One of the reasons cryptocurrency hasn’t taken off as an alternative to fiat as quickly as many enthusiasts would like is because there is generally a wait time associated with the transactions. This delay is due to the transaction having to be verified on the blockchain, with the standard (but not required) number of verifications being six. 0-conf transactions, those that do not require any confirmations, would allow for instantaneous spending of crypto, accelerating its acceptance in the retail space. However, there have been concerns that transactions with no confirmations could lead to double spending and a developer recently set out to prove how easy it would be to double spend on the Bitcoin SV (BSV) blockchain. While his efforts need to be applauded for trying to show a flaw on the blockchain, he misses the mark with the endeavor.
Steve Shadders, director of solutions and engineering at nChain, points out that the results of the experiment are misleading. He explains that the idea of double spending has already been documented as a possibility on many blockchains—including on Bitcoin Cash (BCH) – but that they can easily be controlled. He explains that the practice can be made “economically infeasible” through the introduction of only a few development tools, which are already being worked on by the nChain team for the BSV network.
During the recent CoinGeek Week conference, Shadders tackled the subject of double spends in detail. He pointed out that there are two types of double spends—broadcasts and collusion. A broadcast double spend occurs when the customer broadcasts a second transaction at almost the same time as the legitimate transaction. In a collusion double spend, a crypto user colludes with a miner who will mine the transaction to try and game the system, but these types of transactions typically incur a higher fee.
With collusion double spends, it is very easy to determine the miner involved, which would lead to the individual being blacklisted. In addition, it’s important to consider certain aspects associated with credit and debit cards that offset the potential money losses that could be seen through double spending.
In 2017, retailers lost around $19 billion in chargebacks related to purchases made with plastic. In many cases, the chargeback is not realized for several months following the purchase, meaning the revenue taken in by the company is unexpectedly lost sometimes three or four months later. This means that the retailer has no recourse in trying to recuperate the lost product.
In the case of double spends, it would be possible for a retailer to identify the activity much sooner—in many cases within minutes. This would give the merchant the ability to recover the product and avoid additional losses. While someone who attempts to double spend repeatedly may have some initial success, that individual will quickly be identified after a handful of fraudulent actions, leading them to be banned from doing business in a number of retail locations.
The idea isn’t necessarily to create a perfectly flawless system—none exists. The credit card, in the U.S., was first introduced in 1950 and fraud is still prevalent today. However, it is very possible to create a system that is better than the previous one, and this is what BSV is doing.
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