- Bitcoin fell 11% on Thursday after a report from BitMEX Research suggested that a critical flaw called ‘double spending’ had occurred in the Bitcoin blockchain.
- Double spending is a very dreaded scenario where a user can spend their bitcoins more than once.
- A double-spend event has not been confirmed and BitMEX has given mixed messages.
- Sign up here to receive our daily newsletter, 10 Things Before the Opening Bell.
Bitcoin fell 11% on Thursday, hitting its lowest level in nearly three weeks as the popular cryptocurrency was hit by a double whammy that rocked confidence in its user base.
First, Janet Yellen, President Joe Biden’s candidate for Treasury Secretary, suggested during her confirmation hearing on Tuesday that lawmakers “restrict” the use of Bitcoin due to its use in illicit activities .
And second, an unconfirmed report from BitMEX Research on Wednesday suggested that a critical flaw called ‘double spending’ had occurred in the Bitcoin blockchain.
Double spending is when someone is able to spend the same bitcoin twice. This is a dreaded and dire scenario for the digital asset, and blockchain reportedly solved the problem when Satoshi Nakamoto released the Bitcoin white paper in 2009.
The first attempts to launch a digital treasury system were ultimately halted by vulnerabilities that could have doubled spending and undermined confidence in the system.
BitMEX Research tweeted that “it appears that a small double spend of around 0.00062063 BTC ($ 21) has been detected.”
Read more: GOLDMAN SACHS: These 22 stocks are still not back to pre-pandemic levels – and are set to explode amid higher profits in 2021 as the economy recovers
BitMEX later said it seemed like double spending was actually an RBF transaction, that is, when an unconfirmed bitcoin transaction is replaced by a new transfer paying a higher fee. But BitMEX’s Fork Monitor said “no increase in fees (RBF) was detected.”
BitMEX stated in another tweet: “A transaction in the losing chain sent 0.00062063 BTC to the address 1D6aebVY5DbS1v7rNTnX2xeYcfWM3os1va, and a transaction in the winning chain that spent the same entries sent only 0.00014499 BTC to this address.”
If the double-spending does indeed occur, it could be a fatal blow to the popular cryptocurrency, indicating that the loophole that Nakamoto set out to address remains a vulnerability that could crush trust in the asset.
Meanwhile, institutional investors continue to gain exposure to bitcoin. Documents filed with the Securities and Exchange Commission on Wednesday said BlackRock allowed two of its mutual funds to invest in cryptocurrency.
Read more: We spoke to the Winklevoss-backed crypto platform Gemini about Bitcoin, how to use stablecoins, and why regulations won’t end the digital currency boom.