Discover How Bitcoin Prevents Double Spending

Bitcoin is fast gaining popularity all over the world as a form of digital currency
and payment system that is secure, private and reliable.

In order to understand how bitcoin solves the double spending problem, you will
need to know what double spending is. It�s a pretty simple concept to understand
and this problem only exists on the internet and not in the real world since you
can�t double spend with traditional currency.

Wikipedia states that double spending is, �a failure mode of digital cash schemes,
when it is possible to spend a single digital token twice. Since, unlike physical
token money such as coins, electronic files can be duplicated, and hence the act of
spending a digital coin does not remove its data from the ownership of the original
holder.�

So, what does this mean?

Let�s look at this scenario. You visit a store to buy a book. You have ten dollars
in your wallet and the book costs ten dollars. Once you pay for the book with your
cash, the money will now be in the store�s cash register. The money can only be in
one place at one time. It absolutely cannot be in your wallet and the store
register at the same time.

With online monetary transactions however, this can happen.

The online sales and purchases are all done using computer codes and algorithms.
That basically means, the same money could be in different places at the same time.
To prevent this from happening, there are extremely sophisticated payment gateways
and processors such as PayPal, Worldpay, Authorize.net and many more to make sure
double spending does not occur.

These payment processors have systems in place that review all the transactions
carefully to prevent any mistakes from occurring and also to prevent fraud which is
always a threat.

Despite these processors being first rate and highly reliable, there are some
disadvantages too. If there are any technical issues or the systems flag your
transaction as shady, your transactions will be denied. This is known as a single
point of failure.

Not only that, your account may be suspended pending review. Your funds will also
be stuck till your account is cleared after the review.

Many people have reported having their PayPal accounts suspended for no good
reason. Besides this, in order to maintain their service, these processors charge
fees ranging from 2% to higher. Depending on your volume of transactions, these can
add up and be quite exorbitant.

Bitcoin solves the double spending problem because it does not rely on a single
point of failure. The bitcoin payment system uses the block chain to prevent double
spending from occurring and it does so without incurring high fees.

Without getting too technical, a block chain is a database that is shared by all
the nodes participating in the bitcoin system. This database has a record of all
transactions that have taken place using bitcoin.

Every block has the hash from the previous block. So, the blocks are in
chronological order and you cannot just modify one block because every other block
down the line will have to be modified too. This makes double spending very
difficult because every transaction depends on the one before it and the one before
that. At any point in time, the bitcoin�s movement can be traced all the way back.

There is much more to the block chain but for now, the point is that bitcoin
prevents double spending online without incurring fees or having your funds locked.
This is one of the best features of using bitcoin for your online transactions. No
hassles as far as your funds are concerned. That�s a plus point in anyone�s book.

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