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What Is Chain Reorganization? – Understanding The Term In Detail

A reorganization can be abbreviated as reorg, which happens when a block is removed from the blockchain in order to make space for a longer chain. This process allows for a more efficient and streamlined network. Despite its many potential benefits, blockchain remains plagued by challenges. For instance, a block conflict becomes an increasingly common flaw for the blockchain that indicates that if two blocks are being published around the same time, a fork can occur. This is a potential danger for the blockchain.

The conflict resolution method that is currently in use is based on the rule called Longest Chain Rule, which states that if different blocks exist, the longest chain is considered valid. This ensures that every node follows the particular requirement of a protocol, trying to extend the most extensive branch that it knows. This rule helps to keep the blockchain orderly by delaying transactions that happen on the wrong side of a fork.

This results in a few transactions being reorganized into new blocks, which keeps the blockchain running smoothly. In a nutshell, chain reorganization refers to a process by which blocks on the old chain are deactivated in favor of blocks on the new longer chain. This helps to ensure that the blockchain is always accurate and consistent. In order to comprehend chain reorganization completely, we first need to learn some fundamental concepts such as basics of the blockchain technology, nodes, blocks, and how these work.

Starting with a basic understanding of blockchain technology, you’ll need to explore its many essential components. This will give you a deeper understanding of how blockchain works, and how it can be used in various fields. The blockchain is an innovative way to keep track of transactions, ensuring accuracy and security. Consider it as a network of interconnected computers that are known as nodes. Each node maintains the database, ensuring that it remains accurate and up-to-date.

Blockchains are not all the same, and each one has its own unique features that should be taken into account. Distinct consensus mechanisms are used by blockchains, such as proof-of-stake (PoS) and proof-of-work (PoW). This makes them very different and allows them to operate in different ways.

As users make transactions, nodes must verify them. Once verified, it continues to be “pending” unless it is picked up by a miner (a specialized node). Different mining pools and Bitcoin miners around the world are constantly competing for the confirmation of these transactions. Once the transaction is approved, it will be added up to the blockchain. However, miners will put into the blocks the transactions that are pending instead of confirming. The validated block is quickly disseminated to all nodes on the network to make sure it is accurate.

After the validation process is complete, new blocks are added to the old blocks by the nodes, forming a chain. Additionally, nodes store a full copy of the blockchain, which helps to ensure that the network remains consistent. Now since we have explored the basic information of the underlying technology of blockchain, we can now understand chain reorganization in a more precise way.

Chain reorganization is typically seen on more popular blockchains, such as Ethereum and Bitcoin. This is because these blockchains are designed to be more fault-tolerant, allowing for more widespread changes to the network. This happens when a chain becomes too congested and needs to be split in order to continue functioning. When two nodes build a block simultaneously, a race condition can occur. This can lead to incorrect block verification and possible network instability.

These blocks, which are both recent and from the same blockchain, create a temporary fork in the network. This forces other nodes to make a decision about which of the two blocks to include in their blockchain. Since chain reorganization usually occurs when two blocks are mined at the same time, there will be disagreements about the block that was mined first. Different nodes will create different blocks, so it’s important that the blocks are created quickly so that the network can function properly.

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Thus, chain reorganization makes sure that all nodes contain the same copies of the ledger, which is essential for maintaining consensus and ensuring that all transactions are recorded correctly. This is important because it ensures that all node operators can agree on the state of the ledger and make transactions.

How does the chain reorganization process work?

A blockchain reorganization refers to a situation that causes nodes to receive blocks from the newest chain while the previous chain still exists. This can cause problems for the old chain, as it may not be able to keep up with the new pace. It can lead to instability and confusion in the network, potentially leading to a chain split. Reorganizing the blocks in a way that reduces the number of forks increases the likelihood that the network will eventually find the correct chain.

Therefore, if there are some nodes that are speedy compared to some others, then the blockchain will reorganize. As faster nodes become more prevalent, they will be unable to reach a consensus on which block they should process first, and they will keep adding blocks to the blockchain, resulting in the shorter chain being the one that is eventually processed.

With the faster nodes being added to the network, the blockchains will continue to grow at different rates. Eventually, one of the blockchains will have a longer chain and be accepted as the official version. In the case of two miners both finding a block at the same time, the process of distributing the new blocks across the network will cause one miner’s block to be seen first, followed by the block found by the second miner.

If two blocks have the same difficulty level, it is a stalemate and the client can choose to pick randomly or choose the block that is previously seen. Often, when a third miner creates a new block after two other miners, the link is broken and the other block is obliterated, resulting in the reorganization of the blockchain.

Once a node has chosen a block, it is essentially locked in and cannot change its choice. Now the question arises what will happen to all of the transactions that were placed on the incorrect side of the ledger? The transactions on the wrong side of the blockchain are discarded. Since only verified transactions on the extended chain are included in the blockchain, blocks that are later deleted or altered are not the segments of the history of the blockchain and will be skipped eventually.

These blocks become orphans, which means they are not part of any other blocks or groups. The following query that should be raised is what are the results of the transactions occurring in orphan blocks? Transactions that occur within the orphan blocks’ premises are not considered to be segments of the blockchain’s official transaction history.

Two blocks being mined at the same time should not be a big problem. However, orphaned block transactions must return to the node’s mempool. These transactions then propagate across the network and aim to be mined in any of the future blocks. Since the majority of transactions occur on the correct fork side, those that are placed on the fork’s wrong side will likely experience delays during the blockchain reorganization.

Since transactions can take some time to be confirmed by the network, it is considered to be wise for people to wait for a while for the transactions to be confirmed by at least one block before assuming it to be final. The user has a chance of the blockchain getting reorganized, in which case they can hope that it gets mined on the extended chain. But it is not always guaranteed.

Because the transaction did not get included in the most recent block, it is as if it never existed. This means that when a user wishes to consume his cryptocurrency within an orphan block, the transaction would be invalid as flagged by the nodes That’s not possible, because the asset the user tries to use does not even reside on the chain. This is to prevent accidental or malicious spending of crypto inside an orphan block.

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To put it in a nutshell there is some inconsistency in when nodes receive blocks due to the speed at which blocks are propagated across the network. Since there are multiple blocks that could be considered the “first,” there will be a disagreement about which one should be considered first in everyone’s blockchain. This problem can be resolved by mining the next block.

Next, one of these blocks will be mined, building on top of an existing block to create a new longest chain. As each node receives the latest block, it will see that it creates a new chain that is the longest and will reorganize its chain to adopt it. As a result, each node is able to agree individually on the same version of the blockchain due to chain reorganization.

Putting it simply, chain reorganization results in the oldest block of the node being deactivated. As the blockchain reaches a block with a longer chain, it deletes the old block to make space for the new one. The blockchain is a distributed ledger that ensures that all node operators have the same copy of the ledger. This is done through chain reorganization that helps to ensure the reliability and accuracy of the blockchain.

The Ethereum Beacon chain reorganization

The Ethereum merge is a revolutionary new development that will help to improve the functioning of the Ethereum network. The Ethereum 2.0 upgrade is a significant change that moves the network from a consensus mechanism of a proof-of-work (PoW) to a proof-of-stake (PoS). The proposed merge of the Ethereum Beacon Chain and the Ethereum mainnet is a sensible move that will benefit both projects. It’s scheduled to occur in August of 2022, and it will make the combined network stronger and more reliable.

In December 2020, Ethereum Beacon Chain introduced the process of native staking, making it the first platform to offer this valuable feature. This innovation made Ethereum Beacon Chain the ideal platform for investors who wanted to earn rewards while helping secure the network. By the staking of assets, validators become part of a powerful community that can help secure the blockchain. However, on 25th May, the chain underwent a seven-block reorganization – that is considered to be one of the longest reorganizations in recent years.

This important security issue with the Ethereum Beacon Chain highlighted the need for greater vigilance, as this security flaw that was discovered with Ethereum Beacon Chain could have had serious consequences for the network as a whole.

What is the Seven-Block reorg?

Let’s look into the “seven-block reorg” more. The validation process became disrupted when it was updated by a client. Their outdated software made them perplexed during the process of updating, and they didn’t update it. This “seven-block reorg” essentially means seven blocks of new transactions got to be added to the network before they were discarded. After careful consideration, the network decided not to use the forked chain after concluding that it was the wrong path.

But before that seven blocks of transactions were already added to the database. As per Etherscan, the Ethereum blockchain is home to an average of 200-300 transactions per block. This means that up to 2,100 transactions were moved to orphaned blocks.

What are double-spend attacks?

Now we have learned that if two separate versions exist for a blockchain, a reorganization of the blockchain occurs. This means that, in the event of a dispute, the most accurate version of the blockchain will win out. Before a reorganization is processed, there could be the potential risk for users to spend their assets twice.

This is an event that is called “double-spending.” It means that someone has spent two different currencies in the same transaction, and this is considered to be a very risky thing. If someone maliciously spent the same currency twice, that’s a “double-spend attack.” Whenever a new client updates its blockchain before the remaining validators, the Ethereum chain reorganization happens.

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This can lead to confusion among validators, which could cause them to make mistakes. In the event of Ethereum’s Beacon Chain reorg, the nodes that were up to the minute were up to 12 seconds faster than the nodes that weren’t updated. Therefore, the Beacon Chain reorganization seems to be a reasonable step forward instead of a destructive one.

Advantages of chain reorganization

Here are some of the benefits of reorganizing the blockchain.

  • The benefits of chain reorganization include increased efficiency in blockchain operations. A unified ledger running on each node would be impossible without chain reorganization.
  • This chain reorganization ensures that all nodes have the same copy of the ledger, ensuring that all recorded transactions are valid which minimizes the chances of errors.
  • The chain reorganization process is relatively easy to carry out, and it will work effortlessly.

Disadvantages of chain reorganization

Chain reorganization does have some drawbacks as well.

  • There is a potential risk of double spending with chain reorganization.
  • When two blocks are published close to one another, a block conflict can occur, which can lead to a fork on the blockchain. The conflict between blocks is due to chain reorganization.
  • Chains that undergo reorganizations can incur additional costs due to the need to update their state as a result of the new fork.
  • Since chain reorganization is a possibility, users have to wait for a bit longer before they can be sure that their transactions have been confirmed. Since crypto exchanges don’t accept deposits immediately, it may take them longer to process your payments, which could mean that people are not able to deposit their money as soon as they would like.
  • Since chain reorganization can increase transaction risks for decentralized finance, this means that future trading results will be lower than expected.
  • Chain reorganization also happens to increase the risk of being exposed to attacks. This is because of the reason that during a chain reorganization, attackers only need to tame a small percentage of the honest miners. Instead, attackers simply defeat the “un-orged” miners. Therefore, the task of the attacker becomes possible if the reorganization is repeated.

Conclusion

A chain reorganization usually happens when two blocks are mined simultaneously. There is no set number of blocks a chain reorganization can cover. It tends to be executed in various blocks, depending on the specific situation. When a node accepts a new chain with blocks longer than the currently active chain, the node will reorganize the chain in order to accept the new chain, without taking into account its length.

Reorganizations of chains are a common occurrence in a node’s functionality. By adopting the longest chain, nodes can agree on the same blockchain across the network, making chain reorganizations a part of the process. Any transactions that are deleted as a result of a chain reorganization will get to be recycled into the mempool so that they may be mined on the longest chain.


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Mubashar Nawaz (United Arab Emirates)

Mubashar Nawaz is an experienced crypto writer working for Tokenhell. Having passion for writing, he covers news articles from blockchain to cryptocurrency.

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