![]() ![]() To prevent the bank from tracking specific units, Dan obfuscates the random numbers by adding a blinding factor to each one of them. Let’s suppose he produces five numbers, each to be assigned a value of $20. Provided he has the balance in his account, he will then generate a random number (or many, for smaller denominations). In such a context, if a user (let’s call him Dan) wishes to receive $100 in digital cash, he is required to inform the bank first. To issue users with a digital asset mimicking cash (capable of anonymous and peer-to-peer exchange), a bank can use blind signatures – as detailed by cryptographer David Chaum in his 1982 paper Blind Signatures for Untraceable Payments. A good example of a centralized solution to the double-spend problem is that of David Chaum’s eCash. This typically involves one overseer managing the system and controlling the issuance and distribution of units. The centralized route is considerably easier to implement than decentralized alternatives. How can double-spending be prevented? The centralized approach So, for digital money to function, there must be mechanisms in place to prevent this behavior. Similarly, such a scheme can’t work if she can send the same 10 units to both Bob and Carol simultaneously. ![]() The entire system would be undermined if Alice could receive 10 units, copy-and-paste them 10 times, and find herself in possession of 100 units. When it comes to digital cash, ensuring that specific units can’t be duplicated is of paramount importance. Without any adequate countermeasures, a protocol that doesn’t resolve the problem is fundamentally undermined – users have no way to verify that the funds they’ve received have not already been spent elsewhere. Double-spending is a potential issue in a digital cash system where the same funds are sent to two recipients at the same time.
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