The Party Hat Dupe was the largest glitch in RuneScape Classic History.
The glitch was not an attempt to duplicate items. A player named Sixfeetunder had been experimenting with RuneScape by using a third-party program called AutoRune in an attempt to simply trade a scythe. Although the player never managed to trade the scythe, he did discover how to create any non-stackable item. Therefore, the glitch did essentially duplicate the item, creating a new one although you didn't even need to own the item to "duplicate" it, so it's more appropriately called "item creation."
The glitch was performed by trading with a player, and then using AutoRune to enter the numerical value that corresponded with a certain non-stackable item to have an item pop up and be traded to the other person. For example, the number for the Rune 2-handed sword was 81, so that value would be entered into AutoRune and the player who was trading with the one using AutoRune would be able to receive that item. The quantity of the item is shown as 0 on the trade screen of the player creating the item but it would show up as a quantity of 1 on the trade screen of the player receiving the item.
In his excitement, the experimenter revealed to very few people how to execute the glitch. These players then created several items, the most expensive at the time: specifically a Party Hat. The most expensive item, the purple partyhat (Also known as the Pink Partyhat in RuneScape Classic because, simply, its colour was pink and the item's name was just "Partyhat.") was created most amongst them. That day though, one of the people revealed that the glitch existed.
Jagex did not immediately fix the glitch, and could not, as they themselves did not understand the process behind the "duplication", several days of item duplication made a massive change to the RuneScape economy as players started to duplicate other items such as ores.
Free lifetime membership was offered by Jagex to the first player who could effectively explain and provide a methodology to prevent the glitch. The glitch was fixed soon afterwards. The player who revealed the glitch to Jagex, got perm banned.
Jagex permanently banned some players who were caught abusing the glitch. Jagex couldn't trace the partyhats/crackers, and so only a few accounts with suspicious amounts of partyhats were banned. The only partyhats that were lost were the ones on the banned accounts, as no partyhats were deleted (this was confirmed in a Jagex News update the day of the event). As Jagex did not roll back the servers, the most expensive partyhat, the purple partyhat, dropped to become the least expensive.