A double-spend attack is a practice in the world of digital currencies where a user gains the ability to spend the same cryptocurrency more than once.
A transaction that utilizes the same input as another transaction that has previously been verified on the network is known as double-spending.
A cryptocurrency is like a digital record that is relatively simple to duplicate. Users can effortlessly copy digital files and use them to make purchases because there is no centralized authority to oversee transactions.
Not every cryptocurrency is exposed to double-spending attacks, however, many projects which use the Proof-of-Work consensus mechanism are highly at risk.
Expert programmers who are well-versed with the blockchain protocol can modify or replicate digital information more readily which is why double-spending is most frequently linked with Bitcoin. Bitcoin uses a peer-to-peer method of trade that does not transit through any intermediaries or institutions which makes it an easy target for double-spending attacks by hackers.
In a classic bitcoin double-spend attack, the hacker duplicates the original transaction to make it look original and utilizes it in another transaction while retaining the original currency in their wallet or sometimes deleting the first transaction altogether.
Reversal of a transaction after acquiring the counterparty's assets or services is another technique to conduct a Bitcoin double-spend. It allows the hacker to keep both the received assets and the provided bitcoin (which should’ve been sent to the other party). To make it appear as though the transactions never occurred, the attacker sends numerous packets (data units) to the network, thus making it look like nothing happened in the first place.
There are several types of double-spend attacks. Some of these include:
A Finney attack is a type of deceptive double-spend attack in which the merchant does not wait for the transaction to be confirmed. In this instance, a miner sends money from one wallet to the other but does not instantly verify the block. Then the user makes a purchase with the source wallet and the miner broadcasts the previously mined block, which contains the first transaction after the second transaction is triggered.
A 51% attack, also referred to as a majority attack, is a hypothetical scenario in which bad actors take control of more than 51% of the nodes in a network. It gives them the power to control the network by using the majority-based consensus mechanism. However, as a network gets larger, more dispersed, and valuable, a 51% attack becomes more complex and difficult to execute.
When an attacker initiates two contradictory transactions and merchants accept payments before getting block confirmations on the transaction, a race attack is achievable. At the same time, a competing transaction is broadcasted to the network, returning the same amount of cryptocurrency to the attacker, thereby invalidating the original transaction. In this instance, miners might validate the transaction against the wallet, preventing the merchant from receiving the funds.
Although the blockchain cannot completely prevent double-spending, it can act as a line of defense against double-spending attacks while an army of decentralized validator nodes overcome complex equations to authenticate that new transactions are not double-spent before they are indefinitely added to the network's permanent ledger.
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