Photographer: Chritophe morin / Bloomberg
Photographer: Chritophe morin / Bloomberg
Bitcoin plunged more than 10% on Thursday, sparking a search for reasons why the notoriously volatile asset was being sold. One that caught the eye questioned the viability of the token itself – although that is not a cause for concern.
A report on a commercial blog suggested that there was what is known as double spending, where the same token is used by the same person in two transactions. It is as if someone bought a car, paid the seller, left with its new wheels and then took all the money back. In the case of blockchain – or the software underlying Bitcoin and other cryptocurrencies – the transaction in question would be excluded from the final count in the digital ledger.
But, “in this case, it doesn’t look like a trader was defrauded,” said Nic Carter, co-founder of Coin Metrics, a data company. “It doesn’t look sinister to me. My best guess is that this is an experiment or a software bug. “
Bitcoin was created with the intention of being a digital currency that does not require any centralized authority to support or supervise transactions. Instead of banking software that handles wire transfers, Bitcoin is traded on a blockchain – basically a spreadsheet that records when currencies move and where. Transactions are inserted into the blockchain after an unaffiliated third party verifies the deal, usually in exchange for partial currencies.
The blockchain must be immutable, helping to prevent fraud and making transactions irreversible. A double spend would effectively mean that the blockchain has been manipulated, avoiding Bitcoin’s security claim. Merchants often expect a payment to be verified up to six times. In the case of the reported double expense, the transfer was apparently verified only once, recorded in the ledger and then revoked.
It is rare to consider a final payment after just confirmation, Carter said. What probably happened is that two blocks – the cryptographic term for a check – had the same transaction for the same address, but that entire block was finally deleted.
Still, online discussions about the possible implications of blockchain have intensified, with the rise in Google searches for “double Bitcoin spend”.
Bitcoin fell 11% on Thursday, to trade around $ 30,986. Other cryptocurrencies were also sold, with the Bloomberg Galaxy Crypto Index losing up to 10%.
“The Bitcoin blockchain is operating exactly as designed and has been operating exactly as designed for 12 years,” said Andreas Antonopoulos, a specialist in Bitcoin and open blockchain technologies. “What we saw today was a reorganization of a block. They occur on average every two weeks and are a normal part of the consensus algorithm. “
– With the help of Olivia Raimonde
(Updates the description of the blockchain, starting with the fourth paragraph.)