Mar 2013 - Bitcoin Chain Fork Double Spend Incident - $10k (Global)
"A block that had a larger number of total transaction inputs than previously seen was mined and broadcasted. Bitcoin 0.8 nodes were able to handle this, but some pre-0.8 Bitcoin nodes rejected it, causing an unexpected fork of the blockchain. The pre-0.8-incompatible chain (from here on, the 0.8 chain) at that point had around 60% of the mining hash power ensuring the split did not automatically resolve (as would have occurred if the pre-0.8 chain outpaced the 0.8 chain in total work, forcing 0.8 nodes to reorganise to the pre-0.8 chain).
In order to restore a canonical chain as soon as possible, BTCGuild and Slush downgraded their Bitcoin 0.8 nodes to 0.7 so their pools would also reject the larger block. This placed majority hashpower on the chain without the larger block, thus eventually causing the 0.8 nodes to reorganise to the pre-0.8 chain."
"During this time there was at least one large double spend. However, it was done by someone experimenting to see if it was possible and was not intended to be malicious."
"Because max-sized blocks had been successfully processed on the testnet, it did not occur to anyone that there could be blocks that were smaller but require more locks than were available. Prior to 0.7 unmodified mining nodes self-imposed a maximum block size of 500,000 bytes, which further prevented this case from being triggered. 0.7 made the target size configurable and miners had been encouraged to increase this target in the week prior to the incident.
Bitcoin 0.8 did not use Berkeley DB. It switched to LevelDB instead, which did not implement the same locking limits as BDB. Therefore it was able to process the forking block successfully.
Note that BDB locks are also required during processing of re-organizations. Versions prior to 0.8 may be unable to process some valid re-orgs."
"08:08 – Well before I knew what later have happened, I deposited $10000-worth Bitcoins to BTC-e over OKPAY's Bitcoin payment, I paid OKPAY address 12z2n8YCJw1BEsJhhQPLCTuLqwH341nKnE 211.9093 BTC and 0.0005 BTC as transaction fee.
09:30 – The transaction was included in version 0.8's fork, block 225446
10:08 – Deposit completed, $9800 credited to my BTC-e account
12:53 – After some study, I recognized, the transaction, though included in version 0.8's fork, was never confirmed by the pre-0.8 fork, so I decided to make two double spend transactions on two of the vins of the OKPAY transaction, and broadcasted them with the raw transaction API, 0.001 BTC transaction fee included in each transaction.
13:01 – The double spend transaction was included in pre-0.8 fork block 225446"
Further Analysis
A larger-than-usual block with more transaction inputs was mined and broadcasted, causing a fork in the Bitcoin blockchain. Bitcoin 0.8 nodes managed this well, but pre-0.8 nodes rejected it, resulting in an unexpected split. The 0.8-incompatible chain held about 60% of the mining hash power, preventing an automatic resolution. To restore a canonical chain, BTCGuild and Slush downgraded their Bitcoin 0.8 nodes to 0.7, making the majority hashpower favor the chain without the larger block, eventually causing 0.8 nodes to reorganize to the pre-0.8 chain. During this period, there was a notable double spend, but it was an experiment rather than a malicious act.
How Could This Have Been Prevented?
More Cryptocurrency Exchange Hacks/Scams/Frauds
Vircurex Second Exchange Hack > > < < Mercado Bitcoin
Sources/Further Reading
https://newsletter.banklesshq.com/p/stoppable-finance-lite (Dec 31)
https://bips.xyz/50?utm_source=substack&utm_medium=email (Dec 31)
Stoppable Finance [LITE] - by Donovan Choy - Bankless (Dec 31)
A successful DOUBLE SPEND US$10000 against OKPAY this morning. (Dec 31)
 t.me/QuadrigaInitiative
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