What's going on everyone? My name is nicholas merton here at datadash and today is january 21st of 2021. Well folks, i hope you are having a fantastic day. Wherever you are in today's, video we & # 39.
Ve got some pretty big breaking news, or at least it appears as breaking news as it's. Taking the market down about eight percent for bitcoin's price, and that is the supposed claim that there has been a double spend on the bitcoin network.
So i want to spend some time today to not only talk about what a double spend is, but also really answer this question plain and simple: whether or not we've experienced a double spin on the bitcoin network and then also talk about what This has to do with price overall, so, as you guys can see here from the chart, bitcoin's down about a little over eight percent here for the past day and a full trading day, we're down eight percent question here, Though is how we experience the double spend now guys, we have not experienced a double spend on the bitcoin network and to make this claim that we've experienced the double spend uh.
You know, as it was starting to spread through the rumors of the you know: the crypto space, the crypto twitter and all the different outlets uh. You know media started covering instantly. They basically built up this narrative that something like a double spin, which is a massive security breach, has happened in bitcoin and it hasn't.
I think it's wrong on so many accounts that people have just been going out and constantly claiming that yep it's. Official there's, been a double spin attack because we saw a tweet stating it. So this has been uh, something that's been spreading the rounds here you know cointeller.
I have a lot of great sources again out there on the space still kind of building into this narrative uh that there's been a double spin and it's, not true. So let's, go ahead first and talk a little bit about what a double spend is so for those who don't know.
A double spend basically means what it says: it's, the ability to spend the same amount of money a second time, and the great thing about bitcoin is that its first major achievement as a technology was being able in a trustless way to basically Fight the ability to do a double spend attack in this case basically be able to spend the same money twice.
So i wouldn't, be able, in this case, to be able to spend bitcoin two times. Maybe if i had like one bitcoin or five bitcoin or a fraction of bitcoin, it doesn't matter, the amount that i wouldn't be able to spend it twice, because we have this great chain or ledger on the bitcoin blockchain.
That actually helps to prevent it through the combination of both blockchain technology and proof of work. Now i don't. Have all the time today to be able to detail it. I don't want to bore you guys and talk for you know a couple 30.
40 50 minutes to an hour to explain it all, but i want to go ahead and just dive through this story and i'll. Try to do the best visualization i can of explaining what really happened here. So basically bitmex research and again you guys know i've.
I've, already been really critical of bitmex. I mean this is just like the icing on the cake here for misstatements and spreading fun in the space, so stay away from bitmex. Generally speaking, it's, a derivatives platform um and second off as well like again.
This is the kind of research that's coming out for them, so there was a stale bitcoin block today at height, sixty six thousand eight hundred thirty three. This is basically the six hundred sixty six thousand eight hundred thirty third bitcoin block on the entire bitcoin blockchain.
It's, constantly running and working as intended, and what happened here was there was a race between mining pools. Now for those who don't know, mining pools are collections of various people across the world.
Who are you know either be through asic miners or some type of mining equipment, basically contributing their hashing power and working together with other miners on the network to have a decent chance of getting a fraction of an overall reward for the miners.
So, like? Let's, say, for example, in this case in the story here, slushpool, which is a massive network of miners against f2 pool, actually beat out in a race against uh f2 pool in this case, so they actually got the bitcoin block reward.
Now the problem here is that there was a double spend attempt in this case or not per se double spin. There was a an ability for a user in this case to spend the same amount of bitcoin they had, or only 21.
In this case on the platform of bitmaps, so if there wasn't a double spend on the bitcoin actual the actual bitcoin network. In this case, then, why was there a double spin on bit mix? How is this able to be achieved? So let's, go ahead and just try to detail it best as possible.
There's, a really good set of tweets. Here i was looking throughout the descriptions and just trying to see if people could actually dispel this themselves and this person here vettie in this case, explained it perfectly uh.
It's. Actually a flaw on bit max's side. This is a problem with exchanges using using lower rates of confirmations or using one block confirmation times in order to provide probably more of a convenient user experience overall, but let's, go ahead and just try to visualize it here, because i think some People will have a hard time really getting this unless they can see it visually, and i don't honestly blame anyone.
It's a bit complex because you don't, really see the bitcoin blockchain. You see your transactions getting confirmed, saying and receiving kind of the basic stuff. So how do how do actual transactions get validated on the bitcoin blockchain, some of other blockchains? Well, first off when a user, like this user, for example, broadcasted that they probably wanted to send bitcoin out of the bitmex platform.
In this case, they basically submit a transaction to the bitcoin network through a thousands of different nodes across the world and that transaction gets put into what's known as the mempool so m-e-m-p-o.
The mempool is like this big pool of people waiting to get on the train. They're waiting to get on the train to get their transaction validated. So it's. A bunch of unconfirmed transactions with the nodes have found that you know.
In this case it looks valid. It looks like they have the balance. When i look at my ledger: okay, let's, toss them in the mempool all right, so they're in the mempool waiting to get in a actual block because they're, not confirmed when they're In the mempool they're waiting to get into a block from a miner who's, going to use an excessive amount of computational resources in order to get a hash, a randomized number that proves that their block is valid.
So it means they put an economic cost into creating one of these blocks or discovering the block, and until they actually get the hash in this case, to validate their block. They're pouring in transactions from users and usually the ones that pay the highest fees.
So they're, putting it into the blocks here and now they're. All working in hopes here to basically put an inch on the chain, but here's, a problem. We're working with a decentralized network. There's, tons of different nodes, hearing things; first, uh from other sources.
On occasions. Right, usually it tends to be that there's, gonna be one miner who discovers it and then they get to add the next block right so generally, in most cases, maybe minor one or minor, two, maybe f, two pool or slush pool would Be the validator and they would draw the next block of the chain right, their block would be added in and they would get the bitcoin reward and share it amongst their miners.
Well, something else happened here. Instead of just adding another block to the chain, we had something that happens from time to time and that's. What's known as a split in the chain, so nodes on the network heard two different things.
They heard minor two. Some of the nodes in this case or some of the chain heard minor two in this case, had gotten the reward and some entered minor one got the reward, so in this case slash pool and f2 pool both had valid hashes at around the same time, and This caused something that we see from time to time.
We've, seen it on ethereum, we've, seen it on bitcoin before it causes a chain split now. This generally is not really a security risk overall, because what happens in the next block is that there is going to be a resolution sooner or later here whenever the next block is confirmed, where inevitably these chains come back together and then whoever gets the next block Is going to get that reward and it's, going to basically bring things back in the network is going to confirm either which one of these the two different states here are the valid ones or the wrong ones.
There can only be one that's actually valid in this case added into the chain here and overall. What we saw here is, in this case f2 pool beating out or excuse me slush, pull in this case, beating an f2 pull.
So we can say that, for example, maybe this was slush pool up here. This is their block there and then over here as well. This is uh f2 pool, and this is their block down here. This one was confirmed as the valid one start for my abhorrent check, marks and drawings.
This one was considered a cancel block, so overall the network reverted back and we are now back to our normal chain. Here things are back in business. So what really happened if there wasn't a double spin of the bitcoin network who had the issue? It was bitmex, and this is what the real security flaw here is in this case - is that they were utilizing one block confirmations or less than one block confirmations in order to validate transactions.
So so long as there were some nodes on one of the the versions of the bitcoin network here that we're, stating that yep, this transaction is valid, uh, the user assigned their private key. They sent it to the mempool.
We & # 39, ve, put it in a block that's been validated. You know huzzah in this case they're good to go well. The user had attempted to send the same amount of funds twice whether by accident - or you know - maybe just pure coincidence - or they maybe purposely tried to do this of 21 and bitmex basically allowed them to withdraw two sets of 21.
. So is this really a double spend? No, it's, not a double spend guys because on the real bitcoin blockchain here, only one of those transactions here are valid right. Only one core transaction of 21 bitcoin was really moved over here.
The only thing that might have happened here is that bitmex might have done an additional withdrawal of 21. for this end user in order to again meet with his withdrawal request, because they basically used one block confirmations rather than basically doing something extremely simple, which is waiting For two block confirmations, so in this case, if they would have had a two block confirmation setting only the first 21 dollar withdrawal would have been confirmed here, and here it wouldn't have been confirmed in the previous block and this new block.
So if they would have used two block conformations, we've got the first block here, go ahead and give up my drawing tool and then the second block get the first block here. You wouldn't, have it on the second one.
So this is what's so great about bitcoin, like in the sense of like these decentralized networks, overall guys why they're so resilient, is that, if anything, it tends to be either human error, or, in this case uh overall exchanges Or platforms not really protecting against these small rare events that can happen on the bitcoin network and the great thing is, as i mentioned, bitcoin's back in business.
It's back to doing exactly what it does. This happens on decentralized networks, they sometimes hear different things and they come to resolution and it's generally speaking, which chain has the most proof of work in this case, which chain has been able to put in the most work through miners or has The largest hash rate in this case, and the great thing about all, is that you know as bitcoins dipping eight percent here, nothing's, really changed uh.
In fact, if we had a double spin attack in this case, where bitcoin was broken, i can tell you guys: price would be much lower than where it is right now, if this was a serious security breach, people would be printing bitcoin like crazy or double spending.
Bitcoin and selling it on the market extensively, because at that point, bitcoin's broken and everyone would be taking that advantage to. Basically, you know claim that they have more bitcoin or keep reusing, bitcoin and just selling right.
So anyways again, i i digress here guys. Overall, this is not a double spin attack. This is nothing to be worried about and i think it's, just coordinated uh fud if you will or coordinated fear uncertainty and doubt for media outlets and large players in the space to basically cause the breakdown on the swedge and it's real unfortunate, because this is going to uh - probably lead towards a greater correction.
Now that we've broken through this technical pattern. There's, a lot of significance with price coming down here at this high up in price, and if we go here towards the monthly chart and the weekly chart, for example, we can see here that now it looks very clear that we're going to be experiencing probably multi-week correction, so thanks to all the people who uh basically made this claim it's, a it's, terrible um, but you know stuff, like this spreads into space very easily, so anyways guys.
I hope this provided some resolution, if you guys, like, in this case, just kind of breaking down these more kind of technical topics and trying to dispel a lot of the fun in the space consider dropping a like it's, always appreciated this isn't here to spread more fear guys.
I'm, just basically trying to make sure that, above all uh, if you're, seeing this headline and stuff you're, seeing it from a source that's, going to dispel the the the falsehoods that Are made here from a lot of parties in this space and getting a clear picture of what really happened? Overall, i probably didn't.
Do a hundred percent of a good job explaining the overall technical complication uh that had gone on, but it was entirely on the bitmex platform. So this has nothing to do actually with the bitcoin blockchain.
Generally speaking, it's, working just as fine as it & # 39. S worked for the last 10 years and i'm, really excited to again see what bitcoin is going to continue to do over the next year, guys all right.
So that's it for today's. Video. Thank you guys so much for watching. I've rambled on enough apparently, and i will see you all in the next one - take care everyone