Satoshi Nakamoto designed Bitcoin as a peer-to-peer cryptocurrency on a public distributed ledger. The digital asset is now a valuable store of value, a medium of exchange, and an investment tool. This post focuses on three Bitcoin double-spending risks and their solutions.
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The blockchain achieved security through symmetric and asymmetric cryptography, consensus mechanisms, and smart contracts, but the Bitcoin core, where most of the development happens, includes numerous other automation technologies.
As safe and high-tech as it is, Bitcoin can be prone to vulnerabilities and expose users to various risks. For example, Bitcoin safety is assessed considering the security of private keys and the possibility that smart contracts may contain bugs in the code.
Hence, there are several instances in which the Bitcoin price prediction can be compromised, but one of the most dangerous is double-spending, which can also happen to regular digital cash but especially to cryptocurrency. Let’s examine the problem and some potential solutions.
What is Bitcoin double-spending?
Simply put, Bitcoin double-spending occurs when the currency is spent twice, allowing two transactions to occur. This implies hackers can reproduce Bitcoin copies without the record on the blockchain to show it. Therefore, finding proof of double-spending is difficult.
For now, double spending on Bitcoin is far from happening since security measures on the blockchain counteracted the possibility. It would be considerably difficult for someone to create a copy of Bitcoin and proceed to operate one transaction after another.
That’s because Bitcoin has all the measures to prevent it. The blockchain requires six confirmations before one transaction is completed, whereas the consensus rewards miners for continuously verifying transactions and safeguarding the system.
The Three Bitcoin Double-Spending Risks
There are some possible instances where double-spending can happen when the entire network is focused on one particular issue, leaving space for hackers to operate it.
For example, the 51% attack, prone to proof of work-based consensus, occurs when a miner or a group of miners generate more than 51% of the computational power, exposing the network to an attack.
That’s because this allows actors the power to compromise the blockchain and interfere with the transaction history, therefore allowing them to spend Bitcoins or any other coin twice.
While this is close to impossible on networks like Bitcoin and Ethereum, smaller blockchains are the perfect targets for malicious actors due to fewer miners and safety resources. This has already happened to a few minor blockchains, such as Monacolin, Zen Cash, and Verge.
The second risk is called the race attack, in which the transaction recipient accepts it before all the block confirmations. This can happen if someone sends two transactions very close to each other, so in the end, the one who should receive the money never does so.
Finally, Finney attacks are similar to race attacks, but they’re less likely to happen since miners would have to pre-mine a transaction into a block so that it wouldn’t show on the network. After that, the second transaction would be broadcast into the previously mined block.
What are the solutions for these attacks?
Bitcoin has made it possible for these attacks to be less likely to happen, even though miners and users must be wary about it. First, the Bitcoin protocol enables the protocol of a distributed ledger technology (DLT) where nodes independently verify transactions and communicate with each other fast enough to agree on a transaction’s features.
Therefore, since transactions are confirmed multiple times, the chances of a double transaction to slip are small. At the second time, double-spending is counteracted by timestamp serves, which allows nodes to agree on the transaction’s history.
The technology is based on ensuring that each transaction block comes with a cryptographic hash that can be checked on the public blockchain. Moreover, these timestamps contain data about the previous block, completing the chain.
Finally, the proof-of-work consensus mechanism makes mining on Bitcoin highly efficient, protecting the network. The technology employs miners to solve complex mathematical problems and receive block rewards in BTC, ensuring most miners and nodes are honest and will not spend funds in a double manner.
Would Bitcoin adoption expose the network to attacks more?
At some point in the future, Bitcoin is supposed to become legal tender worldwide and be used by millions as a regulated alternative to our regular currencies.
In a way, this might make the blockchain safer, as there would be many more nodes to mine and safeguard the network. However, this could also mean many more malicious actors are interested in gaining all of Bitcoin’s value and power, so the chance of double-spending might increase.
Bitcoin is continuously improving, so we’re sure developers will find new ways to protect the network while not compromising its efficiency. At the same time, since the size of mining pools is increasing, it might be possible for them to merge at some point and gain control over the entire blockchain.
At this point, everything is possible, so we only have to watch closely what will happen to crypto and blockchain in the future. Their complexity would make it difficult to break in such a short time since development, but considering how many attacks have happened since Bitcoin arrived on the market, we can only hope for the best.
The crypto ecosystem will likely undergo significant changes in the future, especially since adoption is closer. More governments and companies want to leverage blockchain's benefits, which could encourage talented developers to join the industry and contribute.
Do you think a double-spending occurrence will happen at some point?
A double-spending attack happens when malicious actors make it possible for the cryptocurrency to be spent twice. Hence, they can copy the cryptocurrency and hide one of the transactions when they’ve taken control of the network’s hashing power.
The attack would cause significant problems to the network and the community, leading to massive losses and a lack of trust in the cryptocurrency. Luckily, the attack would be close to impossible due to Bitcoin’s high-security measures and the growing number of nodes and miners.
