Lesson 1: "Introduction" Understanding the background of Bitcoin's creation

Introduction

The introduction mentions the need to interpose a trusted third party, such as a financial institution, in modern Internet commerce, and explains the problems and solutions.

Problems

The problems caused by the need for a trusted third party are as follows

• Although the financial institution acts as an intermediary for the transaction between individuals, it collects the cost of arbitration in advance, in order to be prepared to handle arbitration in the event of a problem between individuals. This causes the need to limit the arbitration cost to be less than the transaction cost, and small transactions have not been realized.
• In addition, there is a need to have a mechanism that can be used to pretend that the transaction never happened (reversible transactions) in order to deal with problems. This makes it impossible to realize irreversible transactions (transactions that cannot be reversed).
• In order to achieve reversible transactions, a high level of trust is required, so financial institutions must acquire more personal information than necessary.
• Even with the above stringent measures, it is impossible to completely prevent fraud.

Solution

In order to solve these problems, it is necessary to create a system that enables electronic transactions without the need for a third party such as a financial institution.

• What is needed is not trust in a third party, but a mechanism based on cryptography.
• If a PtoP distributed timestamp server can be used to mathematically verify the transaction time, multiple payments can be prevented.
• Even if there are malicious nodes in the PtoP network, as long as the number of benevolent nodes exceeds the number of malicious nodes, the network can remain normal.

The "PtoP-based distributed timestamp server" that appears here is the original mechanism of the blockchain.

In fact, the term "Blockchain" does not appear once in the paper.

Satoshi Nakamoto himself probably never imagined that the mechanism for realizing Bitcoin would be separated into a blockchain and attract so much attention.