Bitcoin: Peer-to-Peer Electronic Cash Payment System


In the introduction of this article, we see some of the problems we experience in the work of financial institutions and show why we need this
crypto money
or blockchain technology. According to the article, financial institutions are not trustworthy, transaction expenses and small payments prevent transactions and payments. He argues that these costs can be reduced by the use of physical money, but the environment of trust cannot be ensured again. As a solution to this problem, it offers an electronic payment system based on crypto graphic evidence, where two parties can transact directly with each other without the need for a third trusted party.


We define electronic money as a chain of digital signature systems (
). Each time the currency is exchanged, all transaction holders sign the transaction using the digital signature of the previous transaction and thus transfer it to the next one. Their goal here, according to the article, is to count the first transaction once. Duplicate transaction attempts at later stages are not dealt with.

Bitcoin: A Peer-to-Peer Electronic Cash Payment System – Introduction to a Visual


The solution suggested in the article starts with a timestamp server. The timestamp server takes the hash value of a block of transactions waiting to be stamped and broadcasts that summary to the entire network, such as newspaper, Usenet [2-5] , etc. The timestamp is proof that at the moment the message is published, the data enters the digest, that is, it exists. Each timestamp creates a chain by containing the previous timestamp inside the digest, and each plugin reinforces the previous ones.

Bitcoin: Peer-to-Peer Electronic Cash Payment - Visual Two - Timestamp Server


In the paper, the basis of the proof of work is the search for an objective value in the hash function, such as SHA-256, that would allow the digest output to start with a certain number of 0-bits. In our timestamp network, we provide proof of work with a nonce value, which we increase until we reach the desired value of 0 (zero) in the digital signature of the block.


There are steps to operate the network determined according to the article; – Each new transaction is broadcast to all nodes. – Each node aggregates new transactions into a block. – Each node tries to find a proof of work within its own block. – The node that finds the proof of work sends this proof to all other nodes. – Nodes accept the block if all transactions in the block job have been verified and have not been spent before. – Nodes express that they confirm the block by trying to create the next block in the chain using the digital signature (hash value) of the accepted block.


As a rule, the first transaction in a block is a special transaction in which the creator of that block puts into circulation a new coin that he will own. According to the article, this both encourages them to support the network and ensures that the money is brought into circulation since there is no central institution to print the money. Here the money that will enter the economic cycle is predetermined. This situation will prevent inflation, which is the biggest problem of the economies of the country today.


When the last transaction in which a cryptocurrency was used is below enough blocks, the finished transactions can be deleted to free up disk space.


According to the article, validation is secure as long as the network works with honest nodes. But if the attacking nodes take over the processing power on the network, they will be vulnerable. While network nodes can verify transactions on their own, the simplified method can be deflected as long as the attacker has control of the network. One strategy against this would have been to listen for incoming alarms when network nodes encountered a faulty block, ask users to load the alarmed transactions and the entire block, and verify the inconsistency.

Bitcoin: Peer-to-Peer Electronic Cash Payment System - Simplified Payment Verification - Visual Three


Although it was possible to track each coin one by one, it would not be practical to open a transaction separately for each penny to be transferred. Division and unification of value is the execution of transactions in multiple inputs and outputs. Division and unification of value is the execution of transactions in multiple inputs and outputs. Usually it is either a single input from a previous large transaction or multiple inputs that combine small amounts. At most, there will be two outputs: one is the payment amount, and the other, if any, is the redemption that returns the money to the sender.

'Bitcoin: Peer-to-Peer Electronic Cash Payment System' -Visual Four- Merging and Dividing Values


The traditional banking model achieves a level of confidentiality by limiting access to information to parties and trusted third parties. The need to publicly declare all transactions makes this method impractical, but privacy can still be ensured by interrupting the flow of information from another point: by keeping public keys anonymous. It can be traced that someone from the outside sends a certain amount to someone else, but there is no information about who made the transaction.

privacy visual


Let’s consider in the article that offensive nodes do business faster than honest nodes. Even if this happens, it will not be able to expose the system arbitrarily. Nodes will not accept an invalid transaction as payment. Honest nodes will also never accept blocks that host these transactions.


  • The amount of potential advance of the attacker is the Poisson distribution according to the expected value;


  • To calculate the probability that the attacker can still catch up, we multiply the Poisson intensity of each amount of progress by the probability that it will be able to catch up from this point on:

stealth 1

  • We rearrange it to avoid getting the sum of the infinite distribution queue.

Stealth 2

  • If we convert it to C code

under privacy


The article proposes a system of electronic money that is not based on trust across an entire topic. This monetary system of digital signatures could be properly controlled, but since it was incomplete because it did not prevent the problem of double-spending, we proposed a distributed but peer-to-peer network structure that is used to record proof of work, transaction history. The network is robust in its distributed simplicity. The nodes work all at once with little coordination. Since messages should not be routed to a specific specific place and should only be presented on a best-effort basis, they do not need to be identified. Nodes can leave the network or reconnect at any time. Chains that have been proven to work are accepted as their proof when they are gone. Nodes vote with their processor (CPU) power to confirm blocks, reject faulty blocks, and expand their chain. With this consensus mechanism, all necessary rules and incentives (transaction fees, etc.) can be applied.