Why Use Bitcoins Research Paper Example | Topics and Well Written Essays - 2250 words

Why Use Bitcoins - Research Paper Example A solution is proposed to the double-spending problem incorporating peer-to-peer network. Bitcoins involves network timestamps transactions by forming a record that cannot be altered without redoing the proof-of-work. The longest chain clearly proves that it originated from one of the largest pool of CPU strength, and also serves as proof of the sequence of events witnessed. Although as long as most of CPU strength is under the control of nodes which are not collaborating to attack the network, they will spawn the longest chain and outpace attackers. Minimal structure is required by the network itself. Leaving and rejoining of the network by nodes at will also happens, while messages are broadcast on a best effort basis; also the nodes allow the lengthiest proof-of-work chain as evidence of what happened in its absence (Andy). Introduction Commerce on the Internet has come to over relay on financial institutions serving as third parties relied upon to process electronic payments. The system still suffers from the inherent weaknesses of the trust based model, though it works well enough for many transactions. Since financial institutions cannot keep away from mediating disputes, completely non-reversible transactions cannot be deemed possible. While limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, the cost of mediation increases transaction costs, and there is a wider scope regarding the cost in the loss of ability to make non-reversible payments for nonreversible services. There is also the need for trust spreads due to the likelihood of reversal. While interviewing customers for more information than they would otherwise need, Bitcoin merchants must be wary of them (Angry). Although Bitcoins have been proved to be vital in the distribution of currency, they are sometimes associated with various risks which aid dealers in the black markets. A certain degree of fraud is allowed as unavoidable. These e xpenses and expense uncertainties can be evaded in person, through the use of physical currency, though no such mechanisms are present to carry out payments over a communications channel devoid of a trusted party. An electronic payment system based on cryptographic proof instead of trust is required, making it possible for any two willing parties to transact directly with each other, thus not needing the services of a trusted third party. Routine escrow mechanisms could easily be implemented to protect buyers, since the transactions which are computationally impractical to reverse would shield sellers from fraud. In this paper, we study the use of Bitcoins as solutions to the double-spending problem incorporating peer-to-peer distributed timestamp server in order to spawn computational evidence of the sequential order of transactions. The system facilitating Bitcoin transactions is protected as long as honest nodes as a group run more CPU strength than any group of attacker nodes wo rking together (Chirgwin). Bitcoin for a free society A free society needs a free market while a free market requires a sound form of currency. Bitcoin is a form of currency with good properties like pseudonymous, no likely hood of frozen accounts, there is no charge-backs and there is very cheap and very fast transfer of funds. This is a huge advantage over a barter or cash-only economy. In order to succeed in the long-run, Bitcoin needs the following 3 hypotheses: i. No state control. In short, we should not attempt to gain legality for Bitcoin; the state should not be asked or involved in Bitcoin operations ii. No bank involvement: We should not focus on interoperability with the traditional banking