Bitcoin was built to initiate and complete transactions faster and with little or no intermediary while providing a certain degree of privacy. But it is not all that works efficiently that is completely free from manipulative attacks.
No currency is perfect, just like we have found one security gap with digital currencies, in this case, double-spending is one of those problems.
What is Bitcoin Double Spending?
Double spending is a fraudulent phenomenon where a single unit of currency is spent more than once for multiple and different transactions.
This challenge is common with digital currencies like Bitcoin because of its virtual and intangible nature and so can be easily manipulated by skilled programmers that understand the mechanics of the blockchain protocol while tampering with it to erase transaction records.
Essentially, double spending occurs when the blockchain network is disrupted and Bitcoin is stolen. This is a security gap or weakness with virtual currencies unlike fiat currencies where you hand over a $5 bill in exchange for a product or service and that is it.
Cryptographic engineers and veterans have realized this imminent problem set to ruin the integrity of the blockchain network and they have found a technologically advanced method to fix this Bitcoin double-spending problem.
In this article, I will highlight how to fix the Bitcoin double-spending problem.
Key Takeaways
• Using a mechanism called the proof-of-work (PoW), the double-spend problem is prevented in blockchain-based cryptocurrencies.
• Double-spending occurs when the activities on a blockchain network are disrupted, and cryptocurrency is essentially stolen. The thief would send a copy of the currency transaction to make it look legitimate or erase the transaction altogether.
• This proof-of-work (PoW) is carried out by a decentralized network of ‘miners’ who secure the fidelity of the past transactions on the blockchain’s ledger and detect and prevent double-spending.
• Double-spending is most common in cases where a block cyberthief sends multiple packets to the network and reverses the transactions afterward so that it seems like the transactions never happened.
How Does Double-Spending Bitcoin Work?
Having established that double-spending simply means spending a batch of Bitcoin twice and manipulating the public ledger or blockchain in a way that it never shows a duplicate transaction entry.
Aside from peer-2-peer losses on the ills of double-spending, this phenomenon disrupts the entire blockchain network sending panic to many other users causing a sporadic marketwide reaction.
Let’s see how it works…
I’ll illustrate double-spending with an incident that occurred on Thursday, January 21, 2021, according to a Fortune report, where Bitcoin fell by almost 15% (dipping below $30k) following a perceived double-spending rumor.
A user decided to send Bitcoin but fails to add up sufficient transaction fees and so the transactions does not go through. Note that Bitcoin transaction fees fluctuate, unlike fiat ATMs that have a fixed charge.
For the transaction, the miner originally meant to validate the transaction ignore it. The user then posts it for a second time with a higher fee which the miner accepts and validated. Coincidentally a different miner recognizes the same transaction and posts at the same time as the first miner.
So we have 2 miners coincidentally attempting to add a transaction to the block making it seem that the user sent a Bitcoin transaction twice.
If this were to really be possible, it will certainly put Bitcoin on a free fall as investors will scramble to exit all their Bitcoin holdings and exit the crypto space entirely.
How Bitcoin Double-Spending Can Be Prevented
To prevent double spending, Bitcoin employs several security measures by incorporating security features of the blockchain network and different recent networks of miners for transactions to be verified before they are added to the blockchain.
Bitcoin prevents double-spending through the following process.
1. The transaction that gets the maximum number of network confirmations will be included in the blockchain while others will not. It usually takes a minimum of six network confirmations
2. Once a transaction is confirmed and added to the blockchain, it is time-stamped, making it impossible to reverse, change, or alter.
3. The minimum number of confirmations received proves to merchants that the transaction was not a double.
4. Another feature that works strongly against double-spending is the proof of work. Proof of work allows for complex algorithms that require a significant amount of computing power to be solved by validator nodes and miners on the network.
With this process fully active, it becomes very difficult and almost impossible to execute any duplicate items on the blockchain because whoever wishes to put on such an attack would have to go back and re-mine every block with the new fraudulent transaction.
SEE ALSO: 7 Best Bitcoin Faucets To Join
SEE ALSO: How Long Does A Bitcoin Transaction Take Before Confirmation
Due to news flow and other factors, digital currencies like Bitcoin can be volatile investments, and prices change anytime. However, the price change could be a catch for some, especially long-time investors.
There are investments without risks, not even on the Bitcoin blockchain. However, Bitcoin employs so many measures to put all these security threats in check.
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