Depth | Coin's stolen 7,000 bitcoins, why did bitcoin rise against the trend and stand out?

table of Contents:

First, the currency was stolen

Second, technical analysis

Third, recurring twists and turns

Fourth, a single show

V. Value Consensus

First, the currency was stolen

On May 7, 2019, the Bitcoin hot wallet of Binance, the world's most traded digital currency exchange, was hacked and stole more than 7,000 bitcoins [1] (the transfer transaction id: e8b406091959700dbffcff30a60b190133721e5c39e89bb5fe23c5a554ab05ea, total 7,074.18107031BTC) The value is more than 40 million US dollars, accounting for about 2% of the total amount of Bitcoin held by the currency . The official announcement of the currency security said that the suspected hacker obtained a large number of API interface keys and 2FA two-factor authentication related information, thereby using the API programming interface to transfer all the bitcoins under dozens of accounts of the open coin to the address controlled by the hacker.

To this end, the currency security has to suspend the currency for a week to check the security risks of the internal system. This shows that the currency security is still unclear exactly where the loopholes occur and how the hackers succeeded.

At the same time, the company announced that it will use the security fund SAFU to be fully responsible for user losses. [2]

Second, technical analysis

Many blockchain security teams have published analytical opinions. It is believed that the hacker has patiently penetrated the currency security and has already entered the system of the currency security system.

The stolen Bitcoin is from the hot wallet of the currency. There are still hundreds of coins left in the hot wallet that have not been transferred, indicating that the hacker did not steal the private key of the hot wallet .

However, the hacker bypassed various verification factors to take the coins away and did not trigger any security alerts.

Since the current mainstream digital currency exchanges are centralized systems, that is, once the digital assets of all users are transferred to the exchange account, they are essentially separated from the user's own control and become the assets managed by the exchange . Among all the assets, the most important and most important thing to be cautious is bitcoin.

The usual custodial strategy is to put most of the bitcoin in a cold wallet, that is, an offline wallet, as a hard-to-use reserve. The private key is controlled by a person or group with a high privilege level, and a strict approval process is set up for fund transfer, such as assets used to supplement the hot wallet.

The hot wallet is an online wallet that accepts the user's deposits and responds to the user's demand for coins. Periodically or irregularly, the excess bitcoin in the hot wallet is transferred to the cold wallet and frozen.

User billing usually sets different security levels and policies according to the number of coins, and corresponds to the corresponding review and approval process. In order to protect the private key of the hot wallet, a separate, high-security signature machine is usually set up. The online system reviews and approves the transfer transaction and sends it to the signature machine. After signing the signature, the signed transaction is returned to the online. System, the system broadcasts the transaction to the Bitcoin network and completes the transfer of the money.

The weakness of this process is that it may not be able to distinguish between the normal user's normal money transfer transaction and the money transfer transaction initiated by the hacker after entering the system, so that no brain is issued, and the number of coins in the hot wallet is specified by the hacker. In the address.

The security architecture of the centralized system is highly simplified and is roughly like this:

External network (Internet) <–(Security line 1)–Front end machine (FE) <–(Security line 2)–Data and service cluster <– (Security line 3)–Signature machine

In the first layer of defense, load balancing and DDoS protection are usually deployed to prevent huge traffic attacks and malicious attacks, and the service is overwhelmed and cannot provide external services.

In the second layer of defense, you need to pay attention to all kinds of injection and penetration, and leak confidential data stored on the server, such as API keys, user passwords, and so on.

The third layer of defense is specifically designed for the blockchain system, primarily to further protect the security of the private key. Here, the exposure of the signature machine should be minimized, network isolation should be performed, and even manual operations should be introduced to fully isolate the private key and the network.

In the incident of the stolen money, the hacker successfully broke through the first two lines of defense, deceived the third line of defense, and successfully stolen the currency.

Third, recurring twists and turns

Then a speech by CZ (Zhao Changpeng), the founder of the currency, on Twitter, caused a much hotter topic than the theft: deep restructuring of the Bitcoin blockchain.

CZ said this: After discussing with many parties, including JeremyRubin, _prestwich, bcmakes, hasufl, JihanWu (Wu Jihan, founder of Bitcoin), we decided not to seek a solution to reorganize the blockchain. Consider the following:

The benefits are: 1, we can "revenge" to the hacker and transfer the money to the miners; 2, shock hackers do not have to take the lead; 3, explore how the bitcoin network can deal with such problems.

The downside is: 1. We may damage the trustworthiness of Bitcoin; 2. We may cause the bitcoin network and community to split, which will cause more damage than 40 million dollars; 3. Hackers show us The specific weaknesses of the system design and the confusion of the user experience, these issues were not known to us before; 4, although it is very expensive for us, but this is indeed a lesson, we have the responsibility to protect the user's funds. [3]

What CZ didn't expect was that he put this idea (CZ later clarified that the idea started with JeremyRubin, not his own idea) into action (beginning to discuss feasibility) and this event would cause heated discussions in the community. Even Ethereum founder Vitalik Buterin and bitcoin core developer Jimmy Song came out to speak out against it .

Emotional: Vitalik came out and said that in the EAO hacking incident in Ethereum, he relied on the community influence and appeal of the founders of Ethereum to mobilize the community to fork the Ethereum and recover the thieves’ stolen Ethereum. However, it caused the Ethereum community to split into ETH (Ether Square) and ETC (Ethernet Classic) forever. More importantly, this incident and handling method have caused a huge blow to the credibility of the Ethereum blockchain, making many People no longer see it as a persistent, irreversible, and reliable value storage system. [4]

Xiaozhi: JimmySong has calculated an economic account for CZ. Deeply reorganizing the Bitcoin blockchain means reaping enough miners to re-mining and generating new blockchains before returning to the hacker transfer transaction. The way in which Coin’s persuaded these miners could only be promised to compensate them. For the miners, the choice to help the coin to dig the fork chain may not only give up the “net loss” of mining in the past, but also continue to mine in the original chain without helping the currency. Suppose that a lot of computing power goes to help the coin to dig a new chain, the competition of the original chain is less, the miners who don’t help the money will get more benefits, the “loss of opportunity” , and the people who support the original chain, Even the most likely is that the hacker subsidized and attracted miners to dig the “game loss” of the original chain by issuing transactions with high fees on the original chain.

All these possible losses add up. If the compensation is higher than the money, the rational, self-sufficient miners will not help the currency, but will continue to dig the original chain. The compensation given by the coin can be capped, and the upper limit is more than 7,000 coins that it has stolen. The loss of the miner increases with the passage of time and the extension of the original chain, and once it is promised to support the currency The temporary change of the miners will further increase the loss of miners who continue to support the currency. When the combined miners need to pay more than 7,000 coins, the cost of doing this is economically meaningless. [5]

Many people say that CZ is only "shocking" to consider the possibility of deep reorganization. Some netizens replied to CZ and pointed out that it may be more appropriate to change "decision not" to "recognize impossible".

Subsequently, CZ said that it is impossible to do so, and the bitcoin book is the most unchangeable account on the planet.

Fourth, a single show

If you just listen to second-hand news on some currency circle media, you will only get a false impression. Because the media's causal reflex arc is super short, they will only say that the stolen money was stolen, and as a result, bitcoin plunged a few percent in an hour. Fortunately, the data in the blockchain world is highly transparent. You should learn to shield the media and go to the data website to see the truth .

The truth is that after the 7th Announced theft, Bitcoin has gone all the way, from about $5,800 at the beginning of the event to about $6,300 now written in this article, which has risen by 8.6%! [6]

Figure: coinmarketcap

Neither because the masses panicked the safety of bitcoin, nor did they slam the market down because of hacking. Contrary to the surprises of analysts who squandered in some currency media, of course, some conspiracy theories that made the money to go short were broken.

Bitcoin can absorb this black swan event without changing its color. It not only shows that the masses can correctly distinguish the security of Bitcoin and the security of the exchange, but further strengthens the public's perception of Bitcoin's "security": Even if CZ is so rich and powerful, there is a legitimate and moral reason for the “recovery of money”. It is impossible to reverse the bit by artificially manipulating the bitcoin blockchain. The currency book, in order to seek the recovery and compensation of its own interests.

Laozi, an ancient Chinese philosopher, said: "The way of heaven, the loss is more than enough to make up for it; the way of the people, the damage is not enough."

All the science and technology in human history, including centralized Internet technology, are under the control of human power and are all "humanity." As a result, these technologies have increased the productivity of all human beings and have also enhanced the Matthew effect. According to statistics from the World Bank, since the 19th century, income inequality and the polarization between the rich and the poor have continued to increase. why? I have seen the friends of "The Economics of 996" [7] that I wrote before. The power means rent, rent can absorb the surplus value, and transfer most of the wealth created together to the possession of power. By. [8]

This "security" of Bitcoin, (more rigorously, is likely to be) is the first human invention ever invented that can "override" someone's will to power and is not manipulated by power. "Super power" security, which also indicates that Bitcoin technology is higher than "humanity" and closer to "Tiandao".

To say that Bitcoin differs from other altcoins, other blockchain projects, classical centralized Internet technologies, and the legal currency system, the biggest difference is the relationship between people's power will. Bitcoin > Power Will > Other technologies and systems.

Figure: coinmarketcap

Looking at the top ten market capitalization of cryptocurrency, Bitcoin stands out and continues to rise. Bitfinex, which had USDT before, was accused by the US Attorney General of New York (refer to the previous article, "There is a saying in the teaching chain | The New York State Attorney General accused the reserve of being misappropriated, and the stable currency USDT is going to collapse?" [9] "The solution: USDT decoupling the US dollar With the financial policy impossible triangle [10]), after the collapse of the currency security, and even the recent Sino-US trade war negotiations blocked the stock market fell back a few months ago, these shocking events, let other currencies and asset prices 踟蹰Not even before the retreat, but did not let Bitcoin stunned, but instead climbed against the trend. This only illustrates one problem, and the market is rediscovering the important characteristics of Bitcoin – anti-vulnerability.

This year is the 10th anniversary of Bitcoin. In the next 10 years, people will gradually begin to re-recognize Bitcoin. The past decade has been the decade in which idealists and speculators have been involved. The nature of bitcoin is from collectibles to speculation. The next decade will be a decade in which Bitcoin has transformed from speculative attributes to risk-averse value storage. The specific performance will be that price correlations and typical investment products deviate, as well as more serious long-term investment funds and institutional funds. field. (Refer to the previous article, "There is a saying in the teaching chain | Fidelity Group will provide Bitcoin trading services for institutional investors to open Bitcoin for the next decade?" [11]

V. Value Consensus

The USDT accused incident and the stolen money snail incident all appeared to be unfavorable black swan events, but the bitcoin currency price quickly absorbed the impact of the incident, but it quickly rose, indicating that these two incidents strengthened The market consensus on Bitcoin.

This incident and the subsequent storm should further make everyone realize that Bitcoin's PoW (Proof-of-Work) consensus agreement is unbreakable. The recent hot-selling PoS (Proof-of-Stake, proof of money) and staking economy are cold water. Calling and mobilizing nodes is a political force. Except for PoW, no other agreement can compete with this power, because restructuring PoW must pay a physical price, when the cost is greater than the gain of its political purpose, politics Mobilization motives will be eliminated. Other agreements simply cannot compete with political forces.

PoS can easily be reorganized at a lower cost, and DPoS even drastically reduces the difficulty of political mobilization (another cost). PoS verification nodes are many, and it is necessary to mobilize most of the support, which consumes political energy. DPoS fixes the block nodes on a few super nodes, and politically only needs to fix them to do whatever they want.

Even if the power of PoW is concentrated in the hands of the mine, the control of the power of the mine is (to some extent) dispersed in the hands of the miners. I don't support it. I can switch my mining machine to other mines at any time. And for the mine pool, the price is the price. If the coin wants to recover the loss, it is necessary to compensate the mine pool for his cost. Because the cost of PoW is physical, the entropy of thermal law is irreversible. Then, in the case that the currency is not violently forced, the only political mobilization method is negotiation + buying. Negotiating costs, let alone, buying is definitely necessary. Economic interests are fundamental. When the cost of buying exceeds the loss to be recovered, this political action loses its economic significance.

The deep reorganization is different from the BCH accident (hard fork). The split miners are digging new blocks without losing historical gains. Deep reorganization means a net loss. The net loss that all participants have to bear. Who will compensate?

Another key point is "time." The "negotiation + buy-and-buy" strategy, negotiation not only has to pay a political price, but more importantly, it has to pay "time." When the objects that need to be negotiated are sufficiently scattered, the time will be long. The Bitcoin blockchain doesn't care, it won't wait, it will only move steadily. The longer the time, the longer the main chain, the greater the value that needs to be abandoned, and the higher the cost of buying. Soon, the cost of deep reorganization will exceed its revenue, making it economically meaningless. None of the other consensus algorithms have this feature, which is an irreversible economic cost.

The currency security has made the market and the masses further realize the design of the Bitcoin consensus mechanism 10 years ago, why should we adopt the so-called "wasteful" power, so "bulky" PoW consensus algorithm. Only PoW can bring the physics of the bitcoin irreversibility, which is the most important cornerstone of the bitcoin value consensus.

After Satoshi Nakamoto, over the past decade, smart people and luxurious teams have invented various consensus agreements and promoted the community's superior characteristics over Bitcoin. Undoubtedly, from the point of view of surpassing the value of bitcoin, they all fail without failure and will continue to fail.

Because when they are propagating and selling, they intentionally or unintentionally ignore a well-known economic common sense :

There is no free lunch in the world.

(End of the article)

Reference materials:

[1] https://www.blockchain.com/btc/tx/e8b406091959700dbffcff30a60b190133721e5c39e89bb5fe23c5a554ab05ea

[2] https://binance.zendesk.com/hc/en-us/articles/360028031711

[3] https://twitter.com/cz_binance

[4] https://bitcoinist.com/shocked-he-went-there-crypto-takes-sides-on-binances-alleged-bitcoin-reorg-plan/

[5] https://medium.com/@jimmysong/reorg-scenarios-binance-hack-edition-849fc7e7df07

[6] https://coinmarketcap.com/currencies/bitcoin/

[7] https://mp.weixin.qq.com/s/X-JxrE2O-t6gRuKeAijiIg

[8] https://en.wikipedia.org/wiki/Gini_coefficient

[9] https://mp.weixin.qq.com/s/gOiqw5NQoST7QFeYUgNJ1g

[10] https://mp.weixin.qq.com/s/_ER-hVxUnxX3uL2fn_RDoA

[11] https://mp.weixin.qq.com/s/EREf3yShsiksPpp7wpLScw

Author: Liu teaches chain

Source: Liu Jiao Chain (WeChat public number)