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Reorganization in Blockchain; Everything You Need to Know

Blockchain, despite its potential, is hampered by challenges. Block conflict, for instance, is now the most common type of blockchain issue, signaling that if two blocks are recorded nearly simultaneously, the blockchain can fork.

The current conflict resolution technique is based on the LCR, Longest Chain Rule, which states that the longest chain should be considered valid if multiple blocks are available.

Each node abides by the protocol’s restriction of only attempting to extend the branch they are aware of. The rule has caused a few transactions on the wrong side of the fork to be delayed, resulting in blockchain reorganization since transactions on the wrong side of the fork would be restructured into new blocks.

The Working

On May 25th, the Ethereum Beacon chain had suffered a seven-block reorganization and was exposed to a high-level security risk known as chain organization. Validators on the ETH2, now consensus layer upgrade became out of sync.

Seven-block reorganization means that seven blocks of transactions were added to the eventually discarded fork before the network figured out it was not the canonical chain.

Blockchain reorganization happens when some node operators are faster than others. In such cases, faster nodes would be unable to agree on which block should be processed first, and they will continue to add blocks to a longer blockchain, leaving the short-chain with the creation of each next block.

The Impact

Blockchain reorganization elevates node costs, reduces user experience, and makes DeFi transactions vulnerable to 51% of threats.

When a chain reorganization happens, state changes might incur memory and disc costs due to the need to move to the new fork. As a result of the possibility of reorgs, users may have to wait longer before treating a transaction involving them as confirmed. As a result, firms such as exchanges may have to hold off on accepting deposits for longer.

The probability of DeFi transactions failing to owe to human mistakes increases due to chain reorganization, resulting in lower-than-expected trading profits.

The reorganization of a blockchain also makes 51% of attacks more vulnerable, meaning attackers don’t have to defeat all legitimate miners; instead, they have to defeat the percentage of honest miners that aren’t reorganized. If reorganization occurs regularly on a blockchain, the attacker’s job becomes considerably easier.

Drawbacks of Using PoS in the Case of Blockchain Reorganization

Proof-of-stake (PoS) blockchains have several advantages over proof-of-work (PoW) blockchains, including being more environmentally friendly and having no concerns regarding centralization. However, there are significant drawbacks, such as duplicate spending during blockchain reorganization.

The PoS consensus process is considerably more environmentally friendly than the PoW consensus technique. To put it another way, miners don’t have to spend processing power on unnecessary calculations to keep the network safe.

Second, centralization causes no issues. Unlike PoW, where mining has largely been dominated by specialized hardware equipment and a real risk of a single large miner taking over and effectively dominating the space, PoS is CPU friendly in the long haul.

However, there are certain disadvantages to employing a point-of-sale system, including the “nothing at stake” argument. Crypto miners have nothing to lose by voting for several blockchain histories. In contrast to PoW, mining on many chains has a cheap cost, and miners can try to double-spend for free in the event of blockchain reorganization.