For a double-spending event to occur, a hidden block on the blockchain network that is behind in creation must be mined. If the blockchain network recognizes this block, it is identified as the last set of blocks in the network and added to the chain. In this case, the person can then buy and use the cryptocurrency they have already spent. This kind of double spending creates a new duplicate cryptocurrency, causing inflation.
What Are the Types of Double-Spending?
Double Spending has different types. Some of them are:
Finney Attack
The Finney attack is a type of double-spending. In this attack, the trader confirms an unauthorized transaction. A hacker preempts the original block using an eclipse attack. The transaction is created by an unauthorized user. The real block arrives and the transaction is automatically made twice for the block. Therefore, the trader loses their money twice.
Race Attack
A Race Attack is known as a double-spending attempt. A race attack occurs when a recipient accepts a payment before the transaction is confirmed. The first transaction is sent to the payer without waiting for the transaction to be confirmed. A transaction that returns the same amount of crypto assets to the cyber attacker is broadcast on the network, causing the first transaction to be invalidated. A race attack is a variant of double-spending. For unconfirmed transactions, the recipient must accept the payment. Attackers send a confirmed transaction to the person, while a conflicting transaction is broadcast on the network. The person thinks that he/she will be paid because they have observed his/her own transaction, but it is possible that he/she will not receive the payment because the rest of the network has seen the double spend. When the attacker establishes a direct connection to the person's node and gives the miners the overlapping transaction on the network, it becomes easier for the attack to take place.
51% Attack
A 51% attack is an attack on a blockchain network in which more than 51% of the total hash or verification power of a cryptocurrency is captured by attackers and these attackers, i.e. one or more malicious miners, take control of the majority of the network's hash rate and reorganize the blockchain. Attackers who own 51% of the nodes in the network have the power to change the blockchain. A 51% attack is much harder on cryptocurrencies with high participation than on cryptocurrencies with low participation. As transactions go backward, it becomes correspondingly harder for attackers to modify transactions.
How to Prevent Double-Spending?
Double-Spending can be prevented by two systems: centralized and decentralized.
Central Systems
In the case of centralization, a third secure party helps to verify transactions. The third-party can see every transaction and balance that the user has made. When a user makes a transaction, the third party matches that transaction with a unique identity. If transactions are made in countries that do not need a third party, centralization is replaced by decentralized systems. Another disadvantage is that users cannot gain access if the entire system fails.
Decentralized Systems
In these systems, decentralized cryptocurrencies such as Bitcoin (BTC) use a Proof of Work mechanism that verifies their transactions with certainty. Every transaction is backed and verified by powerful algorithms. Unlike centralized systems, decentralized systems are more reliable and transparent.
How to Successfully Manage a Double-Spending Attack?
One of the best ways to successfully manage a double-spending attack is blockchain. With the growing interest in blockchain technology, double-spending attacks have become a major problem. In a blockchain network, transactions are confirmed by nodes, and a transaction must go through at least six confirmations to be approved. Once a block is created, it cannot be changed further, so transactions cannot be reversed. Each node created holds a copy of all transactions made on the blockchain network. Each block has its own unique hash value. This verifies the authenticity of transactions and prevents double-spending.
