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What Is Double Spending & How Does Bitcoin Handle It?

Bitcoin is rapidly gaining popularity and adoption around the world. is redefining the way we use money by being the world’s first fully functional digital currency.

You may be surprised to learn that even before bitcoin, there were attempts to create a sustainable digital monetary system. but all those attempts failed because an obvious problem with digital money is that transactions can be copied and spent twice.

Reading: Bitcoin double buy

let me just the concept…

Bitcoin has been able to survive and thrive because it solves the “double spending” problem.

  • also read: what is bitcoin? a guide for beginners.

what does double spending mean?

What Does Bitcoin Double Spending Mean

Double spending means spending the same money twice.

Let’s consider this example:

You go to Starbucks and order a $10 cappuccino. you pay in cash. now that $10 cash is in the starbucks safe. Of course, you just can’t spend the same $10 elsewhere to make another purchase.

unless you steal it…!!!

When you paid with your $10 bill, the Starbucks service provider instantly confirmed that you had paid and received your coffee in exchange for the money.

but bitcoin is digital money, not physical cash. therefore, bitcoin transactions have the potential to be copied and relayed. this opens up the possibility for its owner to spend the same btc twice.

how?

In our starbucks example, you paid cash, so someone else instantly confirmed and verified the payment. but with digital currency like btc, if this verification mechanism is missing, it can result in double spending.

anyone can simply copy that digital money and pay elsewhere.

and this is where the unique invention lies…

Bitcoin, although it is a digital currency, solves the problem of being copied and spent twice.

how bitcoin handles the problem of double spending

How Bitcoin Handles The Double Spending Problem

See also: What is an ISA in the UK?

Bitcoin manages the double spending problem by implementing a confirmation mechanism and maintaining a universal ledger (called “blockchain”), similar to the traditional cash monetary system.

the bitcoin block chain maintains a chronologically ordered and time-stamped record of transactions since the beginning of its operation in 2009.

every 10 minutes, a block (ie a group of transactions) is added to the ledger. and every node on the bitcoin network keeps a copy of this global ledger (the block chain).

Let’s see how the bitcoin network prevents double spending:

suppose you have 1 btc which you intend to spend twice.

transacted 1 btc to a merchant. now sign again and send the same 1 btc to another bitcoin address to try to trick the merchant.

both transactions go to the uncommitted transaction pool. but only his first transaction got confirmations and was verified by the miners in the next block. your second transaction couldn’t get enough confirmations because the miners deemed it invalid, so it was pulled from the network.

but wait… what if the miners take both transactions simultaneously?

When miners pull transactions simultaneously from the pool, the transaction that gets the maximum number of confirmations from the network will be included in the blockchain and the other one will be discarded.

You could say that this is unfair to the merchant, as the transaction could fail to get confirmations. yes, this can happen!!!

This is why it is recommended that merchants wait for a minimum of 6 confirmations.

here, “6 confirmations” simply means that after a transaction was added to the blockchain, 6 more blocks containing various other transactions were added.

“confirmations” are nothing more than more blocks containing more transactions being added to the blockchain. each transaction and blocks are mathematically related to the previous one.

All of these confirmations and transactions are time-stamped on the blockchain, making them irreversible and impossible to tamper with.

then if a merchant receives their minimum number of confirmations, they can be sure the sender didn’t spend twice.

See also: Will Bitcoin&039s Rebound Last? | PYMNTS.com

Why can the merchant be sure?

because in order to double spend that coin, the sender has to go back and reverse all the transactions in the 6 blocks that were added after your transaction, which is computationally impossible.

how double spend attacks can happen

  • attack 51 %

If an attacker somehow captures 51% of the network’s hashing power, double spending can occur.

“hash power” means the computational power that verifies transactions and blocks. If an attacker has this control, they can reverse any transaction and make a private blockchain that everyone will consider to be real.

but so far, no such attack has occurred because controlling 51% of the network is very expensive. it depends on the current difficulty of mining, the price of hardware and the cost of electricity, all of which are unfeasible to purchase.

  • run attack

When an attacker sends the same coin in quick succession to two different addresses, the obvious result is that only one of them will be included.

Now, if you, as a merchant, don’t wait for payment confirmations, then in a case like this, there is a 50% chance that you have double-spent the coin (and won’t receive that money).

let’s see how…

Your customer can cheat you if he sends the same coins to his address again.

once the client performs both transactions, both transactions go into an unconfirmed transaction pool. The transaction that is verified first and gets 6 confirmations will be accepted, and the other one will be discarded.

As a merchant, you may get all 6 confirmations first, but if the attacker gets the confirmations first, then they won’t receive your funds. That is why it is said that he expects a minimum of 6 confirmations.

So far, in the 8-year history of bitcoin, no such attack has been successful. bitcoin’s mechanism of maintaining a universal transaction book based on confirmations has not yet been fooled.

hope this knowledge about bitcoin will help you to use it safely.

let me know your thoughts and feedback in the comments section below.

and don’t forget to share this post with your friends on facebook and twitter!

also, please read:

See also: In a world first, El Salvador makes bitcoin legal tender | Reuters

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