What is a Chain Reorganization?
A chain reorganization, also referred to as “reorg,” is when node operators replace some blocks with new ones in order to make room for a longer chain. In other words, a reorg results in a block being removed from the blockchain since a longer chain has been created.
There can be various reasons for a reorg to happen. In general, this occurs when multiple blocks are produced at the same time, forcing miners to decide which side of the fork is the correct or canonical chain.
Once the miners or validators choose the fork or canonical chain, the other chain will be lost.
However, a chain reorganization can also happen due to a bug or a malicious attack. A reorg attack is an attempt to rewrite a blockchain’s history by creating an alternate chain of transactions, which describes why a miner with a majority of hashing power can replace blocks and transactions in the current longest chain via a 51% Attack.
How Does a Chain Reorg Happen?
Blockchain technology is a complex system that ensures the secure storage and distribution of data among node operators. Nodes, which are active copies of the distributed ledger or blockchain, play a crucial role in keeping the blockchain up to date and verifying transactions.
A blockchain is essentially a string of interconnected blocks, with each block containing numerous processed transactions. As more transactions are completed and added to the blockchain, the string of blocks grows longer.
This is where chain reorganization comes into play.
When these nodes update their copies of the ledger, the node with the shorter follow-up chain initiates chain reorganization. This process ensures that all node operators maintain an identical copy of the distributed ledger.
By undergoing chain reorganization, blockchain networks maintain consensus and prevent inconsistencies or discrepancies in the ledger.
It is a fundamental mechanism that enables the smooth operation and synchronization of blockchain systems, allowing for secure and reliable transaction verification across the network.
Examples of Major Chain Reorganizations
Chain reorgs do not happen very often. However, there have been some major reorgs in the history of prominent blockchains like Bitcoin and Ethereum that are hard to forget.
In May 2022, Ethereum’s Beacon Chain experienced a seven-block reorganization. On May 25, seven blocks from number 3,887,075 to 3,887,081 were knocked out of the Beacon Chain, according to data from Beacon Scan.
At the time, Martin Köppelmann, CEO and co-founder of decentralized finance (DeFi) service provider Gnosis, said the reorg was the longest “in years.”
“This shows that the current attestation strategy of nodes should be reconsidered to hopefully result in a more stable chain! (proposals already exist),” he added.
This, unfortunately, shows that the analysis by @gakonst and @VitalikButerin here was too optimistic when the article claimed re-org stability will improve in POS over POW.
We have not seen 7 block reorgs on Ethereum mainnet in years.https://t.co/G5g8acG3L8 pic.twitter.com/AvZ6ygZRxs
— Martin Köppelmann 🦉💳 (@koeppelmann) May 25, 2022
Meanwhile, the most famous Bitcoin reorganization happened in March 2013. The chain reorganization happened due to a software bug in older versions of the Bitcoin client software, allowing one user to perform a successful double-spend of $9,800.
Specifically, a vulnerability known as the “blockchain fork exploit” allowed a malicious miner to create a longer chain of blocks privately and then release it to the network.
This longer chain caused the network to switch to the new chain, discarding the shorter chain that had been previously accepted.
As a result, transactions that were included in the shorter chain became unconfirmed, and some users experienced temporary disruptions in their transactions.
The reorganization created confusion and uncertainty within the Bitcoin community, as it raised concerns about the security and stability of the network.
To address the issue, the Bitcoin developers quickly released an updated version of the software to fix the vulnerability and encourage users to upgrade. Miners and node operators were urged to update their software to the latest version to prevent further chain reorganizations.
Drawbacks of Chain Reorgs
While chain reorgs are important for the successful operation of blockchains, they also come with certain downsides, including:
- Delays and Poor User Experience: Chain reorganizations can lead to delayed transactions, causing inconvenience and frustration for users. Exchanges, in particular, rely on timely transaction confirmations to provide smooth services. A reorg can disrupt this process, resulting in longer waiting times for deposits and withdrawals.
- Node Costs: Reorgs can increase the costs associated with running nodes in a blockchain network. When transitioning to a new fork, updating the state requires more memory and disk space, which can impact the performance of nodes.
- Uncertainty and Confusion: Chain reorganizations bring uncertainty and sometimes confusion among both users and miners. Furthermore, the unpredictability can negatively affect the outcomes of DeFi transactions and make them more susceptible to harmful practices like Miner Extractable Value (MEV) extraction.
- Vulnerability to Attacks: Frequent chain reorganizations create a vulnerability that can be exploited by attackers. Instead of having to surpass the computational power of the entire network, attackers only need to defeat a portion of honest miners, thanks to the “longest chain rule.”
A chain reorganization occurs when some blocks are removed from the blockchain since a longer chain has been created. It can happen when multiple blocks are produced at the same time, if there is a bug, or due to a malicious attack.
While chain reorgs are important for the successful operation of blockchains, they also come with certain downsides. They can impact user experience, increase node costs, and make the blockchain more susceptible to harmful practices.