What Is the Double Spend Problem and How Does Bitcoin Fix it?

Cryptocurrency technology is one of the most incredible technologies in history. It brought financial freedom and access to money for the unbanked and underbanked, but it is not without weaknesses.

Cryptocurrency is the only form of money that is truly global, allowing anyone from any part of the world to send and receive funds. However, there are concerns around cryptocurrencies because of their tendency to be used for crimes. 

These concerns are  mostly political and regulatory because crypto is not controlled by any central entity. There are bigger fundamental issues with the technology, one of which is the double spend problem.

In this article, we will discuss what the double spend problem is and how Bitcoin prevents it. We will also look at some examples of the problem and why no such incident has been recorded on the Bitcoin network even though it is the oldest. 

What is the double spend problem?

Imagine that you can use a dollar to pay for an item in one store and use the same dollar to pay for another item in a different store. 

That is impossible right? Digitally though, this happens with cryptocurrency transactions. This is referred to as the double spend problem.

Transactions with cryptocurrencies have to be confirmed as genuine before they are added to blocks. This can be done using different consensus mechanisms, including Proof-of-Work and Proof-of-Stake. In some cases, a person can spend their wallet balance twice. 

Example of a Double Spend

For example, Bob has one dollar in his wallet and he needs to send the whole balance to Alice (assuming there are no fees). 

After sending the whole amount to Alice, he then remembered he needed to send the same amount to Carol. He then initiates another transaction, sending his wallet balance to Carol.

If Bob initiated the transaction to Carol before the one to Alice is confirmed, it can result in a double spend. That means Bob spent his one dollar balance twice, hence the name “double spend”. 

This is a common occurrence on some cryptocurrency networks. It is referred to as an attack because some crypto users do it intentionally to cheat. It is advisable to get several confirmations (at least 6) on a transaction before confirming receipt.

How does Bitcoin Solve The Double Spending Problem?

Bitcoin was the first cryptocurrency ever created, which means it has been around for longer than any other. However, it has never suffered a double spend attack. Before we go into why this is so, let’s take a brief look at how 51% attacks work for example.

For cryptocurrencies that use Proof-of-Work consensus like Bitcoin, miners confirm transactions. There is a general rule in crypto that it takes at least 51% of the hash power on a blockchain to launch such an attack. This means more than half of the miners have to agree to reverse a transaction. Why has this never happened on Bitcoin?

Bitcoin network is designed such that if a user spends the entire wallet balance twice, only the transaction with the first confirmation gets added to the block while the other is discarded. The confirmed transaction then gets a timestamp, making it impossible to reverse. 

The enormous amount of energy required to mine Bitcoin also discourages this. If a miner fakes a transaction, they will need to go back and mine previous blocks to make the transaction look real. 

Meanwhile, more blocks are added approximately every 10 minutes, making it unthinkable to do such a thing. This system serves as a deterrent to any miner(s) that may want to launch such an attack on the bitcoin network.

Conclusion

Bitcoin has proven over he years that it cannot be compromised, since no successful attack has been launched on it. However, it is a digital asset and the possibility of such attack can’t be ruled out.

This is why Bitcoin developers have the Bitcoin Improvement Proposal (BIP) which constantly builds on the technology to ensure that it remains impregnable, and able to prevent issues like a double spend.