Double Spending


Prior to the launch and success of Bitcoin, early attempts at launching digital currencies had already made significant progress within the realms of facilitating secure electronic payments. In fact, Proof-of-Work, a process used to validate transactions, had already been tried and tested within BitGold and HashCash and was subsequently adopted by Satoshi Nakamoto for Bitcoin.

However, there was still one major obstacle that Bitcoins predecessors had yet to overcome, one that it seems made all the difference between the success and failure of digital currency i.e. double-spending.

But what is double-spending?

Double spending refers to a scenario in which a person spends the same cryptocurrency denomination on two or more transactions.

In the real, or physical world, we don’t have this problem. Let’s look at why.

Bob wants to buy a laptop from Sue. Sue is selling her laptop for £1000, and Bob just so happens to have £1000 in physical cash. Bob gives Sue his £1000, and in return, Sue gives Bob his new laptop. As Bob no longer has his £1000 in cash, it is impossible for him to double spend it.

Now, in a scenario in which Bob had chosen to instead transfer £1000 in funds from his personal bank account to Sue’s bank account, just as with cryptocurrencies - no physical money is changing hands. However, in this scenario Bob’s bank is fulfilling the role of a trusted third-party, or intermediary, ensuring that once the funds have been transferred, both Bob and Sue’s accounts reflect their new balances.

But what happens if we’re dealing with digital money but decide to remove the trusted third party, in this case, our bank?

Well, as digital files are easy to manipulate or even duplicate, Bob could send Sue £1000 in the form of digital funds, but then also send another £1000 to John to buy, well, another laptop. In fact, with no means of validating transactions or enforcing trust, Bob could double-spend his digital currency again and again without anyone noticing.

Luckily Satoshi Nakamoto solved this problem by allowing network users to validate each others' transactions without the need for a trusted third party. We’ll learn more about how Blockchain achieves this, in our upcoming articles.

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