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The Double-Spending Problem and the 51% Attack

The Double-Spending Problem​

One of the key problems of digital payment systems is the double-spending problem. It involves the possibility of reusing the same digital asset to make multiple payments.

In traditional centralized systems, this problem is solved by a trusted intermediary, such as a bank, which maintains balance records and confirms transactions. In a decentralized environment without a central authority, this model is not applicable.

Double Spending in Decentralized Systems​

In a decentralized network, participants do not need to trust each other. Without a special coordination mechanism, this could allow an attacker to send the same transaction to multiple recipients.

Blockchain solves this problem through:

  • a global public ledger,
  • strict transaction ordering,
  • a consensus mechanism among network participants.

The Role of Blockchain in Preventing Double Spending​

Each transaction in the blockchain is included in a block and receives a position in the chain. After block confirmation, the transaction is considered final.

An attempt to reuse the same funds will be detected by network nodes since such a transaction contradicts the already recorded state of the ledger.

Transaction Confirmations and Finality​

In most blockchain systems, a transaction is considered more reliable the more blocks have been added after the block containing it. These blocks are called confirmations.

The more confirmations a transaction has, the harder it is to change blockchain history and reverse that transaction.

The 51% Attack​

A 51% attack is a hypothetical situation in which one participant or group of participants controls more than 50% of the network's computational power (in Proof-of-Work systems) or stake share (in Proof-of-Stake systems).

In such a case, the attacker could potentially:

  • temporarily change transaction order,
  • reverse their own transactions,
  • perform double spending.

Limitations of the 51% Attack​

Even with a successful 51% attack, the attacker cannot:

  • create transactions on behalf of other users,
  • gain access to others' funds,
  • modify data in deeply confirmed blocks without significant costs.

Furthermore, conducting such an attack requires enormous resources and typically undermines trust in the network itself, making it economically unfeasible.

Economic Security of Blockchain​

Blockchain system security is based not only on cryptography but also on economic incentives. It is more profitable for network participants to follow the rules than to try to violate them.

The larger and more distributed the network, the higher the cost of an attack and the more resistant the blockchain is to abuse.

Brief Summary​

The double-spending problem is a fundamental challenge for decentralized digital systems. Blockchain solves it using a public ledger, consensus mechanisms, and economic incentives.

Understanding the limitations and risks, including the 51% attack, allows for a more realistic assessment of the security level and trust in various blockchain projects.