In this post, we’ll unpack all you need to know about the Double Spend Problem, defining exactly what it is, why it is an issue, solutions to it and more.
What Is The Double Spend Problem?
The Double Spend Problem (DSP) describes the difficulty of ensuring digital money is not easily duplicated.
A Deeper Look
Due to the nature of digital technology, digital objects are easy to duplicate. With the click of a button, any number of digital objects can be copied from one location to another.
Duplication becomes an even bigger problem in the context of money. A system that allows you to duplicate money at will is obviously not desirable. This is the Double Spend Problem.
Physical Money Versus Digital Money
Physical money cannot be in multiple locations simultaneously. Digital money can be in multiple locations simultaneously. Thus, the Double Spend Problem only applies to the latter.
So, how can all members of a monetary network be sure others are not duplicating their money at will?
Solutions To The Double Spend Problem
There are two solutions to the DSP.
The first solution relies on known centralised authorities to prevent double spends by privately verifying each transaction.
The problem with this solution is that most centralised authorities (third parties) charge fees, impose limits on the size, type and number of transactions a client can make and transactions can take up-to 90 days to settle.
The second solution relies on unknown decentralised authorities to prevent double spends by publicly verifying each transaction.
Most cryptocurrencies utilise the second solution to prevent double spends. They do this by requiring every member of the network to verify each transaction. While this mechanism doesn’t completely eliminate the risk of the Double Spend Problem, it does minimise it.
Bitcoin – A Distributed Decentralised Ledger
Since Bitcoin operates on a distributed decentralised ledger, all members of the network can examine the full history of transactions and ensure that neither their coins nor any other coins have been double spent.
When one user sends bitcoin to another user, they destroy the coin they own and create a new coin owned by the receiver. The destruction of the sender’s coin is recorded on the network for everyone to see, preventing them from sending it to someone else.
Furthermore, since Bitcoin is an open system, it means that there are no third party fees, no limits on the size, type and number of transactions and transactions can settle in less than an hour.
The Double Spend Problem describes the problem of ensuring digital money cannot duplicated.
The solution to the DSP involves requiring every member of a decentralised network to verify each transaction. In doing so, any member of the network at any time can examine the full history of transactions and ensure that any specific coin has not been double spent.