Changpeng Zhao, the CEO of Binance, one of the largest cryptocurrency platforms in the market, announced during an AMA on Twitter that they were thinking about talking with miners to make a network reorganization to recover 7,000 Bitcoin (BTC). The cryptocurrency exchange was hacked just a few hours ago after a very advanced attack using inside and external sources.
Could The Bitcoin Network Be Reorganized?
Binance was hacked on Wednesday and the exchange lost over 7,000 Bitcoin, worth close to $40,000,000. This is the first hack that the company experiences and that affected the exchange, which was considered one of the safest in the market.
During this Ask-Me-Anything on Twitter, that lasted for over half an hour, he answered some questions about the current situation at the exchange. He said that they were also thinking about rolling back Bitcoin network transactions.
On the matter, Zhao commented:
“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 of Bitcoin.”
He mentioned that he has talked with several individuals that are against rollbacks because they could have ethical and reputational considerations for the Bitcoin network. At the same time, they are also checking how to solve this issue with the funds. Changpeng Zhao has also informed that they have the necessary funds to cover the losses and that they will be working on order to rebuild and recover the ecosystem by eradicating trace of hackers on their data.
At the moment, trading activities will not be suspended but withdrawals and deposits will be suspended for around a week. Nevertheless, there will be a system upgrade during the week and the firm would have to halt trading for a little while to make these changes on their core system.
Changpeng Zhao has also recommended traders to change their API and 2FA keys. This would add more security to users and be sure that users’ accounts are safe. The company will be working as it should as soon as in the next week.
According to Mr. Zhao, they have not found any hot wallet addresses compromised. Nevertheless, he mentioned that the hackers used sophisticated methods to gain access to the accounts of different users. He explained that the attackers didn’t move the funds as soon as they have an account, but they were targeting high net worth accounts.
Binance made it clear that they will be using their funds in order to cover the losses, which means that it would not be necessary for the company to gather funds from external sources to pay for this large hack. Since July 2018, Binance decided to allocate 10 percent of its trading fees per month to the SAFU fund. Nonetheless, there is no current information about which is the number of funds that the company currently has stored in this fund.
Binance was one of the most secure exchanges in the market without major hacks and harmful situations for users. Other exchanges such as Coinbase have already offered their help to the platform.
After writing this article, Changpeng Zhao and Binance have decided not to go ahead with the proposed blockchain reorganization. Indeed, the cryptocurrency community as a whole has been talking about this issue and discussing how to deal with this issue.
In a recent Twitter post, Zhao explained that the discussion about reorganizing the blockchain became “hotter” than the incident itself. The proposal was made by Jeremy Rubin, a Bitcoin Core contributor, after the current hack. Binance discussed this idea and they will not be implementing it because it will be creating more problems than solutions.
In another set of tweets, Changpeng Zhao showed the pros and cons of a blockchain reorg:
- Hackers would not have the funds anymore
- Deter future hacking attempts
- Explore the possibility of how Bitcoin network could deal with such situations
- Bitcoin credibility would be severely damaged
- The community could be divided and the network too
- Hackers demonstrated weak points on their platform design
- Binance would have to use SAFU Fund’s money to pay users
— CZ Binance (@cz_binance) May 8, 2019
The market has also reacted to this situation in the space. Binance is one of the main losers in the top 100 falling 7% in the last 24 hours. Moreover, each BNB coin can be purchased for $20.62 and it has a market capitalization of $2.91 billion. BNB 0.05
Changpeng Zhao mentioned during an AMA that they were analyzing the possibility to reorganize the network to recover the funds lost during the recent hack. This could have a negative effect on the Bitcoin network. Nonetheless, this possibility has been discarded by Binance after further discussion.