What is the double-spend problem and how do we solve it?
Imagine having a hundred dollar bill and spending that entire $100 at a grocery store. Is it possible for you to spend that exact same $100 bill at say a clothing store? Of course not. When dealing with digital forms of money this scenario becomes more of a problem since coins/tokens are only supposed to be spent once.
With digitized money, double-spend is possible because money manifests itself in the form of a digital file, which can be copied and/or tampered with.
Essentially, double-spend is exactly what it sounds like. Spending the exact same funds that were intended for a previous purchase, on a second item, without the initial amount spent being deducted from your bank account or wallet address. It is using the same “funds” for two separate transactions.
Race attack — simply put, a race attack is when an individual attempts to send two conflicting transactions simultaneously to the Bitcoin network.
Finney attack—“pre-mining one transaction into a given block and then spending those same coins before releasing the block to invalidate that transaction.”
51% attack— a 51% attack is when an entity controls 51% or more of the network nodes (computing power), and can, therefore, influence the way the blockchain operates. They can control which transactions are validated and can also reverse transactions.
Here are some of the known Consensus Protocols. The biggest innovation Bitcoin brought was a way to solve the double spend problem in a peer-to-peer manner by using Proof-of-Work.
Proof-of-Work — is a protocol that aims at deterring cyber-attacks by requiring miners (network participants) to ensure that they are not malicious actors by putting up collateral in the form of computing power, hardware, and electricity. The need for this collateral, dis-incentivizes potential attackers by making such an attack very costly. By doing so, the network encourages (incentivizes) good behavior and distributed consensus. Or put another way, complete agreement on the validity of the current state of the blockchain. The larger the blockchain and the more extensive its history the more expensive it is to attack.
Proof-of-Stake — is a protocol that aims to deter cyber-attacks and establish distributed consensus by requiring validators (network participants) to have a previous stake (ownership of value) on the network in which they are attempting to be a part of. This stake is determined by the amount of “value” held and the duration that the “value” was held.
Ripple-Consensus-Protocol — is a protocol that aims to deter cyber-attacks on a network and establish consensus by each auditor (network participant) submitting to “trusted peers” their version of transactions to be recorded. Once all submissions have been received, the auditor determines which one will be used as the building block for the next round. The auditor determines this by choosing the version with the most “supermajority support”.
“Supermajority support” just means that a large percentage of the participants involved have put forth the same version. This process continues for a number of rounds until the “supermajority” is decided. The default “supermajority” for the Ripple Network is 80% but can be adjusted.
Let it be known that we have yet to discover a panacea for the double-spend problem. Each consensus protocol has its own pros and cons. These are just a few of the ways to solve this double-spend problem and there will undoubtedly be more to come. May the best consensus algorithm win!
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