A double-spend attack occurs when a user makes a second transaction with the same data as a previous one that has already been validated on a specific network.
This phenomenon is unique to cryptocurrencies, in which one user can spend the same digital asset multiple times.
Double-spend attacks are made possible due to end users reproducing digital information through various means. More stable and established networks such.
Bitcoin have been taking adequate measures against double-spending risks successfully, however not all cryptocurrencies use the same consensus algorithm.
A double-spend attack is not a risk that is feasible with physical fiat money.
On the blockchain however, this process is more convoluted as cryptocurrencies constitute digital files that run the risk of being copied.
Compounding this issue is the fact that there is no centralized authority to control any transactions or police this network.
Rather, users can replicate digital files more easily and use them to make purchases.
The holder can make a copy of the digital coin and use it to execute another transaction while keeping the original in a wallet.
Different Types of Double-Spend Attacks
Not all cryptocurrencies use the confirmation mechanism and the Proof-of-Work (PoW) consensus, however most of these can counter double-spending.
It is still theoretically possible for a double-spend attack to occur.
Double-spending attacks can take multiple shapes. This can include a race attack, which is when merchants accept payments before receiving block confirmations on the transaction.
An end user sends two transactions almost simultaneously, one to the merchant and another one back to another wallet.
By extension, a Finney attack occurs when the merchant doesn’t wait for confirmation of the transaction. In this case, a miner transfers funds from one wallet to another but doesn’t validate the block immediately.
Subsequently, he or she uses the source wallet to make a purchase. Once the second transaction is set, the miner broadcasts the previously mined block, which also includes the first transaction.