The Double Spending Problem, Explained

This article was first published on Komodo

The double spending problem is a security concern specific to digital cash and cryptocurrency projects. In particular, the double spending problem means that the developers of a virtual currency must prevent users from being able to spend their funds more than once. This security concern is akin to the problem of counterfeit currency that governments and traditional financial systems must address.

The solution to the double spending problem is quite easy to implement on networks that use a centralized database. At the same time, the presence of a single point of failure leading to other security vulnerabilities and other concerns, such as censorship. 

In contrast, the double spending problem is more difficult to solve for decentralized networks that use a group of distributed nodes (e.g. computers or other physical devices) to verify transactions. But, if an effective solution is implemented, it becomes infinitely more difficult for a malicious actor or a group of malicious actors to attack the network and spend funds twice.

In this article, we’ll go over an easy-to-understand example of the double spending problem. We’ll look at a few of the early attempts to solve this issue through centralized and decentralized networks. We’ll also dissect three specific types of double spending attacks that can occur on blockchain networks.

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What Is The Double Spending Problem?

The double spending problem is a security challenge that has existed for several decades. Let’s look at a basic example to get a better understanding of this challenge.

Let’s imagine that Alice has $100 in her account and wants to send $30 to Bob through a digital cash network such as a central bank or a decentralized blockchain network.

Scenario 1: If the network functions as it should, the double spending problem will be avoided. Alice will have $70 remaining in ...

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