Photographer: Chritophe morin / Bloomberg
Photographer: Chritophe morin / Bloomberg
Bitcoin plummeted more than 10% on Thursday, triggering a hunt for reasons the notoriously volatile asset was selling away. One who caught attention questioned the very viability of the ticket itself – though it was not a cause for concern.
A report in a trade blog suggested that there has been what is known as double spending, where the same ticket is used by the same person in two transactions. It’s as if someone buys a car, pays the seller, drives away with its brand new wheels and then later complains about all the money. In the case of the blockchain – or the software underlying Bitcoin and other cryptocurrencies – the transaction in question would be excluded from the final account on the digital ledger.
But, “in this case, it doesn’t look like a trader has been fooled,” said Nic Carter, co-founder of Coin Metrics, a data firm. “This doesn’t look sinister to me. My best guess is this is a software experiment or bug. ”
It’s really a feature of the crypto world, where the blockchain is records Bitcoin transactions and performs the tracking functions in much the same way as banks do during traditional transactions. For Bitcoin, it is done by consensus on a decentralized network, and typically six confirmations (or blocks) are considered safe. It’s rare to consider a payment final after only one confirmation, Carter said. What is likely is that two blocks have a discussion of the same direction but that one whole block is ultimately excluded.
Double spending is very rare although chatting on crypto forums has mentioned a few happening in the past. They would normally target exchanges, he said, though it was incredibly difficult to prove that they occurred without the affected party showing their records and proving that the fraud had occurred. While it may have happened in this case, it looks more likely to be a fault, Carter said.
Still, online discussions intensified about the potential implications of blockchain, with Google looking for “double spend Bitcoin” spiking.
Bitcoin fell as much as 11% on Thursday to trade around $ 30,986. Other cryptocurrencies also sold, with Bloomberg’s Crypto Galaxy Index losing as much as 10%.
“The Bitcoin blockchain is operating exactly as designed, and has been operating exactly as it was designed for 12 years,” said Andreas Antonopoulos, an expert in Bitcoin and open blockchain technologies. “What we saw today was the reorganization of one block. These occur on average every two weeks, and are a normal part of the consensus algorithm. ”
– With the help of Olivia Raimonde