Understanding Temporary Forks and Reorganization in Blockchain

Posted on Dec 14, 2024 by Eric Ma In Blockchain, Systems

Temporary forks and chain reorganizations (reorgs) are natural occurrences in decentralized blockchain systems. They arise due to the asynchronous nature of block propagation across the network. While temporary forks are short-lived and resolved quickly, chain reorganization refers to the process by which the blockchain discards one branch in favor of a longer or higher-priority chain. This article deeply explores temporary forks and chain reorganizations, focusing on their causes, resolution mechanisms, and implications, with examples from Bitcoin (BTC) and Ethereum (ETH).

Table of Contents

What Are Temporary Forks?

A temporary fork occurs when a blockchain splits into two or more branches for a short period due to discrepancies in block propagation or validation. Temporary forks are common in blockchains without immediate finality, such as Bitcoin and Ethereum, and are resolved by the network’s consensus mechanism.

Temporary Fork vs Permanent Fork

There is another kind of “fork” in blockchain networks which is called “permanent fork”. It’s different from temporary forks which are the focus in this post.

Temporary Fork: Short-lived splits that are resolved by the network’s consensus mechanism, with only one branch becoming the “main chain.”
Permanent Fork: Long-term divergences that result in two separate blockchains, often due to protocol changes or community disagreements (e.g., Bitcoin and Bitcoin Cash). These are not the focus of this article.

Temporary Fork vs Chain Reorganization

Temporary Fork: A situation where two or more branches of the blockchain exist simultaneously but are resolved when one is chosen as the canonical chain. The discarded chain’s blocks are considered orphaned or uncle blocks (in Ethereum PoW).
Chain Reorganization (Reorg): The process by which nodes in the blockchain discard a shorter branch of the chain and switch to a longer or higher-priority chain. Transactions in the discarded chain are returned to the mempool.

Why Do Temporary Forks Happen?

Temporary forks and reorgs occur due to the decentralized nature of blockchain networks, where nodes operate independently and communicate asynchronously. The primary causes of temporary forks include:

Simultaneous Block Creation: Two miners or validators may produce valid blocks at the same height simultaneously, leading to a temporary split.
Network Latency: Nodes in the network may receive and propagate blocks at different times due to geographic or network delays, causing some nodes to temporarily follow one chain while others follow another.
Discovery of a Longer Chain: If a longer chain is propagated after a chain with fewer blocks has already been built upon, the network reorganizes itself to adopt the longer chain.

What Is a Chain Reorganization (Reorg)?

A chain reorganization (reorg) is the process by which the blockchain abandons its current branch in favor of a longer or higher-priority branch. Reorgs typically occur as part of the natural process of resolving temporary forks but can also be a result of malicious activity, such as a 51% attack or selfish mining.

How Reorgs Work

Fork Formation: A temporary fork forms when two miners or validators produce competing blocks at the same height (n).
Competing Chains: Two branches of the blockchain temporarily exist:
- Chain A: The branch propagated earlier or more widely.
- Chain B: A competing branch produced at the same height.
Resolution: The blockchain resolves the fork when a new block is mined, extending one branch and making it longer than the other. The network switches to the longer chain (Chain A), discarding the shorter chain (Chain B).
Reorganization: Nodes reorganize their local view of the blockchain to match the longer chain. Transactions from the discarded chain are returned to the mempool for re-inclusion in future blocks.

Implications of Reorgs in Blockchain Systems

In general the implications of reorgs in blockchain systems have several aspects.

Transaction Finality: Reorgs can delay transaction finality. Bitcoin users wait for 6 confirmations, while Ethereum PoS provides deterministic finality through checkpoints.
Security Risks: Longer reorgs increase the risk of double-spending attacks, especially in PoW systems where attackers with significant hashing power can outpace the network.
Network Performance: Reorgs reduce efficiency by discarding valid blocks and reprocessing transactions, leading to wasted computational or network resources.
User Experience: While reorgs are largely invisible to users, they can cause slight delays in transaction confirmation and finality.

The implications could be different in different networks depending on the mechanisms in those networks. We will check the cases of BTC as an example of Proof-of-Work blockchain, and Etherem as an example of both Proof-of-Work and Proof-of-Stake blockchains.

Reorganization in Bitcoin (Proof-of-Work)

Bitcoin resolves temporary forks and reorgs using the Longest-Chain Rule, which states that the chain with the most cumulative computational work is considered valid. This ensures that the network converges on a single chain over time.

Example: Reorg in Bitcoin

Simultaneous Block Discovery: Miner A and Miner B both mine valid blocks at height n. The blockchain temporarily splits into two branches:
- Chain A: … -> Block n (A)
- Chain B: … -> Block n (B)
Competing Branches: Half the network sees and propagates Chain A, while the other half propagates Chain B.
Fork Resolution: Miner C mines a new block at height n+1 on top of Chain A. Chain A becomes the longer chain. The network adopts Chain A as the canonical chain, while Chain B is discarded.
Reorg Process: Nodes previously following Chain B reorganize to match Chain A. Transactions in Block n (B) that are not included in Block n (A) are returned to the mempool.

Implications of Reorgs in Bitcoin

Orphaned Blocks: Blocks in the discarded chain are called orphaned blocks. These blocks are valid but do not contribute to the final ledger.
Transaction Handling: Transactions in orphaned blocks are not lost but are returned to the mempool for re-inclusion in future blocks.
Confirmation Delays: Reorgs can invalidate earlier confirmations. For this reason, Bitcoin users are advised to wait for at least 6 confirmations before considering a transaction final.
Security Risks: Longer reorgs (e.g., >6 blocks) can indicate malicious activity, such as a 51% attack, where an attacker controls the majority of the network’s hashing power.

Reorganization in Ethereum

Ethereum handles temporary forks and reorgs differently depending on whether it uses Proof-of-Work (PoW) or Proof-of-Stake (PoS) consensus.

Reorgs in Ethereum PoW (Pre-Merge)

Ethereum PoW resolves forks using the Longest-Chain Rule but improves on Bitcoin’s approach with the GHOST (Greedy Heaviest Observed Subtree) protocol. GHOST gives weight to uncle blocks (orphaned blocks), incentivizing miners even if their blocks are not part of the main chain.

Example: Reorg in Ethereum PoW

Simultaneous Block Creation: Two miners produce valid blocks at height n, creating two competing branches.
Competing Branches:
- Chain A: … -> Block n (A)
- Chain B: … -> Block n (B)
Resolution: A miner extends Chain A by mining Block n+1. Chain A becomes the canonical chain.
Uncle Blocks: Block n (B) is included as an uncle block, receiving partial rewards despite being discarded.

Implications of Reorgs in Ethereum PoW

Uncle Block Rewards: Ethereum rewards miners for orphaned blocks (uncle blocks), reducing wasted computational effort and enhancing network security.
Transaction Handling: Transactions in uncle blocks are returned to the mempool if not included in the main chain.
Lower Risk of Long Reorgs: The GHOST protocol reduces the likelihood of long chain reorganizations by giving weight to discarded blocks.

Reorgs in Ethereum PoS (Post-Merge)

With Ethereum’s transition to Proof-of-Stake (PoS) in September 2022, reorgs are resolved through validator voting and finality checkpoints.

How Reorgs Are Handled in Ethereum PoS

Forks Before Finality: Validators may propose competing blocks due to network latency or malicious behavior, causing a temporary fork.
Voting and Finalization: Validators vote on the chain they consider valid. Once a block reaches finality (through a supermajority of votes), it cannot be reverted.
Short Reorgs: Reorgs can occur before finality when validators switch to a longer chain. However, these reorgs are short-lived and do not affect finalized blocks.

Implications of Reorgs in Ethereum PoS

Finality Guarantees: Once a block is finalized, it is immutable unless at least one-third of validators act maliciously.
Minimal Reorgs: Ethereum PoS minimizes reorgs, as validators operate under economic incentives to avoid proposing conflicting blocks.
Stronger Security: Finality checkpoints provide deterministic guarantees about the chain’s integrity, reducing the risk of double-spending attacks.

Conclusion

Temporary forks and chain reorganizations are inevitable in decentralized blockchain systems, arising from the asynchronous nature of block propagation and validation. Both Bitcoin and Ethereum handle reorgs differently: Bitcoin uses the longest-chain rule to resolve forks, with orphaned blocks discarded and transactions returned to the mempool; Ethereum PoW improves fork resolution with the GHOST protocol, rewarding uncle blocks to incentivize miners; Ethereum PoS minimizes reorgs through validator voting and finality checkpoints, providing stronger guarantees about chain integrity.

Understanding reorgs is critical for assessing the performance, security, and user experience of blockchain systems. Reorgs highlight the trade-offs between decentralization, consensus mechanisms, and finality in blockchain design.