Double spending is a potential attack on a digital currency network in which a malicious user fraudulently spends the same coins twice.
Unlike physical money, digital currency is composed of bits of data which are very easy to copy. The key innovation made by Bitcoin, which allowed modern peer-to-peer digital currency to flourish, was to find a way of preventing double spending without the need for a central authority to keep track of how much money each person has and verify that each transaction is valid. This is done using mining, in which users perform proof of work calculations in order to earn a block reward in return for helping to maintain a distributed consensus as to the correct state of the network’s transaction history, recorded on a public blockchain.
Other digital currencies, or ‘alt coins’, use alternative methods to prevent this from happening, such as proof of stake.
Despite the fact that that double spending is very difficult to do with Bitcoin or many other alt coins, it is still a potential risk for any business or trader who accepts zero-confirmation transactions.« Back to Glossary Index