When following news stories in a fast-paced space like crypto, it’s best not to jump to conclusions.
After Bitcoin’s price spiraled down 12% on the morning of Jan. 21, many crypto community members pointed to BitMEX Research’s recent Twitter thread regarding a potential “double-spend” picked up by their ForkMonitor.
Hypothetically, a confirmed case of double-spend, which refers to a situation where the same token is spent twice, would suggest a major security flaw in Bitcoin’s blockchain.
“Small Double Spend”
“There was a stale Bitcoin block today, at height 666,833. SlushPool has beaten F2Pool in a race,” BitMEX wrote. “It appears as if a small double spend of around 0.00062063 BTC ($21) was detected.”
The story was picked up by Cointelegraph, which published the sensationalist headline “Bitcoin double-spend spotted in the wild.” This led to accusations of “FUD” and it seems to have contributed to Bitcoin’s price to drop. In just one example, AR provider NexTech said in a press release it sold its Bitcoin holding after “news that has emerged is that a critical flaw called a ‘double spend’ may have occurred.”
The only problem: There was no actual double-spend.
Replace by Fee
As it turns out, the situation in question boils down to a “RBF” (Replace by Fee) transaction, wherein a user’s initial transaction gets stuck due to underpaid fees, so they increase their fees on the already broadcast transaction in order to give it priority.
As explained in a Twitter thread written by Coin Metrics Network Data Product Manager Lucas Nuzzi, in this particular instance, the user’s replacement transaction fees weren’t high enough either, so they attempted a third (successful) transaction with even higher fees. Despite the fact that the situation might have temporarily looked like a double-spend, Nuzzi assured readers that the situation is “business as usual.”
Crypto researcher Hasu also conducted an in-depth technical analysis of the mechanics behind the transaction for Deribit, explaining: “…different versions of a transaction can float in the network at the same time. When miners include two conflicting (but not harmful!) transactions, a previously included transaction can become invalid. That makes it initially seem like a double spend.”
BitMEX Was Accurate
To be clear BitMEX’s data was accurate. Their job is to provide evidence-based reports on forking, and the activity they caught looked like a potential double-spend. The issue is that a pithy news headline can have negative effects on the market when it misinterprets and oversimplifies a complex situation.
As Andreas M. Antonopoulos wrote to anyone angry at BitMEX for the price drop: “Wrong target. BitMEX offers a useful service that monitors for re-orgs. They are the messenger who said the right thing. Re-direct your ire at @Cointelegraph who ‘reported’ sensationalist drivel and those who amplified it.”