The Coinbase wallet and exchange service has fixed a bug in the payment gateway system which caused users to lose their funds from Bitcoin transactions via the platform. The issue emerged two weeks after the cryptocurrency exchange announced the launch of Segregated Witness (SegWit) support for its transactions.
In their Reddit post on March 12, Coinbase user Dazzling_Substance shared a problem with the platform’s payment gateway when it failed to send Bitcoin to a merchant. The user suggested that the bug was caused by a problem in the Bitcoin Payment Protocol (BIP70) that provides communication between merchants and customers.
Dazzling_Substance suggested that Coinbase might have missed the update of the BIP70 protocol, subsequently causing the loss of coins he attempted to send:
“If you send payment to a merchant using a coinbase.com payment gateway, they will not receive the bitcoin and you will lose your coins due to a issue with their system (they have not updated the BIP70 to use segwit addresses and your coins are sent to a non-segwit address and are subsequently lost in their tracking system).”
The Coinbase team promptly commented on the issue to Cointelegraph, stating that the BIP70 payment protocol update has been implemented, but the problem emerged because the payment address requested was not SegWit-compatible. A Coinbase spokesperson stated that the issue has affected less than 30 customers and has been immediately fixed.
“As soon as we were notified about the issue we started working to resolve and the issue was fixed within hours. Less than 30 customers were affected by the issue and we've issued refunds to all customers.”
The BIP70 protocol was introduced by Bitcoin developers Gavin Andresen and Mike Hearn in July 2013 in order to improve Bitcoin payment services and provide safer transactions, preventing man-in-the-middle attacks.
On Dec. 14, US payment processor BitPay announced that it will require Bitcoin Payment Protocol-compatible wallets in order to resolve users’ payment problems such as underpayments and overpayments. On Jan. 10, BitPay acknowledged that some of the users have been inconvenienced by the requirement when they had to switch to BIP70-compatible wallets listed on BitPay’s support page.