Discover How Bitcoin Prevents Double Spending

juicybit (12)in #bitcoin • 9 years ago

Bitcoin is fast gaining popularity all over the world as a form of digital currency andpayment system that is secure, private and reliable.In order to understand how bitcoin solves the double spending problem, you will need toknow what double spending is. It’s a pretty simple concept to understand and thisproblem only exists on the internet and not in the real world since you can’t doublespend with traditional currency.Wikipedia states that double spending is, “a failure mode of digital cash schemes, whenit is possible to spend a single digital token twice. Since, unlike physical token moneysuch as coins, electronic files can be duplicated, and hence the act of spending a digitalcoin does not remove its data from the ownership of the original holder.”So, what does this mean?Let’s look at this scenario. You visit a store to buy a book. You have ten dollars in yourwallet and the book costs ten dollars. Once you pay for the book with your cash, themoney will now be in the store’s cash register. The money can only be in one place atone time. It absolutely cannot be in your wallet and the store register at the same time.With online monetary transactions however, this can happen.The online sales and purchases are all done using computer codes and algorithms.That basically means, the same money could be in different places at the same time. Toprevent this from happening, there are extremely sophisticated payment gateways andprocessors such as PayPal, Worldpay, Authorize.net and many more to make suredouble spending does not occur.These payment processors have systems in place that review all the transactionscarefully to prevent any mistakes from occurring and also to prevent fraud which isalways a threat.Despite these processors being first rate and highly reliable, there are somedisadvantages too. If there are any technical issues or the systems flag your transactionas shady, your transactions will be denied. This is known as a single point of failure.Not only that, your account may be suspended pending review. Your funds will also bestuck till your account is cleared after the review.Many people have reported having their PayPal accounts suspended for no goodreason. Besides this, in order to maintain their service, these processors charge feesranging from 2% to higher. Depending on your volume of transactions, these can addup and be quite exorbitant.Bitcoin solves the double spending problem because it does not rely on a single point offailure. The bitcoin payment system uses the block chain to prevent double spendingfrom occurring and it does so without incurring high fees.
Without getting too technical, a block chain is a database that is shared by all the nodesparticipating in the bitcoin system. This database has a record of all transactions thathave taken place using bitcoin.Every block has the hash from the previous block. So, the blocks are in chronologicalorder and you cannot just modify one block because every other block down the line willhave to be modified too. This makes double spending very difficult because everytransaction depends on the one before it and the one before that. At any point in time,the bitcoin’s movement can be traced all the way back.There is much more to the block chain but for now, the point is that bitcoin preventsdouble spending online without incurring fees or having your funds locked. This is oneof the best features of using bitcoin for your online transactions. No hassles as far asyour funds are concerned. That’s a plus point in anyone’s book.