Babbitt Column | Can courts effectively penalize mining pools to roll back bitcoins to correct lost and stolen coins?

We often see law enforcement authorities freezing bank cards related to illegal acts and returning the proceeds to the victims. But can Bitcoin be manipulated this way?

This article does not discuss whether the law enforcement agencies have the power, ethics, morality, etc. to order the reversal of the Bitcoin transaction. We assume it. We are discussing whether it can be done technically. Is Bitcoin really technically guaranteeing the inviolability of private property?

We know that 51% attacks can reverse cryptocurrency transactions such as Bitcoin.

Let's first imagine a potential 51% attack process.

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For example, Bitcoin at a height of 620,000 blocks confirmed a transaction tx_illegal that was deemed "illegal" by the court with an amount of 100 BTC and was sent from address A to address B. The court immediately issued an order to reverse tx_illegal, requesting the domestic mining pool to execute it.

When the court issued an order, the victim used his private key to construct a transaction that conflicted with tx_illegal. Tx_legal and tx_legal were issued from the victim's wallet and also returned to the address of his wallet. That is, the victim double spent his stolen coins.

The court's order clearly specified three factors: 1) the mining pool must be re-mined from a height of 619999; 2) the tx_illegal was abolished; The command took 1 hour to reach the mining pool. Before arriving, the Bitcoin network dug up 6 more blocks, and the latest height was 620006.

The criminal's wallet has received the coins transferred by tx_illegal, and has 7 block confirmations. Corresponding coins are already missing in the victim's wallet.

Under the order, the mining pool must return to the height of 619999 to mine, that is, to actively discard the 7 blocks mined in this hour, and kick tx_illegal out of the memory pool, and simultaneously tx_legal into the memory pool. After 10 minutes, a new block of 620,000 height was dug, tx_legal was successfully packed, and tx_illegal was successfully rolled back.

At this point, the criminal's 100BTC lay in the wallet for 1 hour and disappeared, while the victim's disappeared 100BTC returned to his wallet. It's so amazing.

Where is the key point in the above process?

The key element is that the Bitcoin hash power of the court jurisdiction must exceed 51%, and the order must be effectively communicated to all these 51% hash power, and these 51% hash power must effectively execute the order.

Considering the margin of safety, it is better that the ratio of computing power in the jurisdiction of the court exceeds 75%. The amount of computing power mainly affects the length of time that tx_illegal is reversed.

If it reaches 100%, after the command reaches the mining pool, the average tx_illegal can be reversed in 80 minutes, that is, digging 8 blocks can cover 7 blocks from 620000 to 620007.

If it is 75%, it takes an average of 100 minutes, or 10 blocks. Because the other 25% of the computing power, it has been 6 blocks ahead, and 75% has a three-fold advantage over 25%. When 75% of the computing power is mined to 10 blocks, 25% can only be mined to 3 blocks, 3 + 6 <10. If only 51% of the computing power is available, it will take an average of 306 blocks, that is, 3060 minutes (51 hours) to reverse.

If it does not reach 51%, it cannot be reversed.

The longer the delay, the more difficult it is to be reversed, and the greater the legal economic behavior involved in the reversal, the less likely it is to be discovered.

Correspondingly, the countermeasures of the currency circle are to keep the computing power under the same law enforcement agency as much as possible. For the time being, theoretically all PoW coins have the computing power mainly in China. Including BTC, the court can order a 51% attack to reverse illegal transactions.

PoS coins, if more than half of the super nodes are within the scope of the same government management, can also achieve this kind of reversal.

But in the above process, law enforcement is only completed through a level of computing power. Blockchain technology, are there any countermeasures?

We know that it is the full node that contains all the Bitcoin protocol rules. There are mining pools, exchanges, big wallets, etc. that run complete nodes. The release of complete nodes is a matter for developers. If the law enforcement unit issues an order requiring its mining pool to reverse tx_illegal, at the same time, the Bitcoin community requires other forces to veto the law enforcement unit and veto all mining pool activities that obey the law enforcement unit, which can effectively prevent tx_illegal Reversal behavior.

This can be done through the following process. Developers can publish a full node in an emergency version, specifying a certain height in the next (to undertake the above case), for example, at the height of 620010, implant a Checkpoint checkpoint. The value of Checkpoint is the hash value of the 620,000 height block (tx_illegal is confirmed at the height of 620,000).

Checkpoint is a process by which a full node verifies the legitimacy of a block of a specified height. This process specifies that a block height must contain a specific value, otherwise the block is illegal. Checkpoint can prevent mining pools obeying court orders from abolishing 620000-height blocks containing tx_illegal transactions.

All exchanges, wallets, and mining pools that do not obey court orders can download the full node of this emergency version and consider this to be Bitcoin. The mining pool that obeyed the court order, even if the blockchain was reorganized, but got a split chain without the support of exchanges, developers, wallets, and other mining pools.

The current complete node on BCH has a dynamic rolling checkpoint with a depth of 10 blocks, that is, for every 10 blocks that the BCH chain mines, a height from the latest block is built into the 10th block. The hash value of the height block with a distance of 10.

For the complete node of BCH, when verifying the validity of the block, every 10 blocks need to be checked and compared to see if the block includes the hash value of the previous 10 block. If not included, it is illegal. This rule of BCH can prevent the blockchain from being reorganized by more than 10 blocks.

We add some moral, ethical, and legal considerations.

Reversing transactions through a 51% attack will also affect transactions in all restructured blocks. For example, it was reorganized from the height of 620000 to 62006. In these 7 blocks, 100,000 Bitcoins were recharged into the exchange, sold for ETH, and withdrawn. When the reorganization takes place, these 100,000 Bitcoin users will find that there are 100,000 more coins on their accounts, which is crooked. (This is related to the deposit and withdrawal system of the exchange)

The BTC network processes an average of tens of thousands of BTC transactions per hour, which is an average transaction amount of several hundred million RMB per hour. We have every reason to believe that it is impossible for any law enforcement agency to overturn hundreds of millions of RMB of legitimate commercial transactions for criminal acts far less than this amount.

Therefore, in addition to decentralization of computing power, greater commercial value is the key to protecting Bitcoin transactions from being reversed.

In terms of administrative efficiency of law enforcement, it is unlikely that the courts of any country will issue law enforcement orders within a few hours after the fact of the crime, which is not a fight. Confirming the facts of a crime is a matter of heaven.

The order to issue 51% attacks, as well as the required organizational capabilities and response speed, were too high. In fact, what is more likely to happen is that the court issued a freeze on the transfer of money earned by criminals. The court may order all mining pools and exchanges under the jurisdiction to not accept the currency on the address and all subsequent addresses. This is technically more feasible. However, the blockchain has technologies such as coin mixing and coin laundering, which can also make the freeze command invalid.

The court can order mining pools and even exchanges in the jurisdiction to reverse or freeze specific coins, but the final result is more likely that the commercial value of the executed mining pools and exchanges is cleared, rather than the Bitcoin system being damaged.

Author: Huang Shiliang

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