The Bitcoin Double-Spend That Never Happened
Interest in Bitcoin “double-spending” grew after recent news that the Bitcoin network processed the same bitcoin (BTC) in two transactions – the very “double-spending” scenario Bitcoin was specifically designed to prevent.
Except the double-spend didn’t happen, at least not in the traditional sense.
Put another way, no bitcoin was “double-spent” because no new coins were added to Bitcoin’s supply. Instead, the same coins from the same wallet were registered in two different blocks during a typical split in Bitcoin’s blockchain.
The reason this does not qualify as a double-spend is because only one of these transactions (the one recorded on Bitcoin’s longest blockchain history) is considered valid by the network while the bitcoin in the other transaction cannot be spent because the network does not consider it valid.
Due to the distributed and highly competitive nature of Bitcoin mining, mining pools from time to time mine the same block simultaneously and thus cause a split in the blockchain’s history. When this happens, both blocks will have miners add on to them until one history wins out over the other.
Let’s say, for instance, mining pool A and mining pool B mine a block at the same time, resulting in two different blockchain histories (versions A and B). Going forward, all other miners have to choose which version of the chain to build on. Let’s say the miner who finds the next block in the sequence chooses to build on version A, but then afterwards the next two or three or more miners decide to build on version B. Version B ultimately wins out as more miners choose to mine that transaction history.
The other history is excised from the network and considered irrelevant and any blocks mined on it become stale blocks.
This was the case at block 666,833, wherein two blocks were spawned by separate mining pools and a one-block reorganization, as described by Lau, occurred. The above scenario is why Satoshi Nakamoto said in the white paper that a transaction should only be considered final after it has six confirmations (i.e., six new blocks are mined onto the chain that has recorded the transaction).
The supposed double-spend first became news yesterday after BitMex Research reported on block 666,833’s abnormalities on Twitter. The reorganization meant a “stale block” (also sometimes called an “orphan block”) had been mined that contained bitcoin also spent on Bitcoin’s valid chain, so a transaction containing the same bitcoin was recorded on both the relevant and irrelevant chains.
What BitMEX research called at first a “double-spend-like scenario” now looks like a perfect storm caused by the one block reorg and a replace-by-fee transaction. A RBF transaction occurs when you tell your wallet to send the same bitcoin again but with a higher fee, with the hopes that it will be confirmed before the lower fee transaction.
It went down like this: Someone sent 0.00062063 BTC to this address but set the lowest fee possible (1 satoshi per byte, or less than a fraction of a cent, per byte of transaction data).
Since the fee was so low, the transaction took a while to confirm, so the sender tried to outpace it by sending what’s called a “replace by fee transaction” (RBF).
Instead of the RBF replacing the slow transaction as intended, however, the lower fee transaction cleared first and made it into the block that was mined onto the longest chain.
Meanwhile, the higher fee transaction found its way onto the stale block. The final result: 0.00062063 BTC is recorded as existing on the address 1D6aebVY5DbS1v7rNTnX2xeYcfWM3os1va on the irrelevant transaction history while 0.00014499 BTC exists on the same address but on the relevant transaction ledger.
Technically, the same bitcoin was spent twice in this scenario. But one transaction was double-spent to an address on a transaction history that the Bitcoin network does not consider valid (if you query the transaction ID for the “losing” transaction in any Bitcoin block explorer, for instance, nothing comes up).
In this scenario, “the important thing to know is that, yes, there might be different versions of the same transaction, but only [one] will ultimately be accepted” by nodes and users of the Bitcoin network, Coin Metrics Bitcoin network data analyst Lucas Nuzzi wrote on Twitter.
A double-spend typically means a sender tricks a recipient into accepting a transaction that the sender actually sends to itself, as well. This is why it’s considered best practice for merchants to wait for six confirmations before a payment is considered final to avoid an outcome like this one.
Bitcoin nodes surged to over 11,600 – Latest News, Breaking News, Top News Headlines
The number of nodes in the Bitcoin Blockchain network increased to establish a new all-time high. The reasons for this could be found in the low confidence of users in custody solutions. Also, the recent update of the “Satoshi client” or Bitcoin Core, plays its part.
Thus, the number of active nodes on the network reaches 11,674 according to data from Bitnodes.io. For its part, another analytic, Coin.dance places the number at 11,613.
In either case, the number of nodes exceeds the historical record that had been reached last year of 11,250. The release of version 0.21.0 of Bitcoin Core could be one of those responsible for a new interest in the installation of these software.
The fact that Bitcoin nodes rose to a record number has another factor as well. It is about the increase in user distrust in custody solutions, which are increasingly demanding. This fact has pushed people to create their own nodes.
This, together with the appearance on January 14 of the new Bitcoin Core update, increases the interest in the installation of these softwares. Now, the new update has more than 619 active nodes, which represents 5.5% of all nodes running on the network.
It should be noted that version 0.20.1, prior to the current one, continues to be the most popular and contains about 5000 nodes. However, it should be noted that the latest version is only a week old. Thus, it is the fourth most used, which can be taken as an indication of the magnitude it could reach.
One of the most outstanding qualities of the latest version is that it is friendly with the implementation of Taproot’s consensus rules. The latter should be remembered, it is an update of the pioneering cryptocurrency Blockchain network to improve many of its functionalities. This could explain why Bitcoin nodes increased significantly.
According to statistics portals, Bitcoin nodes increased to 11,674. Source: Bitnodes
As highlighted above, the latest version of the “Satoshi client” from January 14th is harmonious with Taproot. Thus, the update consensus rules can be compatible and tested with version 0.21.0 without having to be activated on the mainnet or main network.
This fact makes it very attractive to the new Bitcoin nodes that are emerging.
The importance of Taproot is that this update will increase the security levels of transactions. It, explains CoinTelegraph, allows you to suppress the visibility of “spending conditions that are unnecessarily exposed in previous implementations.”
Another aspect of no less importance is that some of the properties of the update open the door to the massification of Bitcoin. In other words, the differentiating characteristics of the transactions are eliminated. With this, it will be possible to turn the queen cryptocurrency into a more fungible asset.
Hidden Tor network is priority
The Bitcoin nodes, did not increase lightly. Consequently, the majority of them could be oriented to the hidden Tor network. This remains the most dominant, since 25% of all active nodes of the Bitcoin Blockchain network are located in it.
Consequently, the fundamentals of Tor version 3 allow transactions to access many security options. Among these, the possibility of adding a privacy layer by hiding the IP address of the nodes stands out.
Data to take into consideration
The fact that the Bitcoin nodes increased to a record figure makes it clear that the new version of the “Satoshi client” arouses interest. The version 0.20.0 of the Bitcoin Core, harmonizes in an advanced way with the Taproot update. Explained in CryptoTrend, Taproot increases security levels in transactions. Another fact that drives the increase of Bitcoin nodes is the growing distrust of users in custody solutions.
Author: News Bureau
Buy Crypto That Holds Up During Bitcoin Breakdown
Bitcoin has plummeted by more than $11,000 from its recent FOMO-driven peak. Normally, the bearish momentum in the top cryptocurrency is enough to drag down the rest of the market, but select altcoins are holding up surprisingly well.
Bitcoin and altcoins have an on-again, off-again relationship, which is no surprise for the two types of volatile digital assets.
Bitcoin typically must be bullish or consolidating for altcoins to perform well. When sentiment turns on the market leader, alts take a much worse beating.
This time around, certain alts are holding up against the market’s abuse more so than others, and one expert says that those are the crypto asset to buy for the biggest profits in the months ahead.
That expert is Nik Patel, author of An Altcoin Trader’s Handbook.
Buy altcoins that have held up well against BTC, claims expert | Source: BTCUSD on TradingView.com
Patel knows Bitcoin and altcoin cycles, and has made more than one fortune off of the repeating, cyclic patterns of cryptocurrencies. The author also in the past has explained alt season boom and bust cycles, where certain cryptocurrencies outperform BTC by a wide margin.
Altcoins like Ethereum, Chainlink, and Uniswap have been beating Bitcoin at its own game recently, and according to Patel, these might be coins worth paying closer attention to.
These alternative digital currencies showing strength when sentiment is turning on the leading cryptocurrency by market cap, says that buyers are buying the blood currently, but they are avoiding Bitcoin for now.
As to why altcoins could be holding up better than Bitcoin, it all comes down to unrealized profits. After the epic Bitcoin rally, investors have plenty of profit left to realize, before its too late. This results in the selloff becoming more severe.
The altcoins highlighted have all set a new all-time high, but still have much more to go before prices double like they have in Bitcoin. On the flip side, there are some alts out there that aren’t anywhere near in profit, and given the lack of interest still, likely won’t be in the near future.
Featured image from Deposit Photos, Charts from TradingView.com
Author: by admin
How To Play The Bitcoin Surge Without Taking Too Much Risk
Bitcoin golden physical coin illustration on United States Dollar banknotes. Eindhoven, the … [+] Netherlands on January 13, 2020 (Photo by Nicolas Economou/NurPhoto via Getty Images)
Bitcoin prices have surged by more than 50% over the last month and remain up by about 4x over the 12 months, due to higher retail and institutional interest. That being said, Bitcoin remains a risky investment, given its relative lack of utility and extremely high volatility. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency value chain – could be a safer way to play the crypto space, without betting on individual currencies. The theme has done well, rallying by over 100% over the last year. Below is a bit more about the key companies in the theme and how they have been faring.
[Updated 12/7/2020] How Nvidia, Square & PayPal Stocks Are Benefiting From Soaring Bitcoin Prices
Bitcoin prices have surged by over 160% year-to-date, driven by multiple factors including higher institutional interest, fintech companies Paypal and Square’s moves into the crypto space, and also by a view that scarce digital currency could be a hedge against inflation and a weakening U.S. dollar. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency space – is up a solid 110% year-to-date, compared to the S&P 500 which is up by just about 14% over the same period. Key stocks in our theme include Square, PayPal Holdings, Nvidia, and CME Group.
Although crypto likely represents a small portion of these company’s revenues at the moment, it does have the potential to be big. For example, Payment apps Square and PayPal, who make money by buying bitcoin from brokers and selling them to their customers by adding a “spread” stand to benefit as prices and volumes rise. Square’s Cash App generated about $1.63 billion in Bitcoin-related sales in Q3 2020, an 11x jump year-over-year. Similarly, Nvidia also benefits from demand for its top-of-the-line GPUs such as the Ampere lineup from cryptocurrency miners.
[Updated 10/29/2020] Cryptocurrency Stocks To Watch
Interest in cryptocurrency is surging once again with Bitcoin prices up by almost 30% over the last month, driven by growing institutional interest and Paypal’s recent move to allow its customers to buy and sell certain cryptocurrencies. Our indicative theme on Cryptocurrency Stocks – which includes semiconductor, payments, and brokerage companies that have some exposure to the cryptocurrency space – is up 88% year-to-date, compared to the S&P 500 which is up by just about 5% over the same period. This theme could be of interest to investors who are looking for upside from cryptocurrency adoption and prices, but want to avoid buying into the currencies themselves considering the volatility, risk of fraud, or cyber theft, or potential portfolio mandates. Below is a bit more about the stocks in our theme and how they have fared this year.
Square cash mobile wallet app has emerged as a very popular way for people to buy and sell Bitcoin. The stock has gained a whopping 183% year-to-date, as investors bet that Square’s digital payment solutions will continue to gain traction through and post Covid-19. The stock has dropped by about -9% over the last 5 trading days, however.
Nvidia a semiconductor company that is best known for its graphic processing units which are increasingly used in machine learning and AI, is also finding application in bitcoin mining. The stock has gained over 131% year to date although it declined by about -3% over the last week.
PayPal a large online payments processor, has indicated that it would allow customers to buy, hold, and sell cryptocurrencies such as Bitcoin and Ethereum directly within its PayPal and Venmo app. The stock is up by 88% this year and was down by about -1% over the last 5 trading days.
Advanced Micro Devices is a semiconductor major that makes CPUs and GPUs, which are increasingly used in bitcoin mining. The stock has gained about 79% year-to-date and remained largely flat over the last 5 trading days.
CME Group the world’s largest financial derivatives exchange, also offers bitcoin futures contracts. The stock is down by about -18% year-to-date and declined by about -2% over the last week.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 120% return since 2016, versus about 60% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
See all Trefis Price Estimates and Download Trefis Data here
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Author: Trefis Team
Bitcoin Losses Near $200 Billion As JPMorgan Warns It’s The ‘Least Reliable’ Dollar Hedge
The price of bitcoin is tanking nearly 10% Thursday, tacking on to massive losses as bearish calls from regulators and analysts heighten after a huge surge fueled by still-booming institutional adoption.
The world’s largest cryptocurrency is down nearly 10% over the past 24 hours.
As of 12 p.m. EST, bitcoin’s 24-hour plunge has pushed prices down to their lowest levels in more than two weeks, wiping out roughly $180 billion in market value since a record high on January 8, according to crypto data firm CoinMarketCap.
Most other top tokens are also plunging, with ether, XRP and cardano down 7%, 3.5% and 3%, respectively.
The sustained losses come as bitcoin’s rising mainstream adoption “raises correlations with cyclical assets, potentially converting cryptocurrencies from insurance to leverage,” JPMorgan analysts said in a note to clients reported by Bloomberg Thursday.
The analysts went on to say that bitcoin is the “least reliable hedge during periods of acute market stress,” an observation that stands in stark contrast to Wall Street experts saying that investors have been flocking to the world’s largest cryptocurrency as a “legitimate hedge against inflation.”
Meanwhile, President Joe Biden’s Treasury Secretary nominee, Janet Yellen, who could be overseeing crypto-critical bureaus like the Financial Crimes Enforcement Network and the Internal Revenue Service, called cryptocurrencies “a particular concern” on Tuesday, suggesting that lawmakers take action to “curtail their use,” particularly to ensure they’re not used for illicit financing.
That’s not stopping institutional players from diving further into the space: Investment giant BlackRock filed documents with the Securities and Exchange Commission on Wednesday to include cash-settled bitcoin futures as eligible investments for two of its funds.
“Bitcoin is showing some vulnerability at the end of such a strong month: It was seeing some pressure at $34,000 Wednesday and has since buckled, making a run at $30,000 highly likely,” noted Oanda Senior Market Analyst Craig Erlam Thursday morning. “This level looks very vulnerable and a break below it is bad news in the near term for bitcoin and cryptocurrencies in general,” he added, before saying he’d be less surprised if prices plunge to $20,000 before they break new highs.
$926 billion. That’s the current market value of all cryptocurrencies, according to CoinMarketCap. That’s down nearly $200 billion, following a record $1.1 trillion earlier this month, with nearly all the losses fueled by bitcoin.
Yellen’s not the only Biden nominee with a critical eye on crypto. Gary Gensler, the president’s nominee to head up the SEC, is a former banker who in 2018 said that cryptocurrencies including ether and XRP are akin to securities. In December, the SEC charged Ripple Labs (the firm behind XRP, the world’s third-largest token at the time) and two of its executives with conducting an unauthorized securities offering. In its complaint, the SEC alleged XRP is a security and therefore subject to the agency’s regulatory purview. XRP prices are down more than 60% since then. Meanwhile, an SEC director declared in 2018 that ether was not a security, but he stopped short of making that declaration permanent.
A Sudden $100 Billion Bitcoin Sell-Off Is Dragging Down The Price Of All Major Cryptos—Except One (Forbes)
BlackRock Files To Add Bitcoin Futures To Funds (Forbes)
Ether’s Market Value Surges $20 Billion In One Day While Bitcoin Prices Slow–Here’s Why (Forbes)
Crypto Market Erases $200 Billion In Market Value In 24 Hours; Regulator Warns Investors Could ‘Lose All Their Money’ (Forbes)
Author: Jonathan Ponciano