Notes On Satoshi’s Whitepaper(Part 1)

Bitcoin: A Peer To Peer Electronic Cash System

Abstract

• A pure peer-to-peer ‘e-cash’ would remove the need for intermediaries and financial institutions
• Transactions between two parties no longer need a ‘supervisor’
• No Middle Man-P2P
• Digital Signatures are part of the solution
• But they do not solve the ‘Double-Spending’ Problem
• This Paper proposes a solution:
• A Peer-to-Peer network that timestamps transactions by hashing them into an ongoing chain of hash based Proof-Of-Work (POW), thus forming a record that cannot be changed without redoing the proof of work.
• The longest chain provides the Proof of Work
• As long as a majority of CPU power is controlled by ‘good’ nodes we are fine

1. Introduction

“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments”

• This system has inherent weaknesses since it is using the Trust Based Model
• Non Reversible Transactions are impossible
• Banks and FinInst. are forced to act as mediators
• As cost of mediation increases it increases things such as transaction cost
• Limites minimum practical transaction sizes
• Possibility Of Reversal leads to inherent need for more trust from merchants
• “Hassling them for more information than they would otherwise need.”
• Fraud Is Expected and Accepted as unavoidable
• Using cash fixes this, but no payment mechanism exists to make payments over a communications channel without a trusted party.
• A system based on Cryptopgraphic Proof over “Trust” is necessary.

Check me out on Steemit as well: https://steemit.com/cryptocurrency/@harryhoudinei/my-crypto-rat-hole-stories-notes-on-satoshi-s-whitepaper-part-1