The findings of a recent study on the “incentive compatibility” of blockchain technology conducted by the Bank of Canada reveal that double spending in the computations for blockchain transactions is a far-fetched notion.
The bank’s study released last week centered on proof-of-work (PoW) protocols for blockchain technologies that compared and contrasted the actions of an “honest miner” and a “dishonest miner.”
The research was aimed at checking how digital ledger systems such as blockchain technologies were free from manipulations such as double spending entries made by users for personal benefits.
According to the findings of the study, the backbone of the blockchain technology is premised on the stewardship of users over the technology itself. With the blockchain, a transaction becomes acceptable only after all parties to the transaction vouch for its authenticity, else the transaction becomes worthless.
However, the findings from the study suggests that where a miner has overreaching control of computational resources, that miner would be able to execute a so-called “51% attack” thereby being able to cheat by double spending as a result of the advantage due from their larger controls.
While the study suggests that this could only happen where a ‘dishonest miner’ has large funds and is ‘risk neutral,’ it however agrees that “These assumptions tend to be unrealistic and, in practice, users have little economic incentives to launch such an attack, especially when the computational investment by other miners is large.”
While some top officials at the BoC doubt the usefulness and security to employ blockchain technology in banking, research by Bain & Company, a global management consultancy concluded that distributed ledger technology “has the potential to revolutionize transaction banking.”
According to some crypto analysts, blockchain technologies and the cryptocurrencies which they support will for long continue to divide opinion among policy makers. While there are no signs that the technology will die out any time soon, experts believe that the debate for and against distributed ledger systems such as the blockchain will continue for a long time to come.