Ownership Verification and Double-Spending

Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin.

- Satoshi Nakamoto, Bitcoin Whitepaper

A critical challenge in digital currency transactions is the risk of double-spending, where an owner attempts to spend the same coin more than once. This issue arises because, unlike physical cash, digital coins can be easily replicated. To mitigate this risk, a robust verification process is essential.

The verification process involves the payee confirming the signatures associated with the transaction to ensure that the coin has not been previously spent. Each transaction iteration contains a solution to a predefined predicate, typically involving a public key and a corresponding signature generated using the Elliptic Curve Digital Signature Algorithm (ECDSA). This computationally efficient method allows for quick validation of ownership claims, enabling merchants to accept payments directly from users without relying on a trusted third party.