Implementation of BIP66 DER Signature Affects Bitcoin Network

Transactions on the Bitcoin network were affected earlier today due to few issues arising out of the planned upgrade. According to the information available on the Bitcoin community website, transactions that received confirmation after 8 AM UTC were affected due to the generation of invalid blocks by a few miners. Transactions that were processed across the Bitcoin network after 8 AM had less reliable confirmation scores in comparison with the transactions processed before that time.

The invalid blocks were generated after the implementation of BIP66 strict DER signatures. The implementation of new signatures was brought about by the increase in the mining hast rate over a period of time. Once 95 percent of 1000 blocks were generated as version 3 (v3) blocks, all upgraded miners on the network started rejecting the previous version 2 (v2) blocks. One of the non-upgraded miner among the rest 5 percent mined an invalid block which wasn’t validated by the network. Rest of the miners continued to build new blocks over the invalid block leading to errors in the network, increasing the chances of double spending.

As 50 percent of the miners in the Bitcoin network were mining as SPV without implementing BIP66 rules, they failed to check the validity of blocks and ended up building new blocks over the invalid blocks. Miners running on different versions of Bitcoin software handles the invalid portion of the Blockchain differently. While those running on Bitcoin Core 0.9.5 and later don’t face any issues detecting invalid blocks, others running on previous versions will not be able to differentiate between valid and invalid blocks.

In order to rectify the issue, Bitcoin network has temporarily upgraded all SPVs to active miner status. It has also advised Lightweight (SPV) wallet, web wallet and Bitcoin Core 0.9.4 or earlier  users to wait for additional 30 confirmations that usual to ensure the validity of bitcoin transactions until the issue is completely resolved. Miners who didn’t implement BIP66 lost over $50,000 in mining revenues so far.

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