Bug in Bitcoin software bites exchange rates shortly

Bitcoin bug led to 23 percent decline in the exchange rate

A bug in the Bitcoin software led to a drop of 23 percent in the exchange rate this Monday. The operations were temporarily halted, and funding in or out of the exchanges was made impossible pretty quickly. Bitcoin miners had to go back to an old version to overcome the problem.

The problem had to do with the block chain of Bitcoin. These are databases of all the transactions that took place between the nodes in the network. Every ten minutes new blocks containing the recent transaction data are formed. Miners then verify as soon as possible whether that  block is valid according to the rules of Bitcoin. The nodes must mutually agree that it is a valid block, otherwise uncertainty is created about the transaction history bringing the confidence in Bitcoin in jeopardy.

Problem caused due to newer version of the Bitcoin client

Monday however, a block with a size that was accepted by nodes running the new Bitcoin software version 0.8 wasn’t accepted by the nodes running the older 0.7 version creating a fork. Bitcoin developers informed the mining community to mine only with the 0.7 version and temporarily asked pools to halt trading to stop the fork of the chain. All mining pool operators were asked to go back to 0.7 also and they responded quick solving the problem the same day.

After  brief decline of 23 percent the value climbed back up quickly to the old level. No Bitcoins or transactions were lost.

This glitch in the network might bring a new dent in de confidence of Bitcoin but on the other hand the response of the community to solve the problem was excellent.

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