Bitcoin white paper

Bitcoin: A Peer-to-Peer Electronic Cash SystemSatoshi Nakamotosatoshin@gmx.comwww.bitcoin.orgAbstract.   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.IntroductionCommerce 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   non-reversible 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.