Bitcoin falls 11% after report suggests a critical flaw in the cryptocurrency called 'double spend' may have occurred
- Bitcoin fell as much as 11% on Thursday after a report from BitMEX Research suggested that a critical flaw called "double spend" had occurred in the Bitcoin blockchain.
- Double spend is a highly feared scenario where a user is able to spend their bitcoins more than once.
- Ultimately, a double-spend event did not actually occur, according to the CTO of Bitfinex.
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Bitcoin fell as much as 11% on Thursday, hitting its lowest level in nearly three weeks, as the popular cryptocurrency was hit with a double whammy that jolted faith in its user base.
First, Janet Yellen, President Joe Biden's nominee for treasury secretary, suggested during her confirmation hearing on Tuesday that lawmakers "curtail" the use of Bitcoin because of its use in illicit activities.
And second, a debunked report from BitMEX Research on Wednesday suggested that a critical flaw called "double spend" had occurred in the Bitcoin blockchain.
Double spend is when someone is able to spend the same bitcoin twice. It is a feared and dire scenario for the digital asset, and the blockchain was thought to have solved the issue when Satoshi Nakamoto published the Bitcoin white paper in 2009.
Early attempts to launch a digital cash system were ultimately halted by vulnerabilities that could have enabled double spending and undermined faith in the system.
BitMEX Research tweeted that "it appears as if a small double spend of around 0.00062063 BTC ($21) was detected."
BitMEX later said it appeared that the double spend was actually an RBF transaction, which is when an unconfirmed bitcoin transaction is replaced with a new transfer paying a higher fee. But BitMEX's Fork Monitor said that "no (RBF) fee bumps have been detected."
BitMEX said in another tweet: "A transaction in the losing chain sent 0.00062063 BTC to the address 1D6aebVY5DbS1v7rNTnX2xeYcfWM3os1va, and a transaction in the winning chain which spent the same inputs only sent 0.00014499 BTC to this address."
Ultimately, the double-spend event did not occur, according to Bitfinex CTO Paolo Ardoino. In an e-mail to Insider, Ardoino explained, "In fact, what happened is that two blocks were mined simultaneously. As a consequence, there was a chain reorganization, which did not result in double-spending."
Meanwhile, institutional investors continue to gain exposure to bitcoin. Filings with the Securities and Exchange Commission on Wednesday said BlackRock had enabled two of its mutual funds to invest in the cryptocurrency.
