The Value Overflow incident that nearly destroyed Bitcoin
On August 15, 2010, an unknown hacker generated $184.467B worth of Bitcoin out of thin air that nearly destroyed the cryptocurrency. This was termed as “The Value Overflow incident” and it has a reason for it.
A code that was used for checking Bitcoin transactions did not work. This resulted in the end output be so large that it overflowed when summed together. There was supposed to be a fixed maximum supply of 21M Bitcoins. However, the loophole was taken advantage of by the hacker to create 8784 times more Bitcoins than what should have existed.
Satoshi Nakamoto, the infamous and anonymous Bitcoin creator, sprang in action and hard forked the blockchain to remove 184.467B bitcoins, which was the only thing that saved Bitcoin from succumbing this early. Had the attack not been rectified, the cryptocurrency would have never existed today. Also, the price would have plummeted to zero instantly upon users realizing that it could be minted at will. This would have resulted in a loss of trust and reputation among Bitcoin users.
Nakamoto developed a code fix within 3 hours of the incident being reported on Bitcoin Talk. Early Bitcoin developer Gavin Andresen, also worked alongside him to bring about a quick resolution to the problem.
Within 5 hours of the incident, they were able to release 0.3.1 version of Bitcoin to prevent future printing of Bitcoin and rewound blockchain to deplete the hacked 184.467B Bitcoins.
This was a radical change to the network’s protocol, a hard fork, so two different versions of Bitcoin existed in the immediate hours of the release of version 0.3.1. The competing blockchain networks were monitored and miners were requested not to mine the bad chain as it delayed the good chain take over and become dominant.
Though the counterpart survived until the very next day, after 19 hours of this incident happened, the good chain from version 0.3.1 finally took over and came to be known as the Bitcoin blockchain everyone uses today.