What is Double-Spending and How Can the Blockchain Prevent it from Happening?
Since its inception in 2009, the Bitcoin has been tackling the critical technical issue of double-spending. By being developed on a blockchain network, Bitcoin and any other altcoin with its individual digital ledger, can combat the double-spending issue. But what exactly is double-spending in the crypto space?
Double-spending happens when one Bitcoin or altcoin is spent more than once and it has been a major concern for all digital transactions. This flaw is unique to digital currencies as digital data can more easily be infringed than fiat money. The two scenarios that can deal with the problem are centralized and decentralized solutions.
In the case of a centralized one, a trusted and central third party is responsible for verifying whether the digital currency has been double-spent or not. The drawback of this option is that a centralized third party can be compromised which consequently could lead to a massive breach.
The second solution, the decentralized one, is Bitcoin’s innovation, the blockchain. However, the blockchain itself does not prevent the double-spending but is programmed in a way that all transactions posted to the ledger are verified and protected by a multiparty confirmation process. Once a transaction is validated, it becomes irreversible and it is posted on the blockchain which is shared and public.
Thus, the blockchain technology verifies and ensures that any individual spending cryptocurrencies, is in the possession of those coins. A transaction is considered valid only after it has been grouped into a block and added on the blockchain. As more blocks are added to the blockchain, it becomes increasingly difficult, technically speaking, to revert and double-spend the transaction.
It becomes particularly difficult to double-spend on the blockchain because it is a distributed ledger where users of the network record and verify transactions. If any user attempts to double-spend using the same cryptocurrency in different nodes of the same block, both transactions will be automatically declined to prevent the double-spending of one digital coin.
The blockchain, which is an open and unchangeable ledger, safeguards that the miners verify transactions. For instance, on the Ethereum blockchain, an account nonce prevents double spending or ‘replay attacks’ from happening, making the transaction of PumaPay and any of the ERC20 tokens safe. The confirmation process makes the crypto token unique and its subsequent transactions legitimate. Once the operation is confirmed, it’s nearly impossible to double-spend it. The more confirmations a transaction has, the harder it becomes to double-spend the coin. By solving the double-spend problem, digital currencies are becoming the number one choice for consumers.