Why Was Bitcoin Made

 

Non-Reversible Transactions using a Trustless System

Having a central third party makes micro transactions impossible

No dependency on Central Banks

 

 

1998, Bmoney – Provide Untraceable Entities a Medium of Exchange

2002, Hash Cash – Denial of Service Countermeasure

2008, Bitcoin – A Peer to Peer Electronic Cash System

 

 

Cypherpunks – The Crypto Anarchists

 

Timothy C May

Wei Dai

Adam Back

Satoshi Nakamoto

 

 

1. Irreversible Transactions
2. Pseudo Privacy
3. Decentralized Central Authority
4. Accessibility
5. Printing Money

 

 

Irreversible Transactions

 

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. A certain percentage of fraud is accepted as unavoidable.

 

—

 

No mechanism exists to make payments over a communications channel without a trusted party. With the possibility of reversal, the need for trust spreads.

 

Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.

 

 

Pseudo Privacy

 

When it comes to the Bitcoin network itself, there are no “accounts” to set up, and no e-mail addresses, user-names or passwords are required to hold or spend bitcoins.

 

Each balance is simply associated with an address and its public-private key pair.

 

The money “belongs” to anyone who has the private key and can sign transactions with it. Moreover, those keys do not have to be registered anywhere in advance, as they are only used when required for a transaction.

 

Transacting parties do not need to know each other’s identity in the same way that a store owner does not know a cash-paying customer’s name.

 

 

Decentralized Central Authority

 

Publicly Verifiable

 

No Censorship

 

High Costs of a Central Authority

 

• It is costly. EFTsin Europe can cost 25 euros. Credit transactions can cost several percent of the transaction.

 

• It is slow. Checking and low cost wire services take days to complete.

 

• In most cases, it cannot be anonymous.

 

• Accounts can be frozen, or their balance partially or wholly confiscated.

 

• Banks and other payment processors like PayPal, Visa, and Mastercard may refuse to process payments for certain legal entities.

 

 

Accessibility

 

Accessible to Anyone Anywhere

Anyone can download a full copy of the entire blockchain

No Discrimination

No need for a bank account

 

Printing Money

 

Something has value because there is a consensus among people that it has value.

Apples, Bricks, Gold, Oil would be worthless if no one agreed that they had any value.

 

 

Building upon the notion that money is any object, or any sort of record, accepted as payment for goods and services and repayment of debts in a given country or socio-economic context,

 

 

Bitcoin is designed around the idea of using cryptography to control the creation and transfer of money, rather than relying on central authorities.

 

bitcoins have all the desirable properties of a money-like good. They are portable, durable, divisible, recognizable, fungible, scarce and difficult to counterfeit.

 

 

 

• https://bitcoin.org/bitcoin.pdf
• http://nakamotoinstitute.org/literature/
• http://nakamotoinstitute.org/crypto-anarchist-manifesto/#selection-91.98-91.408
• http://www.weidai.com/bmoney.txt
• http://www.hashcash.org/papers/hashcash.pdf