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BitMEX's tweet

Bitmex: Bitcoin Double Spend Claim Pushing Market Down, Correctly though?

By Foxtrot991 | Foxhole | 21 Jan 2021

Today one of the largest exchanges in the cryptocurrency space, BitMEX released a report suggesting a double-spend transaction on the Bitcoin network. 


Bitmex Twitter

This led to an overall cryptocurrency market correction with over 50 million dollars exiting the cryptocurrency markets from this time yesterday, leaving Bitcoin's price at the low 30,000 range instead of 34,000 as it was yesterday. 

Furthermore, Crypto Twitter hit the fan with this news coming out. There were many replies to the original BitMex Research tweet and even more follow up. With this much attention and actual price action assumably coming from this news, let's dive in and take a closer look.

What is a double spend? 

With digital money, a key component to ensure the monetary system works revolves around the problem of a double spent transaction. Imagine for a moment, you have $100 to your name. You take that $100 (assumably in BTC) and go spend it at Bob's bike shop and now should have $0, after spending it all at the bike shop. Next, though, you go to the shoe store and spend that $100 again because Bob's bike shop hasn't reported the initial usage of these funds to the broader world (or Bitcoin network in the case of BTC). With this, you've created money out of thin air and either Bob's shop or the shoe store will not be getting the money you paid them because you can't spend money twice.

What really happens in Bitmex's claim?

The claim shown above from Bitmex misses the point that a double-spend transaction can be thwarted by the Bitcoin protocol. This is why transactions need to have multiple confirmations before a block is committed to Bitcoin's chain. That being said, the claim is important because any ability of someone to double spend Bitcoin would erode trust in the entire network. As noted by many others on Twitter and within news articles, if there was a live exploit in the Bitcoin protocol, the price would already have dropped closer to $0 and not still be hovering around $31,000 as it is at the time of writing.

In more advanced terms and likely due to this news breaking, Bloomberg ran a wonderful piece explaining the double-spend problem monetary systems face. 

In closing, this claim should not be dragging the price of Bitcoin down. That being said, sensational news stories covering the research and even the research article's title itself play into the F.U.D. Stay safe and smart out there friends!

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