What is Double Spending on Bitcoin?
10:07 12 August 2021
In the wake of recent malicious attacks on the BSV blockchain space, it is important to understand just what these attackers are attempting to accomplish. Obviously, the first thought is to disrupt the platform and its intended operation, similar to what hackers do on the internet to large corporations. The most likely scenario within the cryptocurrency space is an attempt for the attacker(s) to perform double spending.
A double spend occurs when a single digital coin is used more than once in exchange for an item or service. It’s like using the same dollar to pay for a hotdog at one location and a drink at a different location. Obviously, that can’t happen with a physical dollar. It is possible to perform a double spend on the blockchain however, it doesn’t mean you won’t get caught or won’t spend more on the deception than the value of what it’s worth.
First, let’s understand a few things. The blockchain is an immutable ledger of data. Because the protocols built within the blockchain can govern this for us, we no longer need a third party such as a bank or other financial institution. The Bitcoin blockchain is based on honest nodes forming what you can call a democracy, meaning that the majority of the honest miners on the network will get to decide what version of the blockchain represents the truth. This all works well until a dishonest miner is introduced into the mix.
When a transaction is submitted, it is put into a local pool of transactions waiting to be confirmed. Miners then select these transactions and form a block of transactions. To add this block of transactions to the blockchain, the miner must find a solution to a very difficult mathematical problem using computational power. This process is called hashing. Once a miner finds a solution, it will normally be broadcast to the network for other miners to then verify it. This happens only if all transactions inside the block are valid according to the existing record of transactions on the blockchain.
How Double Spending Happens
So, how does a double spend occur or how is it attempted? A dishonest miner or node does not broadcast hashing solutions to the network. Instead, they create a block of transactions that include all other transactions except for the one(s) they used to spend their coins, essentially creating two versions of the same blockchain. The other miners are completely unaware because this unscrupulous miner isn’t broadcasting. On the honest blockchain, the untrustworthy miner can spend all their coins to purchase whatever they choose or maybe convert it to fiat. The dishonest block thinks those coins are still unspent.
Since the dishonest miner is still picking up blocks on the isolated blockchain, it is now in a race to complete and add more blocks to the chain than the honest one. Once it has the longest blockchain, it will broadcast and dump that onto the network. The network now recognizes the dishonest blockchain as the correct one because it has the majority and all transactions not in the new blockchain will be reversed. This reorganization of the blockchain does not include the coins already spent by the dishonest miner so they have them to spend again, hence the term double spending.
The amount of hashing power and the high cost of equipment needed to accomplish this far exceeds the reward. Additionally, you won’t be able to hide due to the fact that all transactions are on the ledger and completely traceable.