1\ There is an alarming amount of misinformation (fueled by the media) on what exactly happened to Bitcoin yesterday, and whether funds were "double spent"

Here's everything you need to know 👇

2\ On the 18th, a user broadcast a transaction with very low fees.

When users underpay fees, their transactions gets stuck because miners have more profitable opportunities.

Users are left with 2 options:

a) wait until fee levels drop
b) tell miners they will increase fees
3\ The most popular way to (b) increase fees of an already-broadcast transaction is through a "Replace By Fee (RBF)" transaction.

Put simply, RBF is a copy-and-paste of the original transaction with higher fees and an explicit instruction to favor the new transaction instead.
4\ Nearly a day passed after our infamous user broadcast the original transaction and miners did not include it.

So the user decided to issue an RBF on the 19th with higher fees... but not high enough!

And the transaction was again stuck...
5\ A couple of hours later, the user decided to bump fees up again via a second RBF!

This time around the user paid enough fees.
6\ So, to recap, the user broadcast a total of 3 transactions:

1) Dec 18th 22:11 UTC (1 sat/b)
2) Dec 19th 21:22 UTC (9.4 sat/b)
3) Dec 20th 00:32 UTC (14.3 sat/b)

And here's where things get a bit more complex
7\ At around 1:18AM the blockchain split into 2 versions, which is an entirely normal occurrence; a fundamental part of how Bitcoin works.

When this happens (1+ times per month), miners need to converge on a single version of events, which often takes around 1 block, or 10 min.
8\ However... by the time the user broadcast the third transaction, fee levels had quieted down and the chain was split:

-One miner picked the first (low fee) transaction for their version of the chain
-The other miner picked up the third (highest fee RBF transaction)
9\ The thing about RBFs is that they're entirely optional. Miners decide which transaction to pick.

In this occasion it might have looked like a malicious "double spend" (inflation), but it is a completely normal event.
10\ The chain was split for 1 block (again, normal), but ultimately the miner on the branch with the low fee transaction ended up winning.

The important thing to know is that, yes, there might be different versions of the same transaction, but ONLY 1 will ultimately be accepted.
11\ @0xB10C (follow this man) made a helpful timeline of events using @coinmetrics data:
12\ Again, RBFs in stale blocks is business as usual.

No reason to freak out. No inflation, no "double-spend" was actually confirmed. Just a ton of loud ignorance and misinformation.
13\ This is a wake up call for crypto media. Looking at you @crypto and @Cointelegraph

You benefit by serving crypto adds. I urge you to at the very least understand your responsibility and step up your technical game.

How about sponsoring a bitcoin developer?
14\ Another clarifying point: @BitMEXResearch is doing an amazing job for the community with https://t.co/k9MhseACnP and https://t.co/0gjizyXMy7

Their depiction of what happened was accurate. Unfortunately, their post was grossly misrepresented misrepresented for clickbait...

More from Bitcoin

1/ #Bitcoin FUD-busting time!

claim: bitcoin ownership is heavily concentrated.

@business published an article claiming "2% of accounts control 95% of all Bitcoin" 🤣

truth: the facts, my friends, simple don't line up. let's dive in!

2/ interrogating on-chain addresses is tricky.

address =/ account.

one person can control multiple addresses.

one address can hold bitcoin belonging to multiple ppl.

exchanges and trading firms will have addresses with large balances that represent client funds.

3/ the fine folks @glassnode published an excellent analysis of on-chain address balances in January

the ownership distribution of bitcoin among wallets is actually much more diverse than one might expect.

full piece here:
https://t.co/n5IdIQdNoA


4/ 31% of BTC is held in addresses not identified as exchange wallets.

these are likely institutions, funds, custodians, and OTC desks.

our analysis at @CoinSharesCo indicates >15% of all bitcoin is held in third party custody, including @coinbase and our own @KomainuCustody

5/ in fact, between asset managers @Grayscale ($36B in BTC) and our @xbtprovider ($4B in BTC), 4% of bitcoin is locked up by fund providers and asset managers!

our @CoinSharesCo research team publishes an EXCELLENT weekly report on fund flows and AUMs -
$BTC views

Price needs to let volatility wear off before its next big move. Thinking 30K-40K range for the next 1-2 weeks. Then either 50K straight or after piercing 30K and bouncing back above 30K within 1-2 days.


$27500-$27000 is the key area. If price heads back down to 30K, expect 30K to be breached, fall to that area, and bounce back. FAST. All very fast.


What do I do with this information?

Simple.

I'm trading the range against a core position. Buying when price pushes lower, selling when higher. It's like playing the achordeon. There's always air left inside.

Where exactly?

Nowhere.

I don't use limits for that. $BTC is liquid enough to trade at market without issues.

I'm watching PA, volume and rates for buying and euphoria as reflected in rates for reducing.

Decision making is dynamic. Nothing is set in stone. But most likely if price heads back down to 30K 'll be holding off next time. The gameplan is to have ammo to buy the dip (to redeploy). If 30K breaks absolutely no buying until down to 27Ks or back above 30K.

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In the spring and summer of 2016, as reported by the Times, activity we traced to GRU was reported to the FBI. This was the standard model of interaction companies used for nation-state attacks against likely US targeted.

In the Spring of 2017, after a deep dive into the Fake News phenomena, the security team wanted to publish an update that covered what we had learned. At this point, we didn’t have any advertising content or the big IRA cluster, but we did know about the GRU model.

This report when through dozens of edits as different equities were represented. I did not have any meetings with Sheryl on the paper, but I can’t speak to whether she was in the loop with my higher-ups.

In the end, the difficult question of attribution was settled by us pointing to the DNI report instead of saying Russia or GRU directly. In my pre-briefs with members of Congress, I made it clear that we believed this action was GRU.