Double Spending Definition

What is the Double Spending Problem?

Double spending is the risk that a digital currency is spent more than once. This issue is unique
to digital currencies because digital signatures and information can be easily reproduced.
Theoretically, a coin holder can make a copy of his or her token, send it to another party, and
still keep the original.

This is in contrast to physical currencies, which can only be used once. If someone uses a $5
bill to purchase a drink, they cannot double spend that bill because it is given to the cashier at
the point of sale.

How Blockchains Prevent Double Spending

Bitcoin and other blockchain networks solve the double spending problem by timestamping
every transaction that takes place. By timestamping each transaction, the blockchain keeps an
immutable record of every token holder’s balance. Most blockchains are public, allowing anyone
to audit the transactions that occur.

As a result, a digital currency cannot be spent twice, because the network will account for the
first transaction and reject the second one. This timestamping mechanism verifies that the
sending party actually possesses the digital currency they are attempting to send.

For example, Bob has three bitcoins and wants to purchase a car from Suzy. Bob sends the
three bitcoins to Suzy’s wallet address, and immediately after, sends the same three bitcoins to
Jim’s wallet address to purchase a boat. He is attempting to double spend his coins.

By design, the network will reject one of the two transactions. The transaction that is mined first
will be accepted and logged onto the bitcoin ledger, while the second transaction will be
rejected. This key feature is also what keeps bitcoin and other digital currencies“trustless”. No
third parties are needed to verify transactions because the blockchain keeps an unalterable
public record.