How Not To Fall Victim To The Double Spending Phenomenon In Crypto

"Double spending" is the process by which two payments are made with the same currency. If in the fiat system this is not possible (you cannot spend twice the same $100 bill, for example), when it comes to online payments, a third party is needed (be it the bank, payment processors, payment companies credit cards) to ensure that funds are sent and received properly. These intermediaries verify and validate transactions and minimize the risk of double spending.

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Who is protecting you in the crypto space from double spending?

In the crypto world there are no intermediaries, only the sender and the receiver. So who ensures that users are protected against double spending?

Blockchain technology cannot prevent double spending on its own. What really helps is the transaction confirmation process.

This is done after the nodes, miners or validators (as applicable, depending on the consensus mechanism) have verified, validated and confirmed the transactions made by the users. Once confirmed, they become immutable and irreversible.

Bitcoin was the first successful attempt to solve the double spending phenomenon in the crypto space. It managed to do this by implementing this confirmation mechanism and also by maintaining a common digital ledger. It contains records of all transactions made on the Bitcoin network from its inception in 2009 to the present.

Types of attacks

There are several ways to try a double spend attack (race attack, Finney attack, 51% attack). The most famous of all remains the 51% type attack. This attack requires a group or individual to control more than 50% of a network's processing power, which allows it to alter the data in the blocks.

Since the processing power of the Bitcoin network is immense, it is unlikely that such an attack will ever be executed on this blockchain. To execute such an attack requires very large resources (for Bitcoin it costs hundreds of millions of dollars per hour), plus it is necessary that the result of the attack is more valuable than its cost. Unfortunately, other networks have not been able to avoid such events (we mention here the case of Ethereum Classic or, very recently, that of Bitcoin SV).

How to avoid double spending as a simple user?

As long as you don't accept transactions that don't have at least one network confirmation, you don't have to worry about being scammed like this. In the Bitcoin network, it is ideal to wait at least 3 confirmations for smaller amounts and at least 6 confirmations for large amounts. Basically, the more confirmations you wait, the lower the risk becomes.