Blockchain technology is a sophisticated system of interconnected processes that guarantees the secure distribution and storage of data among node operators. A node is any active copy of the distributed ledger or Blockchain. To verify transactions effectively, nodes must maintain their copies of the Blockchain, which is where chain reorganization comes into play.

Each Blockchain is made up of a significant number of interconnected blocks that form a distributed ledger. Each block itself is made up of tens of thousands of processed transactions.

Moreover, as the Blockchain evolves, an increasing number of transactions are completed, lengthening the chain of blocks. Therefore, a node will deactivate blocks in its previous longest chain during the chain reorganization process to add the newest blocks, which serve as the foundation for the new longest chain.

Let’s learn more about chain reorganization in the following sections.

What is chain reorganization?

When conflict arises between various iterations of the same Blockchain, a chain reorganization—also known as a reorg—takes place. Usually, this happens when two or more miners build blocks at once and broadcast them to the network.

The Blockchain will then need to be reorganized as the network must choose which of the two conflicting blocks to accept as the valid block.

Reorganizations can also take place if a miner launches an attack on the network and is successful in creating a chain that is longer than the main chain.

What are the advantages of chain reorganization?

Any Blockchain can benefit from chain reorganization, including but not limited to the following:

• Enhanced Blockchain efficiency—Without chain reorganization, it would be difficult to maintain a single ledger that runs on every node.

• A guarantee that all nodes use the same copy of the ledger, reducing the possibility of errors and assuring that all recorded transactions are valid.

• The chain reorganization procedure can be executed quickly and effectively.

Major impact of chain reorganization

There is the following impact of chain reorganizations on Blockchain technology:

• Delays and bad user experience

Reorgs raise the chance of delayed transactions in addition to increasing node costs. This is a serious issue for exchanges since they depend on transactions being confirmed promptly or risk suffering the consequences of having to wait longer for a deposit.

• Node Costs 

Reorgs increase the number of nodes within a Blockchain over time, which can result in a poor user experience. State updates cost more memory and disc when switching to a new fork.

• Uncertainty

Users have fewer guarantees that transactions will be completed on time when reorgs are prominent. DeFi transactions would produce even worse outcomes and destructive MEV extraction if there were insufficient context.

• Vulnerability to attacks

As reorgs become more prevalent, attackers just need to beat a handful of honest miners (due to the “longest chain rule) and not all of them. The attacker’s job is made much simpler with more number of reorgs.

Chain reorganization and Ethereum Merge

A Blockchain reorganization entails a chain split within a Blockchain ledger. The splits at this place use blocks from a new chain while maintaining the functionality of the old chain.

The Ethereum Beacon Chain just underwent a seven-block chain restructuring, significantly increasing the security risk. Many clients were uninformed of the issue; however, a group of Blockchain experts informed them that the issue was really brought on by some clients’ out-of-date software rather than a fault.

Another important thing to understand in this notion is the restructuring of the seven blocks. It’s the addition of seven transaction blocks to a split that had previously been denied. It may still occur even before the network understands the chain is not normal. As a result, Blockchain restructuring occurs when certain nodes operate more quickly than others.

Closing thoughts

Usually, chain reorganization happens when two blocks are mined concurrently. Any given chain reorganization can operate across an infinite number of blocks, and depending on the circumstances, they frequently do so.

An essential component of Blockchain technology is technical methodology. Unfortunately, Blockchain operations cannot yet afford to replace the complex procedure because it frequently goes a long way in assuring the smooth operation of a Blockchain, despite the possible drawbacks it may offer.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.