One of the options that CZ considered to recover from the hack was a bitcoin reorg. That idea immediately faced a huge backlash and Binance will not try to reorg the chain any longer. But along with this statement there seems to be a lot of confusion as to what they actually wanted to do, how much power Binance has over the bitcoin chain and what the consequences arise.
Binance cannot roll back the BTC chain
And this was never the plan. The idea was to set up a bounty of 7000 BTC for miners to roll back the chain. And this can work game theoretically whenever the sender of a large payment quickly wants to revert it, as long as the payment is larger than the cumulative block reward.
Right now the hack has about 100 confirmations and therefore a total mined reward of 1250 BTC, smaller than the 7000 stolen BTC. A rollback will therefore remain theoretically possible for a few days.
But in reality there are a couple of considerations that make this much more difficult in practice. First the miners need to be convinced that the reorg will be successful. If they end up short of 50% the reorg will fail, if the are just above 50% the reorg will take a very long time. Only when 70% or more of the miners commit this can actually work.
Even then, this will likely cause a fork of the chain, where it is not at all clear if the reorged bitcoin will be valued reasonably, or if potentially both coins significantly loose value, making it a very bad deal for the participating miners.
In summary, I am not convinced that it is practically possible to revert anything beyond a few blocks.
Binance does not get the money back
The second important consideration is that while this would revert the hack, binance would still loose the money. The difference is that now the hackers have 7000 BTC and in the alternative world the miners would have those 7000 BTC.
Once a transaction is confirmed it can only be reverted at a loss. Either by dishonest mining and paying for the electricity, or by directly paying miners to do that for you.
What would happen to BTC in case of a 100 block reorg?
I am convinced that this would be an absolute disaster. A lot of transactions would be reverted with a big amount of potential double spends. The price would drop, people would have to choose from two inferior forks and we would be back to another year of bear market.
The question is if this idea has unveiled a fatal security flaw in bitcoin? Can such an attack be realistically performed? Do we need better protection against reorgs? Is bitcoins CAPEX/OPEX ratio acceptable? What happens to lightning in such a case? What about block reward halving and long term security of big payments? And do we need a better culture of constructive forking, accepting this as a regular event to combat adversary outside actors.
So many open questions. Please leave your opinion in the comments.