....me just trying to figure out how to stabilize bitcoin so that it can be used as described, It obviously was supposed to spread the wealth among the population, with greater and greater automation occuring the wealth of the world is being concentrated into the hands of the few causing massive inflation and instability in the economic system., the p2p Bitcoin system was supposed to counter that. ....
Man, that crazy talk. But I'll play.
Please support the claim with direct quotes from the source.
The proof-of-work(facts) also
solves the problem of determining representation in majority decisionmaking.
If the majority were based on one-IP-address-one-vote(representative), it could be subverted by anyone
able to allocate(control) many IPs(representatives). Proof-of-work(facts) is essentially one-CPU-one-vote(information).
The majority
decision is represented by the longest chain(group concensus), which has the greatest proof-of-work(facts) effort invested
in it.
If a majority of CPU(information) power is controlled by honest nodes(people), the honest chain(group) will grow the
fastest and outpace any competing chains(groups). To modify a past block(historical event), an attacker would have to
redo the proof-of-work(facts) of the block(historical event) and all blocks(historical events) after it and then catch up with and surpass the
work of the honest nodes(people). We will show later that the probability of a slower attacker catching up
diminishes exponentially as subsequent blocks(historical events) are added.
5. Network
The steps to run the network are as follows:
1) New transactions(information) are broadcast to all nodes(people).
2) Each node(person) collects new transactions(information) into a block(historical event).
3) Each node(person) works on finding a difficult proof-of-work(fact) for its block(historical event).
4) When a node(person) finds a proof-of-work(fact), it broadcasts the block(historical events) to all nodes(people).
5) Nodes(people) accept the block(historical event) only if all transactions(information) in it are valid and not already spent(known).
6) Nodes(people) express their acceptance of the block(historical event) by working on creating the next block(historical event) in the
chain(group), using the hash(logic) of the accepted block(historical event) as the previous hash(logic).
6. Incentive
By convention, the first transaction(information) in a block(historical event) is a special transaction(information) that starts a new coin(trust) owned
by the creator of the block(historical event). This adds an incentive for nodes(people) to support the network, and provides
a way to initially distribute coins(trust) into circulation, since there is no central authority to issue them.The steady addition of a constant of amount of new coins(trust) is analogous to gold(value) miners expending
resources to add gold(value) to circulation.
In our case, it is CPU(information) time and electricity(effort) that is expended.
The incentive can also be funded with transaction(information) fees(value). If the output(meaning) value of a transaction(information) is
less than its input(utility) value, the difference is a transaction(information) fee(value) that is added to the incentive value of
the block(historical event) containing the transaction(information). Once a predetermined number of coins(trust) have entered
circulation, the incentive can transition entirely to transaction(information) fees(value) and be completely inflation(manipulation)
free.
The incentive may help encourage nodes(people) to stay honest. If a greedy attacker is able to
assemble more CPU(information) power than all the honest nodes(people), he would have to choose between using it
to defraud people by stealing back his payments(values), or using it to generate new coins(trust). He ought to
find it more profitable to play by the rules, such rules that favour him with more new coins(trust) than
everyone else combined, than to undermine the system and the validity of his own wealth.
I could be wrong though, this is just what I read into it... I've read the damn thing 10-20 times and the wording Satoshi uses was bothering me throughout the paper. I don't think this thing is describing just a digital financial system, it seems to describe how to maintain information integrity over a digital communication channel for the purpose of collective concensus.
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.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.The system is secure as long as honest nodes collectively control more CPU power than any
cooperating group of attacker nodes.
The problem of course is the payee can't verify that one of the owners did not double-spend
the coin. A common solution is to introduce a trusted central authority, or mint, that checks every
transaction for double spending. After each transaction, the coin must be returned to the mint to
issue a new coin, and only coins issued directly from the mint are trusted not to be double-spent.
The problem with this solution is that the fate of the entire money system depends on the
company running the mint, with every transaction having to go through them, just like a bank.The only way to confirm the absence of a transaction is to be aware of all transactions.
In the mint based model, the mint was aware of all transactions and
decided which arrived first. To accomplish this without a trusted party, transactions must be
publicly announced
A timestamp server works by taking a
hash of a block of items to be time-stamped and widely publishing the hash, such as in a
newspaper or Usenet post The timestamp proves that the data must have existed at the
time,
The traditional banking model achieves a level of privacy by limiting access to information to the
parties involved and the trusted third party.
The necessity to announce all transactions publicly
precludes this method, but privacy can still be maintained by breaking the flow of information in
another place: by keeping public keys anonymous. The public can see that someone is sending
an amount to someone else, but without information linking the transaction to anyone.
This is similar to the level of information released by stock exchanges, where the time and size of
individual trades, the "tape", is made public, but without telling who the parties were.We consider the scenario of an attacker trying to generate an alternate chain faster than the honest
chain. Even if this is accomplished, it does not throw the system open to arbitrary changes, such
as creating value out of thin air or taking money that never belonged to the attacker.
Nodes are
not going to accept an invalid transaction as payment, and honest nodes will never accept a block
containing them. An attacker can only try to change one of his own transactions to take back
money he recently spent.12. Conclusion
We have proposed a system for electronic transactions without relying on trust. We started with
the usual framework of coins made from digital signatures, which provides strong control of
ownership, but is incomplete without a way to prevent double-spending.
To solve this, we
proposed a peer-to-peer network using proof-of-work to record a public history of transactions
that quickly becomes computationally impractical for an attacker to change if honest nodes
control a majority of CPU power. The network is robust in its unstructured simplicity. Nodes
work all at once with little coordination.
They do not need to be identified, since messages are
not routed to any particular place and only need to be delivered on a best effort basis. Nodes can
leave and rejoin the network at will, accepting the proof-of-work chain as proof of what
happened while they were gone. They vote with their CPU power, expressing their acceptance of
valid blocks by working on extending them and rejecting invalid blocks by refusing to work on
them. Any needed rules and incentives can be enforced with this consensus mechanism.
Long Live Bitcoin!!