What Is Double Spending?

Because digital data can be copied easily, double spending was the fundamental obstacle facing electronic money systems that work without a central intermediary. In traditional systems, banks solve this problem by keeping account balances in a single central record. The Bitcoin paper that Satoshi Nakamoto published in 2008 proposed a solution that puts transactions in chronological order in blocks created through Proof of Work and in which all nodes in the network agree on the same history. Of two transactions that spend the same coin, only one can enter the chain.

Attack paths still do not disappear completely. A merchant who accepts transactions that have not yet entered a block (zero-confirmation) can be deceived by a competing transaction that sends the same coins to another address. An attacker who gains a majority of the network's computing power or stake can, on the other hand, reorganize the chain with a 51 percent attack and reverse confirmed transactions; relatively small networks such as Ethereum Classic have been subject to such attacks in the past.

For this reason, exchanges and merchants wait for a certain number of block confirmations before treating a transaction as final. Each new block increases the cost of reversing the transaction.