The popular decentralized exchange, Uniswap, is having one of its latest governance proposals stonewalled by the crypto venture capital giant Andreesen Horowitz (a16z). The ongoing proposal vote, which ends on February 10, is currently 38% weighed against the change – almost entirely due to the software investor. So Much for Decentralization The proposal, tabled by 0xPlasma Labs on February 2, would have Uniswap v3 deployed to BNB chain. To enable the deployment, the proposal chose to use Wormhole – an…
What is Crypto Double Spending?
Double spending is the act of spending the same cryptocurrency units twice. This is a potential problem because digital currency transactions can be duplicated, unlike the physical currency, which can only be transferred from one person to another.
Here’s an example of how double spending might work:
- Alice has 10 units of cryptocurrency.
- So Alice sends 5 cryptocurrency units to Bob to buy a product from Bob’s online store.
- Before Bob can confirm that he has received the payment, Alice sends the same 5 units of cryptocurrency to Charlie to get a refund for a product she bought from Charlie’s online store.
- Bob and Charlie both try to process the transactions at the same time.
- If both transactions are successful, Alice will have effectively spent the same cryptocurrency units twice, which is not allowed and would be considered double-spending.
To prevent double spending, most cryptocurrency transactions are processed through a decentralized computer network that verifies each transaction’s authenticity. This helps to ensure that no single user can spend the same cryptocurrency units more than once.
How Does it Occur?
Double spending is a potential issue in any digital currency system. Still, it is particularly relevant in cryptocurrency, where transactions are often made online without a central authority’s involvement. Some common ways that double spending can occur in cryptocurrency include:
- Replay attacks: Occur when a malicious actor broadcasts a valid transaction to the network but then broadcasts the same transaction again later. The second transaction is called a “replay” and can be used to double-spend the cryptocurrency.
- Finney attacks: This is a type of attack in which a miner (a computer that processes cryptocurrency transactions) creates a valid block containing a double-spend transaction and then releases it to the network. This is possible because miners can choose which transactions to include in the blocks they create.
- Race attacks: occur when a malicious actor sends a transaction to one merchant and then sends a conflicting transaction to another merchant to approve both transactions before the network realizes that the transactions are conflicting.
- Vector76 attacks: This type of attack in which a malicious actor creates many transactions dependent on each other. The attacker then broadcasts the transactions to the network and waits for them to be verified. Once the transactions are verified, the attacker can double-spend the cryptocurrency by broadcasting a conflicting transaction that invalidates the original ones.
- Selfish mining: This is an attack in which a miner withholds newly mined blocks from the network to give themselves an advantage over other miners. This can allow the miner to double-spend cryptocurrency by including conflicting transactions in the blocks they eventually release to the network.
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