Cryptocurrency and double spending history: transactions with zero confirmation

Abstract

We develop a general equilibrium model of cryptocurrency to study a double spending prevention mechanism without payment confirmations. Agents trade cryptocurrency using a digital wallet, and the cryptocurrency system provides a means to verify a wallet's double spending history. Double spending can be prevented without payment confirmations under some conditions if a wallet has a good reputation for transaction history. As the difficulty of mining work increases, incentives for double spending decrease. We provide new insights into the properties of Bitcoin transaction fees, quantitatively assess the current Bitcoin system, and evaluate the welfare gain from fast transactions without payment confirmations.

Digital currency and privacy

“…Chiu and Wong (2015) and Carli and Uras (2023) examine how E‐money improves the efficiency of the economy. Chiu and Koeppl (2022b) and Kang (2023) investigate double spending incentives in the Bitcoin system, and Choi and Rocheteau (2021) and Pagnotta (2022) study cryptocurrency pricing. Fernández‐Villaverde and Sanches (2019), Schilling and Uhlig (2019), and Kang and Lee (forthcoming) explore the macroeconomic implications of cryptocurrencies via currency competition.…”

A qualitative analysis of rural fishermen: Potential for blockchain-enabled framework for livelihood sustainability

“…Blockchain was first used in Bitcoin, a peer-to-peer payment system created by Nakomoto [3] during the financial crisis to fix the double-spending issue (i.e. spending the same cryptocurrency more than once) [4] .…”