Vulnerability of scale-free cryptocurrency networks to double-spending attacks

Abstract

Cryptocurrencies including Bitcoin are known to be vulnerable to so-called ‘double-spending’ attacks, where the same digital currency is used to execute multiple different transactions simultaneously. Little is known, however, about the underlying reasons for this vulnerability. Here we develop an agent-based model to study how features of cryptocurrency networks contribute to their vulnerability to double-spending attacks. Perhaps surprisingly, we find neither the number of network nodes nor its path length seem to influence the probability of successful attacks. We find robust evidence that the network's clustering coefficient has substantial influence. In particular, scale-free networks, with their small clustering coefficients, are more than twice as likely to succumb to double-spending attacks than are networks with larger coefficients, such as regular networks. The implication is that cryptocurrency networks, which are scale-free, may be uniquely susceptible to double-spending attacks.

Keywords:

• Cryptocurrency
• double-spending
• networks
• experimental finance
• agent-based modeling

Acknowledgments

Junhuan Zhang acknowledges support from National Natural Science Foundation of China (# 71801008), and Beihang University (# KG12113201, # ZF202S1876). The authors also thank Editor Chris Adcock and  the three anonymous reviewers for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

Junhuan Zhang acknowledges support from National Natural Science Foundation of China [grant number 71801008], and Beihang University [grant numbers KG12113201, ZF202S1876].