensstion.  So the short term upside was outstripped by the longterm downside.

The key discussion point at every roundtable is how to pay miners as halving cuts into their profits.  There are only two realistic solutions on the table, either remove the cap or institute higher transaction fees.

My friend's portfolio is about $15 Million.  He was cosidering moving about a million into bitcoin.  But after the loss on his test run it is completely off the table.  These are the people who drove the price up.  They wont be coming back.  So new ones like the one who put $100 million in the pot will need to be found.  Not so easy to do.

Offline FreeLancer

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The only reason it didnt happen was because what the miners would lose in mined coin and transaction fees was about equivalent to what Binance could offer in compensstion.  So the short term upside was outstripped by the longterm downside.

Of course.  Because opportunity cost is a bitch, miners are mercenary AF, and they trust their fellow miners' promises less than the bitcoin consensus algorithm and game theory.  Satoshi baked all that in from the beginning.


The key discussion point at every roundtable is how to pay miners as halving cuts into their profits.  There are only two realistic solutions on the table, either remove the cap or institute higher transaction fees.

And the approaching halving and likely increase in offchain Lightning transactions further compounds that problem.  If users value the unforgeable scarcity that bitcoin represents the mining fees will have to go up.


My friend's portfolio is about $15 Million.  He was cosidering moving about a million into bitcoin.  But after the loss on his test run it is completely off the table.  These are the people who drove the price up.  They wont be coming back.  So new ones like the one who put $100 million in the pot will need to be found.  Not so easy to do.

The market cap is up $50 billion in the last 3 months, $12 billion in the last week, $3 billion so far today.  Some of those guys must be coming back.

There are currently 42 million people in the world who are worth more than $1 million.  That's half a bitcoin apiece. 

Online iam4liberty

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The market cap is up $50 billion in the last 3 months, $12 billion in the last week, $3 billion so far today.  Some of those guys must be coming back.

There are currently 42 million people in the world who are worth more than $1 million.  That's half a bitcoin apiece.

It is definitely getting pumped again.  The ones who got burned arent coming back.  For example:

https://www.foxbusiness.com/features/this-japanese-billionaire-lost-130-million-on-bitcoin.amp
This Japanese billionaire lost $130 million on bitcoin

Japanese billionaire and Softbank founder Masayoshi Son reportedly dove head first into the bitcoin craze during its peak in 2017, which has ultimately led him to lose more than $130 million as the cybercurrency fell.

Son, who is worth an estimated $24 billion and is Japan’s second richest man, took the advice of a well-known “bitcoin booster,” according to the Wall Street Journal and invested a large amount of cash into the cryptocurrency during its peak at $20,000 in December of 2017.

However, shortly after that the cryptocurrency started to plummet, forcing Son to sell and swallow the loss of $130 million, sources told the Journal.


So new ones have to be found.  As they come in, price increases several thousand.  Then large holders start to sell off and price plummits to lower than when rally started.  Rinse and repeat.  So right now it may get to up to $8k and then plummit down back below $5k.  A few will win and most will lose.  Of course, "the house" will always win.


Offline FreeLancer

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Then large holders start to sell off and price plummits to lower than when rally started.  Rinse and repeat.  So right now it may get to up to $8k and then plummit down back below $5k.  A few will win and most will lose.  Of course, "the house" will always win.

But that's not what we've seen historically with bitcoin's several bubbles.  Look at 2011, 2013, 2017 and see that the bust side of the bubble never goes below twice the price where the bubble started.  And everyone who bought at the peak of the prior bubble is still up 2-3x on the bust side of the current bubble. 

If you missed out on the pre-pump $100 price and paid the $1000 peak bubble price for your first bitcoin at the end of 2013 it went down to $200 and stayed there before going back up to $20k at the end of 2017, and even at the low of $3000 a few months ago the guy who's hodled his one coin from 2013 is still up. 

Why doesn't the dump go below the start of the pump?  And how many pump and dumps does the same ponzi scheme get before it goes to zero?

Online iam4liberty

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But that's not what we've seen historically with bitcoin's several bubbles.  Look at 2011, 2013, 2017 and see that the bust side of the bubble never goes below twice the price where the bubble started.  And everyone who bought at the peak of the prior bubble is still up 2-3x on the bust side of the current bubble. 

If you missed out on the pre-pump $100 price and paid the $1000 peak bubble price for your first bitcoin at the end of 2013 it went down to $200 and stayed there before going back up to $20k at the end of 2017, and even at the low of $3000 a few months ago the guy who's hodled his one coin from 2013 is still up. 

Why doesn't the dump go below the start of the pump?  And how many pump and dumps does the same ponzi scheme get before it goes to zero?

They show the pump and dump on the above chart.  Here are a few of them since big December 2017drop:

Dec 18, 2017   $12,600
Jan 1, 2018      $17,231
Feb 5, 2018      $8,570

Feb 5, 2018      $8,570
Feb 19, 2018   $11,452
April 2, 2018     $6,905

April 2, 2018     $6,905
April 30, 2018   $9,817
June 18, 2018   $6,183

June 18, 2018   $6,183
July 23, 2018    $8,234
Dec 10, 2018    $3,244

Dec 10, 2018    $3,244
May 6, 2019      $7,184
?                        ?

Offline FreeLancer

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In the big picture, it's all noise in between the big parabolic tulip bubbles.  Roll that same time frame back to 2013 and see how significant it was.

Online iam4liberty

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Not noise, data for comparison to historic speculations and investments.  General pattern for speculations:



It looks just like hundreds of historic examples of speculative bubbles.  Almost perfect match for the South Seas pattern that cost Newton his fortune.  Strong front wave followed by series of smaller ones on top of long downward trend.

https://www.businessinsider.com/isaac-newton-lost-a-fortune-on-englands-hottest-stock-2016-1



Bitcoin:


Offline FreeLancer

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Again, you can see that same tulip bubble pattern for 2013 and 2011, as well. Why does this speculative bubble pattern keep repeating, but at increasingly higher valuations, every few years for BTC?  When the bubble pops with Bitcoin, the despair trough never dips below the mean, it bottoms out above the mean and then we start over again. 

Online iam4liberty

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The same reason we see that exact pattern in all bubbles.  It has to do with perspectives on alternatives.  Dot com bust is very instructive in understanding this.

http://dotcombubblelly.blogspot.com/2013/02/the-burst-of-dot-com-bubble.html


Offline FreeLancer

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I agree about the dot.com similarities with bitcoin, they both share the technology adoption s-curve where the trough of disillusion stays above the mean.  It doesn't fully crater like the Tulip or South Sea bubbles.