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The Bitcoin whitepaper, explained and commented — section 1, introduction
Have you ever read Bitcoin’s whitepaper? Is it a bit too technical? In this series, we’ll look at Satoshi Nakamoto’s original whitepaper from 2008, which introduced Bitcoin to the world, and I will comment and explain it section by section, and try to put everything in context. The paragraph in quotes are from the whitepaper itself. Today, we start with… the introduction! Let’s get to it.
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services.
From the start, we can see that Nakamoto was mostly preoccupied with e-commerce: how to do electronic transactions between two parties? More precisely, he was not satisfied with the current solutions for a few reasons: