Double spending is a potential flaw in a digital cash scheme where a single digital token can be spent more than once. This is possible because a digital token consists of a digital file that can be duplicated or falsified.
In the context of cryptocurrencies, double spending refers to the risk that a cryptocurrency can be spent twice. It is a potential problem unique to “digital currencies” because digital information can be reproduced relatively easily.
Cryptocurrencies like Bitcoin solve the double spending problem by using a consensus mechanism known as blockchain. Transactions are added to the “block,” then they are “confirmed” by the network of computers working on the blockchain. This ensures a single, agreed-upon history of transactions, and once a transaction has been written into the blockchain, it cannot be changed, making double-spending very hard if not impossible.
Bitcoin solves the double spending problem by introducing confirmations. When a Bitcoin transaction occurs, it is not considered confirmed until it is added to the blockchain, which typically takes about 10 minutes. Until a transaction is confirmed, it is technically possible for the sender to cancel the transaction and double spend the funds, although this becomes increasingly difficult as more time passes.
However, if someone can control more than 50% of the network’s mining hash rate or computing power, they can reverse transactions and create a separate, private blockchain. This is known as a 51% attack. The likelihood of such an attack occurring is incredibly low, as it would be very costly and time-consuming to undertake.