Potential insolvency issues arising from losses due to chain reorgs

Every time the Bifrost service detects a new block at a previous height it has seen before, it scans the newly discovered block for previously reported transactions. If it finds a transaction that is missing, it means the transaction has been reorged out. The missing transaction is reported to THORChain as an ErrataTx. Any state changes associated with the transaction are reversed.

The required confirmation count for a block is derived from the total transaction value of the block. This is designed such that a malicious reorg is unlikely to happen, as the cost of the reorg would exceed the sum of value gained. However, losses arising due to reorgs would be socialized across LPs, potentially causing the backing vaults to be insolvent.