Why was Satoshi's solution to the double spend problem so revolutionary...
The double-spend problem exists when transacting over the Internet.
The way the Internet is designed, anyone can spend the same value—issued as a digital file—multiple times, because digital information can be copied, and copies of that same digital file can be sent from one computer to multiple other computers at the same time.
Before the emergence of Bitcoin, ideas around cryptographically secured P2P networks had been discussed in various circles, however there had never been a practical implementation of a P2P network that managed to avoid the double-spending problem, without the need for trusted intermediaries guaranteeing value exchange.
Satoshi’s fabled paper introduced a mechanism of making it expensive to copy digital values.
The Blockchain solution for the double spend problem
- In a blockchain network transactions are recorded in batches of data called “blocks” that are “hashed.” This cryptographic hash creates a digital fingerprint of the block
- Each block includes the hash of the prior block, thereby linking one block with another into a chain of blocks.
- This process guarantees the historic integrity of all the blocks back to the genesis block.
- If data in one block is altered, the hash value of the block and all subsequent blocks will change, and every node in the network will know that the data has been tampered with.
- This growing list of chained blocks is also referred to as the ledger.
The ledger is a file that maintains the list of transaction records, chained in blocks that are cryptographically secured from tampering and revision.
If manipulation attempts are made, the hash value of the manipulated ledger will not coincide with the hash value recorded on the copies of the ledger on all other nodes.
The hash value of a block therefore serves as a counterfeit protection that can be used to check the authenticity of a transaction on a ledger.
Last modified: 23/01/2022
