Bitcoin whitepaper was released some odd 13 years ago on 31 Oct 2008. Yesterday, it was the whitepaper’s 13th anniversary, which described the principles and the idea behind the now trillion-dollar network. The title of the whitepaper is “Bitcoin: A Peer-to-Peer Electronic Cash System”. You can read that here. Let’s dissect the concepts behind this historical document.
The abstract explains the basic idea behind the peer-to-peer electronic cash system, without an intermediary or any kind of a central party. Nobody needs to be trusted, except the code itself. It introduces the concept of timestamping, hashing, chain of blocks, nodes, the reliance of the network on the honesty of the majority, and the prevention of double-spending. The Nakamoto Consensus’s primary rule of accepting the longest chain as the legitimate one is also described.
Bitcoin whitepaper’s introduction begins with the explanation of the current system, where financial institutions are a trusted third party. It explains the non-finality of transactions, where each transaction can still be reversed after completion, based on numerous reasons. In this part, the benefits of an electronic payment system based on cryptographic proof are explained.
The next parts explain the transactions, timestamping proof, Proof of Work (POW), incentive, simplified payment verification, privacy aspects, and unspent transaction outputs. On page 4, the Bitcoin whitepaper gives an overview of the network as follows:
The steps to run the network are as follows:
1) New transactions are broadcast to all nodes.
2) Each node collects new transactions into a block.
3) Each node works on finding a difficult proof-of-work for its block.
4) When a node finds a proof-of-work, it broadcasts the block to all nodes.
5) Nodes accept the block only if all transactions in it are valid and not already spent.
6) Nodes express their acceptance of the block by working on creating the next block in the
chain, using the hash of the accepted block as the previous hash
Bitcoin network finally went live on 03 January 2009 – a little over 2 months after the whitepaper release.
