Bitcoin has an excellent track record, with nearly 100% uptime and impregnable cryptographic security. However, during the early days of Bitcoin there were many bugs to work out, and on 15 August 2010, a hacker caused the value overflow incident at block 74,638, which resulted in the creation of 184.4 billion bitcoins. Bitcoin’s lead developer at the time, Wladimir Van Der Laan said: “It was the worst problem ever”.
The hacker figured out that the code used for checking transactions didn’t work if outputs were so large that they overflowed when summed. The hacker exploited this flaw and outputted 184.467 billion Bitcoins, sending 92.2 billion Bitcoins to 2 addresses. There will only be 21 million Bitcoins ever created, so this single transaction created 8,784 times more Bitcoins than the total possible Bitcoin supply. If this wasn’t fixed it could’ve caused an early death for Bitcoin, since it would crash markets to zero, and completely ruin Bitcoin’s credibility.
Fortunately, the value overflow incident was noticed almost immediately and a code fix was put into place within 5 hours by Satoshi Nakamoto, with the help of Gavin Andresen and other Bitcoin developers. The new code rejected transactions whose output was a value overflow and also rejected outputs that for any reason have more than 21 million bitcoins.
The only way to fix the hack was to implement the code fix and re-start the blockchain from the time right before the value overflow incident occurred. This resulted in a fork and 2 competing blockchains, but at block 74,691 the corrected blockchain overtook the hacked blockchain, after which all nodes accepted the corrected blockchain as the mainchain and the 184.4 billion bitcoins disappeared.
This means that the hacked blockchain with 184.4 billion Bitcoins was dominant for 53 blocks, which is roughly 9 hours. Transactions sent on the hacked blockchain during these 9 hours were reversed, which might have resulted in the loss of money for some Bitcoin users, and is a very serious incident that could cause people to lose trust in Bitcoin. Fortunately, Bitcoin was used by only a small number of people back then, so any damage was limited, and the incident didn’t stop Bitcoin from growing into a major global currency.
A very positive lesson that can be learned from the value overflow incident is even if Bitcoin encounters an error, it can be fixed with the help of the developer team and good communication.
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