2.3 Solving the Double Spend Problem - Video Tutorials & Practice Problems

What we will talk about now is something known as the, Double Spend Problem. And it's very important that you understand this concept, because it's the double spend problem that prevented those earlier attempts at e-cash from actually working. None of those attempts could solve the double spend problem. And yet, Bitcoin was able to do so. And the way that Bitcoin did it, was by leveraging blockchain technology. let's describe exactly what the double spend problem is, by going through an example. If you take a digital photograph, let's say for example, you take a picture of a flower, it's a really beautiful picture of a flower, and you wanna share it with a friend. So you email it to someone else. You would think that would be the end of it. I mean, you took the picture, and you emailed it to someone else. But there's a challenge here, there's two pictures of that flower. There's the one you sent by email, and the original one, which is still in your computer. You see, you didn't really send that picture to your friend, you sent a copy of that picture. And it's important for you to understand that this concept of the double spend problem, is a huge problem. Because if you actually were to take a digital photograph of a $100 bill, you could just make unlimited copies of it. I mean, there's no way you can take an asset of value, and make multiple copies of it and still have it retain its value. This is very important. And it's one of the key reasons why the internet has had such a difficult time dealing with business models. When the internet came about and we had the World Wide Web, the music industry had been performing wonderfully. And then came Napster. And then people were able to take songs, convert them into MP3, and share them all over the world for free. This is the challenge here. If you take an asset of value, and you can make a copy of it and share it with other people, that asset no longer preserves its value. So if you're doing a transfer of an asset of value, it's very important that you literally transfer that asset of value from one party to another. If you're actually just sending a digital asset, like a photograph or an MP3, you're not really transferring it, you're really just sending a copy of it. This is what's known as the double spend problem. Double spending involves the act of spending the same money more than once. Now, I used the example of a digital photograph or an MP3, because it's also a digital asset. But if you were actually trying to transfer an asset that may be worth say $3 or $5, if you can't find a way to transfer it uniquely, like literally do that transfer, you simply cannot do a transfer of value. So this double spend problem is a critical, critical problem, which has prevented digital cash prior to Bitcoin. What Bitcoin does, is that it has enabled what's known as, Digital Scarcity. Digital scarcity is the ability to limit the quantity available of a digital asset. This digital scarcity adds value to the digital asset as it creates a limit to the amount that is available.