Cryptocurrency and double spending history: transactions with zero confirmation

Kee-Youn Kang ()
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Kee-Youn Kang: Yonsei University

Economic Theory, 2023, vol. 75, issue 2, No 6, 453-491

Abstract: 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. A digital wallet may obtain a good reputation for no double spending attempts based on its transaction history. If a buyer makes a payment with a digital wallet that does not have a good reputation, sellers provide goods after payment confirmations in the blockchain to prevent a double spending attack. On the other hand, sellers deliver goods immediately without payment confirmations if the payment is made through a digital wallet with a good reputation as long as the cost of losing a good reputation outweighs the short-run gain from double spending. As the time required for each confirmation increases, the utility loss from delayed delivery of goods increases so double spending incentives decrease.

Keywords: Blockchain; Cryptocurrency; Precautionary confirmation; Double spending; Trade history (search for similar items in EconPapers)
JEL-codes: D86 E40 E50 G10 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00199-021-01411-3

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