Cryptocurrency and Double Spending History: Transactions with Zero Confirmation

48 Pages Posted: 8 May 2019 Last revised: 4 Feb 2020

Date Written: August 21, 2019

Abstract

We develop a general equilibrium model of cryptocurrency to study a double spending prevention mechanism without payment confirmations. Agents trade the cryptocurrency using a digital wallet, and the cryptocurrency system provides a way 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 about transaction history. As the difficulty of mining work rises, incentives of double spending decrease. We provide new insights on properties of Bitcoin transaction fees, quantitatively assess the current Bitcoin system, and evaluate the welfare gain from fast transactions without payment confirmations.

Keywords: Blockchain, Cryptocurrency, Delivery Lag, Double Spending, Trade History

JEL Classification: D86, E40, E50, G10

Suggested Citation

Kang, Kee-Youn, Cryptocurrency and Double Spending History: Transactions with Zero Confirmation (August 21, 2019). Available at SSRN: https://ssrn.com/abstract=3369306 or http://dx.doi.org/10.2139/ssrn.3369306

Kee-Youn Kang (Contact Author)

Yonsei University ( email )

50 Yonsei-ro, Seodaemun-gu
Seoul, 120-749
Korea, Republic of (South Korea)

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