Wuhan, in China, was once again at the epicenter of another disaster: more than 80 tons of gold promised as collateral for a loan are being investigated for counterfeiting. If confirmed, the fraud is valued at US$4 billion. That is, gold, which is a scarce asset, can be counterfeited, as the case shows. Can bitcoin, considered digital gold, be counterfeited?
The answer is no. It is not possible to fake bitcoin due to the characteristics of its protocol, which prevent a person from performing an attack known as double spending. That is, a fraudulent operation in which a user tries to generate two or more transactions from the same operation.
The network allows that only transactions that have never been spent before to be added to the blockchain and that have a valid signature. If a user performs two transactions with the same currency, at the time one of these two transactions is confirmed, the following is no longer valid by simple consensus rules.
Miners ensure that it is not possible to counterfeit bitcoin
All these operational rules are programmed, but resistance to counterfeiting does not depend on a code or a mathematical solution, but on miners. These agents, which are machines with high processing power, check on-hold transactions at random and do not confirm transactions already spent because they violate the consensus.
In turn, miners also cannot issue fake bitcoins due to these same consensus mechanisms. This is because the coins in bitcoin are transactions and all these new bitcoins are issued through a “currency generation transaction” – better known as the coinbase transaction – which are also subject to the network’s anti-counterfeiting mechanisms.
That is, miners cannot generate a coinbase transaction from scratch to claim new currencies. It will have to go through the hash resolution process and will not have the network approval because it is false.
All this allows every transaction with bitcoins registered on the blockchain to be unique and unrepeatable, to the point that bitcoin counterfeiting is impossible.