My Blockchain Journey

An introduction to Bitcoin

Over the years, financial institutions have been the only trusted third party to process electronic payments over the internet especially for commercial purposes. Non arguably for most transactions, the system works well. However, the system has some intrinsic deficiencies. For example, because financial institutions cannot avoid reconciling discourse, it is a bit difficult to carry out completely non-reversible transactions which makes room for fraud.

To solve this trusted third-party problem, an electronic payment system based on cryptographic evidence is our best bet. To generate this evidence, a peer-to-peer distributed timestamp server can be used and is secure if the CPU power is controlled by more honest nodes. An example of this electronic payment system is the bitcoin.

Bitcoin is a chain of digital signatures. To tackle double spending problems in bitcoin transactions, a mint to check every transaction is introduced and to do this without a trusted party, transactions are publicly announced. As I said earlier in the previous paragraph(about using a peer-to-peer distributed timestamp server), it is important to note that a proof-of -work is needed for implementation.

In paragraph 2, I talked about honest nodes. Nodes are where all new transactions are relayed to. They turn every new transaction into a block which become several blocks that form a chain. The longest chain is usually the correct one and it keeps extending. Until the next proof-of-work is found, it keeps extending.

Bitcoin has proven that transactions can be announced publicly without information linking transaction to anyone. Great right?

Disclaimer: The views expressed by the author above do not necessarily represent the views of the Ethereum Foundation.