A:

Double-spending – the incidence of one individual successfully spending a Bitcoin balance more than once – is a major concern for all digital transactions. The block chain itself does not prevent double-spending; instead, all transactions posted to the block chain are verified and protected through a confirmation process. Once a transaction has been confirmed, it becomes irreversible and posted publicly.

Understanding the Block Chain

In Bitcoin terms, a "block" is a file of permanently recorded data. All recent transactions are written into blocks, much like a stock transaction ledger on an exchange.

The term "block chain" refers to a virtual ledger that is publicly (yet anonymously) shared to all members of the Bitcoin network. Any economic transaction involving the Blockchain.info allows users to navigate the Bitcoin block chain and review transactions in quantity only; information about the buyer and seller are protected. Bitcoin uses a high-level AES encryption to prevent outside sources from accessing or changing the ledger.

All Bitcoin wallets are instantly updated through the block chain. "The integrity and the chronological order of the block chain are enforced with cryptography," the Bitcoin website indicates.

Handling Double-Spending

Suppose two transactions spend the same input to the same block. Bitcoin automatically rejects both transactions to prevent one Bitcoin from going toward two separate ends. A similar rejection occurs if two separate blocks receive inputs from the same Bitcoin source. Bitcoin treats such circumstances as incidents of accounting fraud.

Nevertheless, double-spending is still possible (though highly unlikely) in Bitcoin. If this does occur, at least one party in one of the transactions will not receive the Bitcoin. All parties are responsible for communicating and sorting out the dispute.

RELATED FAQS
  1. Is Bitcoin legal in the US?

    Learn about the legality of Bitcoin as a form of payment in the United States, as well as how it is produced and concerns ... Read Answer >>
  2. What is the difference between a value chain and a supply chain?

    Learn the difference between a value chain and a supply chain, and why a company would want to maximize the value of both. Read Answer >>
  3. Value chain analysis: What are the advantages and disadvantages?

    Learn about the five activities that make up a generic value chain, and understand the advantages and disadvantages of value ... Read Answer >>
Related Articles
  1. Tech

    Bitcoin vs. Bitcoin Cash: What's the Difference?

    We break down the difference between bitcoin and bitcoin cash, and what it might mean for the future of cryptocurrencies.
  2. Tech

    How Will Bitcoin 2.0 Change The World? (MSFT, OSTK)

    Since Bitcoin's 2009 launch, the decentralized, peer-to-peer digital currency and payment system has garnered worldwide interest.
  3. Tech

    Are There Taxes On Bitcoins?

    Here is a short guide to the tax implications when using or investing in bitcoins in the US.
  4. Tech

    How Bitcoin Works

    Miners, hashes, keys, cold storage, blocks - it's confusing. We can help you understand how bitcoin works.
  5. Tech

    Will Rising Transaction Fees Bring Down Bitcoin's Price?

    Bitcoin's escalating transaction fees have raised eyebrows but experts say they won't hurt bitcoin's price.
  6. Tech

    Bitcoin Unlimited Thwarted, Again!

    Bitcoin Unlimited is vying for supremacy in the Game of Bitcoins, but it's got some problems.
  7. Tech

    Countries Where Bitcoin Is Legal & Illegal (DISH, OTSK)

    Many countries do not have consistent laws regulating Bitcoin. It is regulated in most countries, and some have banned it entirely.
  8. Tech

    Bitcoin Innovations And Obstacles

    Investopedia explains the development of the Bitcoin digital currency system and the risks associated with using and investing in it.
  9. Tech

    How Should Investors Play Bitcoin Price Volatility From November Fork?

    Here's a brief analysis of what's at stake and key indicators that investors should look for.
  10. Investing

    Bitcoin Miners Are About to Tap 17 Millionth Coin

    Bitcoin's supply is dwindling as it struggles to break above $10,000 again.
RELATED TERMS
  1. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network ...
  2. Block Reward

    Bitcoin block rewards are the new bitcoins that are awarded by ...
  3. 51% Attack

    51% attack refers to an attack on a blockchain by a group of ...
  4. Block Time (Cryptocurrency)

    Block time is the average time for a new block to be generated ...
  5. Bitcoin Exchange

    A bitcoin exchange is a digital marketplace where traders can ...
  6. Satoshi Cycle

    Satoshi Cycle is a crypto theory that denotes to the high correlation ...
Trading Center