Double-spending

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Double-spending is a fundamental flaw in a

Fundamental cryptographic techniques to prevent double-spending, while preserving anonymity in a transaction, are the introduction of an authority (and hence centralization) for blind signatures and, particularly in offline systems, secret splitting.^[2]

Centralized currencies

Prevention of double-spending is usually implemented using an

In a decentralized system, the double-spending problem is significantly harder to solve. To avoid the need for a trusted third party, many servers must store identical up-to-date copies of a public transaction ledger, but as transactions (requests to spend money) are broadcast, they will arrive at each server at slightly different times. If two transactions attempt to spend the same token, each server will consider the first transaction it sees to be valid, and the other invalid. Once the servers disagree, there is no way to determine true balances, as each server's observations are considered equally valid.

Most decentralized systems solve this problem with a

By 2007, a number of

Due to the nature of a decentralized blockchain, and in lack of a central authority to do so, the correct succession of transactions is defined only by the dominating consensus. This leads to the possibility of one actor gaining majority control over the entities deciding said consensus, to force their own version of events, including alternative and double transactions. Due to information propagation delays, 51% attacks are temporarily possible for a localized subset of actors too.

The total computational power of a decentralized proof-of-work system is the sum of the computational power of the nodes, which can differ significantly due to the hardware used. Larger computational power increases the chance to win the mining reward for each new block mined, which creates an incentive to accumulate clusters of mining nodes, or mining pools. Any pool that achieves 51% hashing power can effectively overturn network transactions, resulting in double spending. ^[5] One of the Bitcoin forks, Bitcoin Gold, was hit by such an attack in 2018 and then again in 2020.^[6]

A given cryptocurrency's susceptibility to attack depends on the existing hashing power of the network since the attacker needs to overcome it. For the attack to be economically viable, the market cap of the currency must be sufficiently large to justify the cost to rent hashing power.^[7][8]

In 2014, mining pool