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Concept
Double-spending
Summary
Double-spending is a fundamental flaw in a digital cash protocol in which the same single digital token can be spent more than once. Due to the nature of information space, in comparison to physical space (as in: valuable physical resources), a digital token (like a file) is inherently almost infinitely duplicable or falsifiable, leading to ownership of said token itself being undefinable unless declared so by a chosen authority. As with counterfeit money, such double-spending leads to inflation by creating a new amount of copied currency that did not previously exist. Like all increasingly abundant resources, this devalues the currency relative to other monetary units or goods and diminishes user trust as well as the circulation and retention of the currency.
Fundamental cryptographic techniques to prevent double-spending, while preserving anonymity in a transaction, are the introduction of an authority (and hence centralization) for blind signatures and, particularly in offline systems, secret splitting.
Prevention of double-spending is usually implemented using an online central trusted third party that can verify whether a token has been spent. This normally represents a single point of failure from both availability and trust viewpoints.
Blockchain#Finality
In a decentralized system, the double-spending problem is significantly harder to solve. To avoid the need for a trusted third party, many servers must store identical up-to-date copies of a public transaction ledger, but as transactions (requests to spend money) are broadcast, they will arrive at each server at slightly different times. If two transactions attempt to spend the same token, each server will consider the first transaction it sees to be valid, and the other invalid. Once the servers disagree, there is no way to determine true balances, as each server's observations are considered equally valid.
Most decentralized systems solve this problem with a consensus algorithm, a way to bring the servers back in sync.
Official source
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