Cryptocurrency and Double Spending History: Transactions with Zero Confirmation

We develop a general equilibrium model of cryptocurrency to study a double spending prevention mechanism without payment confirmations. Agents trade cryptocurrency using a digital wallet, and the cryptocurrency system provides a means to verify a wallet's double spending history. Double spending can be prevented without payment confirmations under some conditions if a wallet has a good reputation for transaction history. As the difficulty of mining work increases, incentives for double spending decrease. We provide new insights into the properties of Bitcoin transaction fees, quantitatively assess the current Bitcoin system, and evaluate the welfare gain from fast transactions without payment confirmations.