Page Summary
Double-spending is a flaw within cryptocurrency protocols that allow users to spend tokens or coins more than once. Cryptocurrencies consist of files that users can duplicate or falsify when they are vulnerable. Double-spending leads to the inflation of the cryptocurrency involved. Blind signatures and secret splitting are ways to prevent double-spending.
Blind Signatures
Blind signatures are digital signatures in which the content of a message is disguised before it is signed. People can verify the blind signature against the original.
Secret Splitting
Secret splitting or secret sharing is a method to distribute a secret among multiple people, each knowing a part of the secret. People can solve the secret only when they combine enough parts of the secret.
How are cryptocurrency transactions verified?
Centralized currencies use a central trusted party to verify transactions. Decentralized currencies don’t use a third party to verify transactions, but rely on validators. These are servers that store copies of the current blockchain ledger. Validators reach a consensus about the legitimacy of transactions. They do this by either proof-of-work or proof-of-stake. Proof-of-work is a cryptographic system that involves the solving of computational puzzles called mining. With proof-of-stake, the validators that own the most cryptocurrency have the most voting power when it comes to deciding the legitimacy of transactions.
51% Attack
A 51% attack is when a network of computers contributes more than 51% of all computational power to a decentralized proof-of-work system. Any such network can overturn transactions and double-spend. In 2014 Ghash.io obtained more than 51% of the total Bitcoin computational power. They decided to voluntarily cap their hash rate to 39,99% and requested other mining pools to do the same if that ever were the case.
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Stefan Grasic (Dipl.-Jur) is the owner of Business24-7 and has considerable experience in the financial and investment niche, but also enjoys writing articles for the general readership. Stefan is an active stock, CFD, crypto and general investment researcher, advising blockchain companies such as Blockbird, GoCrypto, Hive Terminal at their start up level. Stefan began trading in 2010 as a college student. Money was tight,…