Bitcoin has been successfully able to combat malware attacks and has also sustained a high level of security, but as every transaction has its flaw! Therefore, bitcoin is no special case.
Due to increasing hi-tech advances our economic system has been moved to a more digitized version, but the sad part is the more advanced our economy has become, the hackers and online fraud have cunningly discovered many manipulative ways for doing fraud in the Bitcoin system.
One such popular online fraud is ‘double spending’, where a coin changing problem tricks the bitcoin transaction system. If you want to sustain bitcoin for a long time pay attention to these tips.
Knowing Better About Double Spending Problem
Double spending is a condition where the blockchain network is dismantled and the digital token given is easily misused for more than one time, in simple words a person is able to make simultaneous transactions by using the same digital token.
Let’s imagine a situation where we have 100 rupees and we have already bought a shirt from that money but we came to a different counter and again buy another cloth with that same 100 rupees, although it is impossible in the case of physical money.
But in case of digital token, this thing is possible where digital token not being physical money is an encrypted file which is corrupted and harmed by hackers and they create a duplicate version of the original file by accessing it illegally.
They steal the digital file and erase the original data while creating the similar file with the help of a stolen mechanism, they are able to do multiple transactions with the same cryptocurrency.
Types of Double-Spending Attack
Double-spending problem is deployed through various means by these hackers, who tends to cheat the online transaction system by replacing the original details with the fake details, here are some ways through which they try to create hoax in digital transactions:
1. Finney Attack
This type of double-spending attack occurs when the broadcast about some already done transactions are not revealed, these attacks can be majorly done by the bitcoin miners, who follow the rule of broadcasting the news of transactions made to the group or in the blockchain network.
- It was the first double-spending attack discovered in bitcoin transactions; it was discovered by Hal Finney who received the first bitcoin from Satoshi Nakamoto.
- It is also called an unconfirmed transaction where users without confirming the details about the transaction accept the payments.
- Bitcoin miners are said to include the transaction of payment made from the previous address to the recent address they have mined.
- Bitcoin miners after mining the block include the transaction but don't transmit it to the blockchain network while making a payment with the same amount of coin used at the time of first transaction.
- This transaction is considered valid by the blockchain network while the real transaction paid to merchants is labelled as invalid by the network.
2. 51% Double-Spending Attack
This type of double spending attack is done when a bitcoin group is able to control the 51% of hash power in the blockchain network.
- 51% attack has been very frequent but some examples like Bitcoin Gold double -spending attack in 2018, 2020, are some examples.
- 51% attack requires many resources as bitcoin has vast amounts of hash power and can’t be destroyed easily.
- Some malicious miners trick the transaction by using minimum hash power to mine some secret transaction and later doing the 51% attack.
- Miners convert the large amount of cryptocurrencies into another digital cash and then send it to cryptocurrencies exchanges moving the trading funds to their own secret transaction address.
- After sending the fund in their secret address they erase their previous data and simply release the fund for the thing they buy and for the thing they sold.
Key Takeaways
Double-spending attacks occurred due to unconfirmed transactions therefore one must be aware about their transactions and must do a background check of the proposal that he got online.
While Bitcoin has the secured protocol and works on the decentralized ledger which easily identifies the authentication of the transaction but it can’t be prevented solely, however bitcoin releases the time-stamped transactions and announces that the more confirmation records a transaction has, the more likely it gets included in the bitcoin network.
