What does the Bitcoin whitepaper say, in plain English?

Who wrote it, and when

Bitcoin was first described in 2008, in a paper called "Bitcoin: A Peer-to-Peer Electronic Cash System".¹ The author used the name Satoshi Nakamoto. Nobody knows who that person, or group, really is.¹

Nakamoto shared the paper on a cryptography mailing list on 31 October 2008.³ It is only nine pages long.²

The problem it set out to solve

Paying online almost always means going through a bank or a payment company. The paper calls these trusted third parties.² Nakamoto wanted a payment system "based on cryptographic proof instead of trust", so any two people could pay each other directly.²

The hard part is double-spending: paying two people with the same coin. Someone who receives a coin can't easily check that it wasn't already spent somewhere else.²

The usual fix is a central "mint" that checks every payment. The paper's worry is that the whole money system then depends on whoever runs the mint, just like a bank.²

Announce everything, agree on one history

Nakamoto's answer was to announce every transaction in public. As the paper puts it, the only way to be sure a payment didn't happen is to know about every payment.² Then everyone needs a way to agree on one history of which payment came first.²

A hash is the result of scrambling any amount of data into a short, fixed-size output.⁴ The paper groups transactions into blocks, hashes each block, and puts that hash inside the next block. This links the blocks into a chain.²

Proof of work

To add a block, a computer must find a number that makes the block's hash start with a set number of zeros. This is proof of work.² Finding the number takes a huge amount of guessing, but anyone can check it with a single hash.²

Once the work is done, the block can't be changed without doing the work again. Changing an old block also means redoing every block after it.²

The paper calls this "one-CPU-one-vote". The longest chain, which has the most work behind it, counts as the true history.² The system stays safe as long as honest computers have more computing power than any group of attackers.²

How the network runs

In plain English, the paper's steps are:²

1. New transactions are sent to all nodes, the computers that run the network.²
2. Each node collects new transactions into a block and works on its proof of work.²
3. The node that finds the proof sends its block to everyone.²
4. Nodes accept the block only if every transaction in it is valid and not already spent.²
5. Nodes show they accept it by building the next block on top of it.²

What else fits in nine pages

• Rewards. The first transaction in each block creates new coins for whoever made the block.²
• Fees. If a transaction pays out less than it takes in, the difference is a fee for the block maker.²
• Privacy. The public can see amounts moving, but not who is behind them. The paper suggests a new key pair for every transaction.²
• Simple checking. You can check a payment without running a full node, by keeping only the block headers. The paper calls this simplified payment verification.²

The paper never gives the 21 million limit. It only says that once "a predetermined number of coins" are in circulation, block makers can be paid by fees alone.²

From paper to network

Nakamoto released the first Bitcoin software on 8 January 2009.⁵ The very first block holds a newspaper headline: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". It was meant as proof of the earliest date the block could have been made.⁶