Vulnerability of scale-free cryptocurrency networks to double-spending attacks. Issue 12 (13th August 2021)

• Record Type: Journal Article
• Authors: Zhang, Junhuan; Xu, Yuqian; Houser, Daniel
• Is Part Of: European journal of finance. Volume 27:Issue 12(2021)
• Page Start: 1235
• Page End: 1249
• Publication Date: 2021-08-13
• Subjects: Cryptocurrency -- double-spending -- networks -- experimental finance -- agent-based modeling; Finance -- Periodicals; Finance -- Europe -- Periodicals; International finance -- Periodicals; 332.094
• DOI: 10.1080/1351847X.2021.1886964
• Languages: English
• ISSNs: 1351-847X

Abstract

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.