Bitcoin open source implementation of P2P currency
I’ve developed a new open source P2P e-cash system called Bitcoin. It’s completely decentralized, with no central server or trusted parties, because everything is based on crypto proof instead of trust.
The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts.
With e-currency based on cryptographic proof, without the need to trust a third party middleman, money can be secure and transactions effortless.
The solution Bitcoin proposes is to use a peer-to-peer network to check for double-spending. In a nutshell, the network works like a distributed timestamp server, stamping the first transaction to spend a coin. It takes advantage of the nature of information being easy to spread but hard to stifle.
For more details on how it works, see the design paper at http://www.bitcoin.org/bitcoin.pdf or visit http://www.bitcoin.org where you can download the software and try it out.
Satoshi Nakamoto
Sepp Hasslberger wrote:
Dante, in an email, has mentioned a UK project called Open Coin. It seems to go in a similar direction.
Could there be synergies with bitcoin?
Could be. They’re talking about the old Chaumian central mint stuff, but maybe only because that was the only thing available. Maybe they would be interested in going in a new direction.
A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.
Joerg Baach wrote:
What I did not understand about your system - how would you use it for a currency of any sort? Everybody can create a coin as they like, as far as I understood, so therefore there is no trusted supply of tokens / coins.
Sepp Hasslberger wrote:
Is there a formula to decide on what should be the total amount of tokens, and if so, what is the formula?
It is a global distributed database, with additions to the database by consent of the majority, based on a set of rules they follow:
-
Whenever someone finds proof-of-work to generate a block, they get some new coins
-
The proof-of-work difficulty is adjusted every two weeks to target an average of 6 blocks per hour (for the whole network)
-
The coins given per block is cut in half every 4 years
You could say coins are issued by the majority. They are issued in a limited, predetermined amount.
As an example, if there are 1000 nodes, and 6 get coins each hour, it would likely take a week before you get anything.
To Sepp’s question, indeed there is nobody to act as central bank or federal reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because I don’t know a way for software to know the real world value of things. If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that.
In this sense, it’s more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.
I am not Dorian Nakamoto.