How do I prevent double-spending scams?

What is double-spending?

In the field of crypto, double spending is a type of fraud which refers to the same crypto being spent twice.

In simple terms, when you send a transaction on a decentralized network, it takes some time to be confirmed by the network. During this confirmation period, a malicious attacker can try to create another transaction using the same crypto and make the second transaction confirm faster than the first.

If the fraudulent action is successful, the first transaction becomes invalid, and the attacker can spend the same crypto twice and commit fraud.

Common Forms of Double-Spending Attacks

• 51% Attack: If a miner or mining pool controls more than 51% of the network’s computing power, they can theoretically control the order of transaction confirmations, enabling double-spending.

• Race Attack: The attacker sends two conflicting transactions at the same time, one to the merchant and another back to themselves, in an attempt to invalidate the merchant’s transaction.

• Finney Attack: It targets zero-confirmation transactions. After sending the first transaction, the attacker privately mines a block containing the second transaction, then broadcasts it to override the first transaction.

How do I prevent double-spending scams?

Wait for sufficient confirmations

This is the most important and fundamental preventive measure. For any crypto transaction you receive, always wait for a sufficient number of confirmations before considering it as final.

The definition of sufficient may vary by crypto and platform:

• Bitcoin (BTC): Typically 3 to 6 confirmations are recommended. One confirmation takes about 10 minutes, so this may require 30 minutes to 1 hour.

• Ethereum (ETH): Typically 12 to 30 confirmations are recommended. Ethereum has a shorter block time which is about 13–15 seconds so the waiting time is relatively shorter.

• Small transactions: For lower-value transactions, waiting for fewer confirmations or even no confirmations may involve a lower level of risk.

• Large transactions: For higher-value transactions, it is strongly recommended to wait for more confirmations to ensure security.

Most exchanges and wallets display the confirmation status when you receive funds. Kindly check this information carefully, and do not treat the transaction as complete until it is fully confirmed.

Trade on reputable platforms and with reputable merchants

Always trade with reputable crypto exchanges and merchants that have strong security systems in place. These platforms typically offer more robust double-spend protection, such as:

• Higher confirmation requirements: Transactions above certain amounts automatically require more confirmations.

• Real-time risk monitoring: Suspicious transaction patterns are monitored to quickly detect and block potential double-spend attempts.

• Technical safeguards: Strong underlying technology and network architecture that help defend against various types of attacks.

Avoid conducting large private transactions with unknown or low-reputation individuals or platforms, as this significantly increases your risk.

Avoid zero-confirmation transactions

Whenever possible, kindly avoid accepting zero-confirmation transactions, especially for high-value goods or services. A zero-confirmation transaction means the transfer has not yet been officially recorded or confirmed by the network, making it most vulnerable to double-spend attacks. Even waiting for just one or two confirmations can significantly improve your transaction's security.

Pay attention to health of the blockchain network

Although it can be difficult for regular users to analyze blockchain data in depth, it is still helpful to pay attention to the overall health of the blockchain network.

For example, a sudden drop in network hash rate or frequent block reorganizations may indicate potential risks. While such situations are rare, being aware of them can help you better understand the overall risk profile of the crypto you use.

Stay alert and identify anomalies

• Mismatched Transaction Hash: If the transaction hash provided by the other party does not match with what you see on a blockchain explorer, or changes frequently, this may be a sign of fraud.

• Rushed Transactions: Be cautious of anyone pressuring you to complete a transaction without waiting for confirmations.

• Unusually Low Fees: Extremely low or zero transaction fees may prevent the transaction from being confirmed promptly and increase the risk of double-spending.

Notes: double-spending fraud is a real risk in the crypto field. Kindly wait for sufficient block confirmations, choose reputable platforms, avoid zero-confirmation transactions, and always stay vigilant.