BCH Sustained $1.3 Million Double Spend

According to a report released on May 26 by the research division of the crypto derivatives exchange BitMex, Bitcoin Cash (BCH) may have sustained a $1.3 million double spend as a result of the hard fork that took place on May 15.

Multiple Issues

The hard fork earlier this month resulted in a 2-block chain reorganization, which led to a 3,392 BCH (which, at the time of writing, is worth about $1.3 million) double spend.

According to the report by BitMex, this took place due to multiple issues. The first issue was related to the bug that was in the upgrade, where transactions met the mempool’s (memory pool) validity conditions but did not meet the consensus checks.

With normal transactions, the consensus checks are supposed to be less stringent than the mempool validity checks. This is critical to the security of the network, as it prevents malicious spenders carrying out 0-confirmation double-spend attacks.

However, a malicious actor did find that bug and exploited it to carry out exactly such an attack. The attacker broadcast transactions that passed mempool checks but failed the block consensus checks. Miners that tried to produce blocks using these 0-confirmation transactions were unable to do so, and ended up producing empty blocks.

Some miners also had tried to mine the original chain (the non-hard fork one), which then led to a consensus chainsplit.

And finally, this consensus chainsplit led to the prevention of a safety protocol being carried out. Funds had been accidentally sent to SegWit addresses, and a system in place to prevent such funds transfers was blocked from carrying out a correction due to the chainsplit.

This, according to the research conducted by NitMex, is what led to the deliberate as well as coordinated blockchain reorganization, and 25 double spend transactions totaling 3,392 BCH.

Not Good News for Cryptos

This hack attack impacts the entire cryptocurrency community as it highlights the fact that blockchain systems also can be easily exploited. BitMex states that this attack only shows that such hacks can also take place on the Bitcoin network as it follows the same protocols with regard to double-spend protection.

This is also not the first time that crypto networks have struggled with blockchain reorganizations. Earlier in April, Bitcoin SV (BSV) also faced similar issues after it carried out a series of block reorganizations.

Similarly, in January, the Ethereum Classic (ETC) had also carried out some deep reorganizations of its blocks, which led to double spending to the tune of $1.1 million worth of ETC.