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
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: Suggested Citation