- Double spending can never occur in a physical mode of transaction, it can only happen in online transactions.
- Double spending is a critical issue in blockchain technology where a digital asset can be fraudulently spent more than once, undermining the integrity and trustworthiness of the system.
To understand the attack of double spending, we first have to understand how a blockchain works. When a new block is created, it receives a hash-an encrypted number, that includes timestamp, the transaction data and information from the previous block.
Once the miner verifies the hash through a proof-of-stake mechanism, the existing one is closed and a new one is created with a timestamp, previous block information and transaction data. The miner who verifies the block is rewarded with Bitcoin.
So double spending is a loophole in the process. Double spending, as the name indicates, is spending the same coin in more than one transaction. It is a technical flaw in the process where users use a copy of the coin to make payments and avail services before the transaction gets validated.
How is Double Spending Executed?
Double spending is a loophole in the process that is used by attackers to undertake their activities or to perform malicious activities on the blockchain. Since digital assets are nothing more than files, an attacker can use them at multiple places to avail services by creating copies of digital assets.
The issue of double spending also occurs when there is some alteration in the network and copies of digital currency are used, instead of the original ones. In double spending attackers can reverse the transaction to execute it twice.
Double spending can never occur in a physical mode of transaction, it only happens in online transactions. Generally, this transaction occurs due to the non availability of any central authority or because the wallet of a user is not secured.
For example, a user has to make payments to Merchant A and Merchant B to avail of their service.
- The user makes the payment to Merchant A.
- At the same time, the user keeps a copy of the same coin on their computer.
- For making payment to Merchant B, the user uses the copy of the digital currency.
- Now both merchants are under the illusion that digital currency has been credited to their accounts since the transactions are still not verified by the miners.
This is the case of double spending, where the user paid the same particular coin to both merchants.
Types of Double Spending
- Finney attack: It is a type of double spending attack. In this case, the merchant accepts the payment, which is not validated by the miner. The hackers hid the original block through an Eclipse attack. And the transaction is performed on the fake one. After that, the original block shows up automatically and again a transaction is executed automatically on the original block. Thus, the merchant loses money twice.
- Race attack: Race attack basically indicates the race between two transactions. The attacker sends the same money to two different merchants from two different machines. In this case, one transaction gets invalid and another gets valid. Thus, the hacker double spends the same money.
- 51% attack: These types of attacks happen in small blockchains where attackers have more than 51% of the mining power of the blockchain and can do anything of their will.
How Blockchain Tackles Double Spending
- Validation: Validating the newly created block from maximum number of nodes. Once a block is created, add it to the pending list. Finally, when users give validation to a block then it is added to the blockchain.
- Timestamp: A transaction with Bitcoin is verified as confirmed transactions are timestamped which are irreversible. So if a user wants to execute a transaction with the same coin in future, the transaction will be cancelled.
- Block confirmation: To confirm a transaction in bitcoin, a merchant has to wait for a minimum of six confirmation.
- Saving copies: Saving a copy of each transaction with at least one node will not hamper the network if some network failure occurs.
Conclusion
Double spending is a critical challenge in blockchain technology, where digital assets can be fraudulently spent more than once. It occurs due to technical flaws or malicious activities and poses a threat to the integrity of the system. To address this issue, blockchain employs validation, timestamping, and block confirmations to ensure secure and trustworthy transactions, mitigating the risk of double spending.
