Double-Spend Attack

A double-spend attack occurs when a user successfully spends the same digital asset in two or more transactions. This exploits the fact that digital information can be copied, challenging the system to establish a single, canonical history of ownership. It is the primary security problem that blockchain consensus mechanisms, like Proof of Work, are designed to solve by creating an immutable, agreed-upon ledger.

A simple form of double-spending where an attacker sends two conflicting transactions to the network in rapid succession.

• The attacker sends Transaction A to a merchant and Transaction B (sending the same coins back to themselves) to the network.
• The attack succeeds if the merchant accepts payment before Transaction B is confirmed and later included in the longest chain, invalidating the payment.

A more sophisticated attack requiring a miner. The attacker pre-mines a block containing a transaction that sends coins back to themselves (Transaction B).

• They then spend the same coins with a merchant (Transaction A).
• After the merchant delivers goods upon seeing Transaction A in the mempool, the attacker releases their pre-mined block. If the network accepts this block, Transaction B is confirmed first, making Transaction A invalid.

The most severe form of double-spend, enabled by controlling a majority of a blockchain's hashing power (Proof of Work) or stake (Proof of Stake).

• With majority control, the attacker can mine a private chain that excludes certain transactions (like payments to merchants).
• After goods are received, they release their longer, alternative chain, reorganizing the network's history and erasing the original payments, allowing them to respend the coins.

Double-spend risk is highest in specific scenarios:

• Zero-Confirmation Transactions: Accepting payments before any block confirmations.
• Network Latency: Exploiting delays in transaction propagation.
• Chain Reorganizations: Natural or malicious forks can unconfirm recent transactions.
• Smaller Networks: Blockchains with lower total hash rate are more susceptible to 51% attacks.

Blockchain security is built to prevent double-spends:

• Block Confirmations: Waiting for multiple blocks makes rewriting history exponentially harder.
• Consensus Algorithms: Proof of Work and Proof of Stake make chain reorganization costly.
• Network Monitoring: Services track hash rate distribution to warn of potential 51% attacks.
• Check-locking-time-verify (CLTV): Smart contracts can enforce confirmation delays.

A double-spend attack occurs when a malicious actor successfully spends the same cryptocurrency unit in two or more transactions, exploiting the time delay in transaction propagation and confirmation. This violates the fundamental property of digital scarcity that blockchains are designed to enforce. The attack is most feasible against networks with low hash power or during a 51% attack, where an entity gains majority control of the network's mining or validation power.

Two common double-spend variants target unconfirmed transactions:

• Race Attack: The attacker sends a valid payment to a merchant and a conflicting spend to the network simultaneously, hoping their version is mined first, invalidating the merchant's transaction.
• Finney Attack: A miner pre-mines a block containing a transaction spending their own coins, then makes a payment with the same coins before releasing the block. Once the pre-mined block is broadcast, the merchant's payment is reversed. Both attacks rely on the victim accepting zero-confirmation transactions.

The most severe form of double-spend is a 51% attack (or majority attack), where a single entity controls more than 50% of a Proof-of-Work network's hash rate. This allows them to:

• Exclude or modify the ordering of transactions.
• Prevent other miners from completing blocks.
• Reverse their own transactions after confirmation, enabling double-spending on a massive scale. This is economically prohibitive on large networks like Bitcoin but has been executed against smaller chains like Ethereum Classic and Bitcoin Gold.

Blockchains prevent double-spends through consensus mechanisms and the concept of block confirmations.

• Proof-of-Work (PoW): Requires solving a cryptographic puzzle, making chain reorganization computationally expensive.
• Proof-of-Stake (PoS): Penalizes malicious validators by slashing their staked assets.
• Confirmations: Each subsequent block mined on top of a transaction increases the cost to reverse it. Merchants wait for multiple confirmations (e.g., 6 for Bitcoin) to ensure settlement finality. The longest chain rule ensures network agreement on the valid transaction history.

In May 2018, Bitcoin Gold (BTG) suffered a successful 51% attack. The attacker rented enough hash power to gain majority control of the network, allowing them to double-spend over $18 million worth of BTG. They deposited coins on an exchange, withdrew them, then reorganized the blockchain to erase the deposit transaction, leaving with both the exchanged currency and the original BTG. This highlighted the vulnerability of chains with low total hash power to rental market attacks.

Services mitigate double-spend risk through operational safeguards:

• Exchanges: Enforce high confirmation counts (e.g., 30+ for Ethereum Classic) before crediting deposits, especially for chains with lower security.
• Wallet Software: Use Replace-By-Fee (RBF) signaling to detect conflicting transactions and warn users.
• Merchants: Should use payment processors or wait for sufficient confirmations for high-value items, avoiding reliance on zero-confirmation transactions for anything beyond trivial amounts.

A sustained 51% attack on the Bitcoin Gold (BTG) network that resulted in significant financial losses.

• Mechanism: Attackers gained majority hash power and performed deep chain reorganizations, reversing multiple blocks to double-spend coins deposited on exchanges.
• Impact: Over $18 million in BTG was double-spent across several exchanges. The attack lasted several days, undermining confidence in the network's security and highlighting the vulnerability of smaller proof-of-work chains to hash power rental.

Ethereum Classic (ETC) suffered multiple major 51% attacks, making it a case study in chain security.

• 2019 Attack: Attackers reorganized over 100 blocks, double-spending roughly $1.1 million.
• 2020 Attacks: A series of attacks throughout 2020, including one with 15 block reorganizations. Cumulative losses exceeded $5.6 million.
• Aftermath: These events forced exchanges to drastically increase confirmation times for ETC deposits and spurred discussions on finality mechanisms and checkpointing for PoW chains.

A double-spend attack that does not require majority hash power, targeting zero-confirmation transactions.

• Mechanism: An attacker broadcasts a transaction to a merchant and a conflicting transaction to the network simultaneously. They then use their own hash power to try and mine a block containing their conflicting transaction. If they succeed before the network mines the merchant's version, the payment is reversed.
• Context: This attack is a primary reason zero-confirmation transactions are considered insecure on networks like Bitcoin, especially for high-value items. It relies on network propagation latency and the attacker's limited hash power.

An exploit of a vulnerability specific to Verge's multi-algorithm design, not a classic 51% attack.

• Mechanism: Attackers exploited a flaw in Verge's timestamp verification, allowing them to spoof timestamps for blocks using the scrypt algorithm. This let them create a long, valid chain in secret and overwhelm the other four mining algorithms, effectively controlling the chain.
• Impact: Attackers mined over 35 days worth of blocks in a few hours, double-spending an estimated $1.75 million in XVG. This highlighted risks in complex, multi-algorithm consensus designs.

Double-spends targeting merchants accepting unconfirmed transactions, often using Replace-By-Fee (RBF).

• Mechanism: A buyer pays a merchant with a low-fee transaction. The merchant sees the unconfirmed tx and releases digital goods. The buyer immediately uses RBF to replace their own transaction with a higher-fee one sending the coins back to themselves. The higher-fee version is mined, invalidating the payment.
• Modern Context: This is a prevalent risk for crypto payment gateways that don't wait for confirmations. It's a deliberate exploitation of Bitcoin's mempool policy, not a network attack, demonstrating that protocol features must be understood to avoid economic vulnerabilities.

A 51% attack is a specific type of double-spend attack where a single entity gains control of more than 50% of a network's hashing power (PoW) or staked assets (PoS). This allows them to:

• Exclude or modify the ordering of transactions.
• Reverse their own transactions to double-spend.
• Prevent other miners from completing blocks. It is the primary theoretical vulnerability exploited for double-spending on major blockchains.

Block confirmation refers to the number of blocks built on top of a transaction's block, which quantifies its security against reorganization. The probability of a double-spend decreases exponentially with each confirmation.

• 0-confirmation transactions are highly vulnerable to double-spends.
• 6 confirmations on Bitcoin is a common standard for high-value transactions, reducing double-spend risk to near zero.

A race attack is a double-spend technique where an attacker sends two conflicting transactions simultaneously to different parts of the network. The merchant sees the first transaction and releases goods, but the attacker's second transaction, sent directly to a collaborating miner, may be included in the canonical chain, invalidating the payment. This exploits network latency and is a risk for zero-confirmation transactions.

A Finney attack is a pre-mined double-spend where a miner secretly mines a block containing a transaction that spends their coins. Before releasing this block, they spend the same coins in a second transaction with a merchant. When the merchant sees the second transaction (with 0 confirmations) and delivers goods, the miner broadcasts their pre-mined block, making the first spend canonical and invalidating the payment to the merchant. This requires the attacker to successfully mine a block.

A chain reorganization occurs when a blockchain fork is resolved, and nodes switch to a longer or heavier valid chain, discarding blocks from the shorter fork. This is a natural part of consensus but is exploited in double-spend attacks.

• Intentional Reorg: An attacker with sufficient hash power creates a longer, alternative chain that excludes their original payment transaction, enabling a double-spend.
• Orphaned Blocks: The blocks containing the original, now-invalid transaction become orphaned.