Evolutionist,
We continue our examination of the Bitcoin White Paper, released by Satoshi Nakamoto in October of 2008, focusing on section one, the Introduction.
In this section, Satoshi introduces the problem of sending money on the internet. He explains that all transactions pass through a middleman (banks, credit cards, etc.) to provide verification and security on both sides of a transaction. Thus both parties can trust each other. There is always a middleman in this system, and paying them for the transaction verification, and dispute resolution has become more expensive over time.
This has made small transactions very expensive to perform. For example, banks charge $25+ for wire transfers, and credit cards charge up to 3% per transaction. A $25 fee for a $50 charge is not worth it. However, because we have no other alternatives, many of us have accepted these fees as the cost of doing business online for years.
Satoshi proposed another solution, replacing the middleman with a trust system using cryptographic proof. The proof would come from a peer-to-peer distributed timestamp server. Think of this “timestamp server” as a giant spreadsheet that every computer on the network has access to. This spreadsheet accounts for all the money in the world, including where it came from and where it went, and is accurate in real-time. Every time there is a Bitcoin transaction, the computers would check the spreadsheet for accuracy. There would no longer be a need for humans or financial institutions for verification - yay!
The introduction concludes that the spreadsheet would be accurate as long as the more honest nodes control the network. In its 13 years, Bitcoin has always been in the control of open nodes; so far, so good.
To the moon!
Bitcoin: A Peer-to-Peer Electronic Cash System
Introduction
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.
Virgin Bitcoin: Bitcoins considered “brand new” in that they have been released due to mining but have not yet been used in any transactions.
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The Bitcoin Standard: The Decentralized Alternative to Central Banking
The Fiat Standard: The Debt Slavery Alternative to Human Civilization
21 Lessons - What I've Learned from Falling Down the Bitcoin Rabbit Hole
The Blocksize War: The battle over who controls Bitcoin’s protocol rules
The Price of Tomorrow - Why Deflation Is the Key to an Abundant Future
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Cryptopia - Bitcoin, Blockchains, and the Future of the Internet
Bitcoin: The End of Money as We Know It
Banking On Africa - The Bitcoin Revolution
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