⚡️Thank you, Satoshi Nakamoto, for changing my life—today marks the 16th anniversary of the #Bitcoin white paper release!

The initial trading price of Bitcoin was $0.0008, and it has appreciated over 90 million times since then.

Although Satoshi Nakamoto disappeared after 2011, the worldview of Bitcoin that Satoshi most wanted to convey is covered in the white paper—

Bitcoin is the first time in human history that technology has achieved the sanctity and inviolability of private property; time will ultimately prove the greatness of Bitcoin.

The most widely circulated Chinese translation of the white paper comes from Mr. Wu Jihan. I recommend everyone read it again; I believe it will yield new insights. Once again, thank you #BTC for changing my life!

Below is an excerpt from "Bitcoin: A Peer-to-Peer Electronic Cash System" (translated by Wu Jihan), highlighting some key parts—

[Abstract]: This paper proposes an electronic cash system that is fully implemented through peer-to-peer technology, allowing online payments to be sent directly from one party to another without going through any financial institution.

1⃣ Introduction

Trade on the internet almost always requires financial institutions as trusted third parties to process electronic payment information. While these systems work well in the vast majority of cases, they are still inherently limited by the weaknesses of the "credit-based model."

We cannot achieve completely irreversible transactions because financial institutions will inevitably intervene to mediate disputes. The existence of financial intermediaries also increases transaction costs and limits the minimum feasible transaction size, restricting everyday small payments.

Therefore, we need an electronic payment system that is based on cryptographic principles rather than credit, allowing any two parties that reach an agreement to make payments directly without the need for a third-party intermediary.

Eliminating the possibility of reversing payment transactions can protect specific sellers from fraud; for those who want to protect buyers, establishing a typical third-party escrow mechanism in this environment can also be easy and pleasant.

In this paper, we will propose a method for generating electronic transaction proofs that are time-stamped and recorded in chronological order through a peer-to-peer distributed timestamp server, thus solving the double-spending problem. As long as the total computational power controlled by honest nodes is greater than that of colluding attackers, the system is secure.

2⃣ Transactions

We define an electronic currency as a string of digital signatures: each owner signs a random hash of the previous transaction and the public key of the next owner, appending this signature to the end of the electronic currency, which is then sent to the next owner. The recipient can verify the chain of ownership by checking the signature.

The problem with this process is that the recipient will find it difficult to verify whether a previous owner has double-spent the electronic currency.

If we want to eliminate third-party intermediaries in the electronic system, then transaction information should be publicly announced, and we need all participants in the system to have a uniquely recognized historical transaction sequence. The recipient needs to ensure that the vast majority of nodes recognize the transaction as the first occurrence during the transaction period.

3⃣ Timestamp Server

This solution first proposes a "timestamp server." The timestamp server adds a timestamp to a set of data existing in the form of blocks by implementing a random hash and broadcasts this random hash, similar to posting in news or worldwide news groups.

Clearly, this timestamp can confirm that specific data indeed existed at a certain time because the corresponding random hash value can only be obtained if it existed at that moment. Each timestamp should include the previous timestamp in its random hash value, and each subsequent timestamp reinforces the previous one, thus forming a chain.

4⃣ Proof-of-Work

To build a decentralized set of timestamp servers on a peer-to-peer basis, it is not enough to work like newspapers or worldwide news networks; we also need something similar to Adam Back's Hashcash.

During the random hashing process, the proof-of-work mechanism introduces a scanning effort for a specific value, adding a random number (Nonce) to the block that causes the random hash value of that given block to have a required number of leading zeros. We find this random number through repeated attempts until we succeed, thus constructing a proof-of-work mechanism.

As long as the computational effort expended by the CPU meets the proof-of-work mechanism, the information in that block cannot be changed unless a corresponding amount of work is redone. Since subsequent blocks are linked to that block, changing the information in that block would also require redoing all the work for all subsequent blocks.

The proof-of-work difficulty will be determined using a moving average target method, meaning the difficulty is adjusted to maintain a predetermined average rate of block generation per hour. If blocks are generated too quickly, the difficulty will increase.

5⃣ Network

The steps to run the network are as follows:

1) New transactions are broadcast to the entire network;

2) Each node includes the received transaction information in a block;

3) Each node attempts to find a proof-of-work with sufficient difficulty in its own block;

4) When a node finds a proof-of-work, it broadcasts it to the entire network;

5) Other nodes only accept the validity of the block if all transactions included in that block are valid and have not existed before;

6) Other nodes indicate their acceptance of the block by creating new blocks at the end of that block to extend the chain, treating the random hash value of the accepted block as the predecessor of the new block's random hash value.

6⃣ Incentives

We agree that the first transaction in each block is treated specially, generating a new electronic currency owned by the creator of that block. This increases the incentive for nodes to support the network and provides a way to distribute electronic currency into circulation without a central authority issuing currency.

At this point, the CPU's time and power consumption are the consumed resources. Another source of incentive is transaction fees. Once a certain amount of electronic currency has entered circulation, the incentive mechanism can gradually shift to rely entirely on transaction fees, allowing this currency system to avoid inflation.

The incentive system also helps encourage nodes to remain honest. If a greedy attacker can muster more CPU computing power than all honest nodes combined, they face a choice: either use it to honestly generate new electronic currency or use it to conduct double-spending attacks.

They will find that acting according to the rules and working honestly is more profitable because those rules allow them to acquire more electronic currency rather than destroy the system, which would undermine the validity of their own wealth.

7⃣ Hard Drive Space Recovery

If recent transactions have been included in enough blocks, then the data from before those transactions can be discarded to recover hard drive space.

To ensure that the random hash value of the block is not compromised, transaction information is randomly hashed and constructed into a Merkle tree form, so that only the root is included in the random hash value of the block. By stubbing the branches of that tree, old blocks can be compressed. The internal random hash values do not need to be preserved.

8⃣ Simplified Payment Verification

Payments can be verified without running a full network node. A user needs to keep a copy of the block headers of the longest proof-of-work chain, which can continuously query the network until they are confident they have the longest chain and can trace back through the Merkle branches to the transaction that was timestamped and included in the block.

It is originally impossible for nodes to verify the validity of the transaction themselves, but by tracing back to a certain point in the chain, they can see that a certain node has accepted it, and the subsequent blocks further prove that the entire network has accepted it.

9⃣ Combining and Splitting Value

While electronic currency can be processed one by one, initiating a transaction for each individual electronic currency would be cumbersome. To make value easy to combine and split, transactions are designed to accommodate multiple inputs and outputs.

Generally, a single input is formed from a previous transaction of larger value or from several previous transactions of smaller values combined in parallel, but there are at most two outputs: one for payment and another for change (if any).

🔟 Privacy

Broadcasting transaction information to the entire network means that this method fails. However, privacy can still be protected: by keeping public keys anonymous.

The public only knows that a certain person has sent a certain amount of currency to another person, but it is difficult to link that transaction to a specific individual, meaning the public cannot be sure who these people are.

As an additional precaution, users can generate a new address for each transaction to ensure that these transactions cannot be traced back to a common owner. However, due to the existence of parallel inputs, some degree of tracing is still unavoidable, as parallel inputs indicate that these currencies belong to the same owner. The risk here is that if a person's public key is confirmed to belong to them, many of that person's other transactions can be traced back.

1⃣1⃣ Calculation

Consider the following scenario: an attacker attempts to create an alternative blockchain faster than honest nodes can produce their chain. Even if they achieve this, the entire system is not completely subject to the attacker’s arbitrary will, such as creating value out of thin air or seizing currency that does not belong to the attacker.

This is because nodes will not accept invalid transactions, and honest nodes will never accept a block that contains invalid information.

What an attacker can do at most is change their own transaction information and attempt to reclaim the money they just paid to someone else.

1⃣2⃣ Conclusion

We propose an electronic payment system that does not require credit intermediaries. We first discussed the electronic signature principles of conventional electronic currency, which, while providing strong control over ownership, are insufficient to prevent double spending.

To solve this problem, we propose a peer-to-peer network that uses a proof-of-work mechanism to record publicly available transaction information. As long as honest nodes can control the vast majority of CPU computing power, it becomes practically difficult for attackers to alter transaction records. The robustness of the network lies in its structural simplicity.

Most of the work between nodes is independent of each other, requiring little collaboration. Each node does not need to explicitly identify itself and can leave the network at any time.

This framework contains all the rules and incentives necessary for a P2P electronic currency system.

👉 English original version: https://bitcoin.org/files/bitcoin-paper/bitcoinzhcn.pdf

👉 Full version translated by Wu Jihan: https://www.sohu.com/a/351211414_120095403

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