Internet business has come to depend on financial organizations serving as trusted third-parties to process electronic payments. While the system works well enough for most of the transactions, it still suffers from the inherent weaknesses of the trust-based model. Non-reversible transactions are not possible, since financial organizations can’t abstain from intervening disputes.
The expense of mediation increases the transaction costs, constraining the minimum 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.
With the prospect of reversal, the need for trust binges.
Traders must be cautious of their customers, bothering them for more information than they would otherwise need. A certain proportion of fraud is accepted as unavoidable.
These costs and payment doubts can be avoided in person by using physical currency, but no mechanism be present to make payments over a communications channel without a trusted party.
What is needed is an automated payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.
Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double spending problem using a peer- to-peer distributed timestamp server to generate
computational proof of the sequential order of transactions.
The system is secure if authentic nodes together control more CPU power than any conjoining group of attacker nodes.NYEWhitePaper