Photographer: Chritophe morin / Bloomberg
Photographer: Chritophe morin / Bloomberg
Bitcoin fell more than 10% on Thursday, causing a hunt for reasons why the notorious volatile asset was selling. One that caught my attention questioned the very viability of the symbol itself – although it turned out not to be a cause for concern.
A report from a trading blog suggested that there was what is known as double spending, in which the same symbol is used by the same person in two transactions. It’s like someone bought a car, paid the seller, left with the brand new wheels and then took out 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 calculation of the digital register.
But, “in this case, it does not appear that a trader was deceived,” said Nic Carter, co-founder of Coin Metrics, a data firm. “It simply came to our notice then. My best guess is that this is an experiment or a software error. ”
Bitcoin was created with the intention of being a digital currency that does not require any centralized authority to support it or to oversee transactions. Instead of banking software that manages electronic transfers, Bitcoin is traded on a blockchain – basically a spreadsheet that records when currencies move and where. Transactions are entered on the blockchain after an unaffiliated third party verifies the transaction, often in exchange for partial currencies.
The blockchain should be immutable, helping to prevent fraud and making transactions irreversible. A double expense would effectively mean that the blockchain was manipulated, avoiding the security claim announced by Bitcoin. Merchants often expect a payment to be verified up to six times. In the case of reported double expenses, the transfer was apparently checked only once, entered in the register and then revoked.
It is rare to consider a final payment after a single confirmation, Carter said. What probably happened is that two blocks – the encryption term for verification – had the same transaction from the same address, but that an entire block was eventually excluded.
However, online discussions about the potential implications of the blockchain have intensified, with Google looking for an increase in “double Bitcoin spending”.
Bitcoin fell to 11% on Thursday to trade around $ 30,986. Other cryptocurrencies also sold, with the Bloomberg Galaxy Crypto index losing up to 10%.
“The Bitcoin blockchain works exactly as it was designed and works exactly as it has been designed for 12 years,” said Andreas Antonopoulos, an expert in Bitcoin and open blockchain technologies. “What we saw today was a reorganization with a single bloc. They appear on average every two weeks and are a normal part of the consensus algorithm.
– With the assistance of Olivia Raimonde
(Updates the description of the blockchain, starting with the fourth paragraph.)