This is my attempt to breakdown each section of the *White Paper* proposed by **Satoshi Nakamoto** on **October 31st 2008.** To prevent **ONE** extremely lengthy post, the plan is to record separate entries delivering the explanation in a most basic version to be digested a little at a time. For this series, I'm assuming one knows absolutely nothing about Bitcoin and is looking for more information to further their understanding. If this explanation is too rudimentary for you at this point, then by all means continue in your journey of exploration with this wonderful technology, but if you believe someone else may benefit from this series, please introduce us. Thank you!
In order to accomplish my task I've decided to:
**1.** Present the section from the original *White Paper* to be read for your review.
**2.** Provide definitions to possible unfamiliar terms.
**3.** Explain the meaning of the section.
**4.** Ask for questions & honest feedback.
As I've continued to research and digest information on Bitcoin and Blockchain technology, I've begun to have friends and family ask me to explain what I know to them. This is my attempt to get the knowledge out of my head and into the minds and hearts of anyone else who wishes to educate themselves about this emerging technology. The most amazing aspect to me concerning this technology is how rapidly it progresses. Changes will undoubtedly take place, but the heart of the mission is contained here in Satoshi's words for the world to look upon.
**Image provided by Fortune.com**
**Let's get started.**
**Possible Upcoming Unfamiliar Terms:**
* **Double Spending:** *Double spending is the result of successfully spending some money more than once.*
* **Hash:** *A digital fingerprint of some binary input.*
* **Proof-of-Work:** *A piece of data that requires significant computation to find.*
* **Node:** *A full node is a program that fully validates transactions and blocks*
* **Block:** *A grouping of transactions, marked with a timestamp, and a fingerprint of the previous block.*
* **Blockchain:** *A list of validated blocks, each linking to its predecessor all the way to the genesis block.*
**BITCOIN: ABSTRACT & INTRODUCTION**
Bitcoin: A Peer-to-Peer Electronic Cash System
Satoshi Nakamoto
satoshin@gmx.com
www.bitcoin.org
**Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.**
1. 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.*
**IMAGE COURTESY OF GCN.COM**
Ok, ok, so you've looked at a few of the above terms (maybe you already knew what they meant--if so, this isn't for you), and now you've also read the **Abstract** (idea) and **Introduction** to the *White Paper* that Satoshi Nakamoto proposed.
Why the need for this type of digital currency? Let's uncover it's original intent. Bitcoin was proposed as a payment solution for electronic cash and the ever increasing commerce on the internet. The need for this type of currency is in affect to cut out the middle man. The original vision for bitcoin was to have a fully operational peer-to-peer payment system unfettered by mediators or a trusted third party (financial institution). In dealing with monies a certain level of trust or distrust is always automatically assumed. Bitcoin essentially eliminated the need for this level of trust by computational proof-of-work verification or cryptography. When a payment has been made in the system, due to the timestamp of that transaction and the computational verification, the transaction becomes irreversible. Alright, alright, you might be thinking "what the hell is computational verification." Don't get too hung up on it just yet. We'll go over that next time. Back to the process; while transactions are being proven, many others are chronologically being verified simultaneously in the block as well until it's maximum capacity has been reached. Once completed, the block can subsequently build or *chain* itself on top of another completed block. This is known as the **Blockchain.** This is also why once a transaction has been verified and accepted it becomes permanent in the blockchain. The double spending problem we face can be solved using bitcoin, which can then eliminate the need for that trusted "third party."
Again, this is a basic explanation of the original *White Paper* *ABSTRACT* & *INTRODUCTION* proposed by Satoshi Nakamoto. Next time, I will explain section 2. **Transactions.**
I would appreciate the opportunity to discuss this explanation in the comments below. I look forward to hearing from you. Have a great night, and Happy New Year!!
**DID THIS HELP?**
**WHAT QUESTIONS DO YOU HAVE?**
**YOU CAN READ THE FULL WHITE PAPER HERE:**
https://bitcoin.org/bitcoin.pdf
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