Bitcoin payment processor Bitnet has partnered with blockchain web services startup BlockCypher in a bid to get the upper hand on the resurgent threat of double spending attacks.
Most commercial bitcoin transactions are conducted by good actors. Therefore, many merchants are willing to accept them even before the network confirms the availability of funds from the address used, relying on a “zero-confirmation” transaction. In the vast majority of cases, the transactions are eventually confirmed, and accepting them right away is optimal for the customer experience.
Once the first confirmation comes in, the chances of double spending are significantly lowered, though not eliminated. However, the confirmation can take from several minutes to an hour or more. Only after multiple confirmations is it considered probabilistically impossible that fraud is happening, but this can take several hours.
Bitnet processes bitcoin payments for its merchants, with a focus on large companies. It recently partnered with France-based Limonetik to bring bitcoin payments to its e-commerce clients.
Boosting Profits in Low FX VolatilityGo to article >>
BlockCypher aims to make blockchain data easier to integrate into applications. It will be providing key blockchain data to Bitnet, that will use it in real-time to assess the probability of a fraudulent transaction. This will enable merchants to complete sales instantly; Bitnet calls its service ‘Instant Approval’.
Double spending has re-emerged as fraudsters look to exploit the haste of market participants to accept transactions, especially those of the low or no-fee variety that are typically low-priority for miners to process.
Altcoin brokerage ShapeShift.io has encountered a few such incidents. Confirming so on reddit, founder Erik Voorhees said the startup is looking to strike the right balance between customer experience and security using BlockCypher:
“We accept thousands of zero-conf transactions. We don’t need it to be impossible to double-spend, we just need to mitigate the risk sufficiently to where it can still make business sense. An occasional double-spend against us is worth the cost for the improved user experience. We utilize Blockcypher’s confidence system plus some of our own technology to detect likely double-spends and we require a conf on those. Clearly we need to tweak the system further… it’s an ongoing process.”
Like the block size issue, debate has erupted over how to best approach the issue directly with Bitcoin software.