Finney attacks on Bitcoin cryptocurrency

17.02.2024
Finney attacks on Bitcoin cryptocurrency

Bitcoin is a decentralized digital currency that operates on a peer-to-peer network. Transactions are verified and recorded in a public ledger called the blockchain. Bitcoin is considered to be secure because it uses cryptographic algorithms to ensure that transactions are authentic and cannot be altered. However, like any other system, Bitcoin is not completely immune to attacks. One such attack is the Finney attack.

A Finney attack is a type of double-spending attack that can be used against Bitcoin transactions. In a double-spending attack, an attacker tries to spend the same Bitcoin twice, once with a legitimate merchant and once with a fake one. The goal is to trick the legitimate merchant into accepting a transaction that will later be reversed, while the attacker keeps the goods or services they received.

In a Finney attack, the attacker creates a transaction that sends Bitcoin to a legitimate merchant, but they do not broadcast it to the network immediately. Instead, they mine a new block that includes their own transaction as well as the transaction they want to double-spend. This block is kept secret and not broadcast to the network.

The attacker then broadcasts their original transaction to the network, which is verified and included in the blockchain. The merchant, seeing that the transaction has been confirmed, delivers the goods or services to the attacker. However, the attacker has not yet broadcast their second transaction, which is included in the secret block they mined.

Once the attacker has received the goods or services, they broadcast the secret block to the network. This block includes the attacker’s second transaction, which double-spends the Bitcoin they sent to the merchant. Because the attacker mined the block that includes their second transaction, they are able to include it in the blockchain before the legitimate transaction is confirmed.

This means that the merchant will eventually see that the transaction they received has been reversed, and the attacker will have successfully double-spent the Bitcoin.

Finney attacks are relatively rare because they require the attacker to have significant computational power to mine a block that includes their double-spend transaction. However, they are still a potential threat to Bitcoin transactions, and merchants should be aware of the possibility of such attacks.

To protect against Finney attacks, merchants can wait for multiple confirmations before accepting a transaction as valid. This means that the transaction must be included in multiple blocks in the blockchain before it is considered final. By waiting for multiple confirmations, merchants can reduce the risk of accepting a transaction that will later be reversed in a Finney attack.

In conclusion, Finney attacks are a type of double-spending attack that can be used against Bitcoin transactions. While relatively rare, they are still a potential threat, and merchants should take steps to protect themselves against such attacks. By waiting for multiple confirmations, merchants can reduce the risk of accepting a transaction that will later be reversed in a Finney attack.


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