The following is a partial annotated bibliography of the SNI Mempool, building the case for why Bitcoin will displace all competing currencies, including altcoins, fiat money, and precious metals:
In terms of monetary policy, Bitcoin is the greatest money the world has ever seen.
Turns out, if you add point A a lot of times (in other words, multiply it by a large enough number) and get another point B, it will be hard to figure out what that number was, provided you are given only the original point A and the resulting point B.
My strategy in the post is to build Bitcoin up in stages. I’ll begin by explaining a very simple digital currency, based on ideas that are almost obvious. We’ll call that currency Infocoin, to distinguish it from Bitcoin. Of course, our first version of Infocoin will have many deficiencies, and so we’ll go through several iterations of Infocoin, with each iteration introducing just one or two simple new ideas. After several such iterations, we’ll arrive at the full Bitcoin protocol. We will have reinvented Bitcoin!
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. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
A more challenging problem is that this protocol allows Alice to cheat by double spending her infocoin. She sends the signed message “I, Alice, am giving Bob one infocoin, with serial number 1234567″ to Bob, and the message”I, Alice, am giving Charlie one infocoin, with [the same] serial number 1234567” to Charlie. Both Bob and Charlie use their copy of the block chain to verify that the infocoin is Alice’s to spend. Provided they do this verification at nearly the same time (before they’ve had a chance to hear from one another), both will find that, yes, the block chain shows the coin belongs to Alice. And so they will both accept the transaction, and also broadcast their acceptance of the transaction.
A blockchain – originally block chain – is a distributed database that is used to maintain a continuously growing list of records, called blocks. Each block contains a timestamp and a link to a previous block. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. By design, blockchains are inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. Functionally, a blockchain can serve as "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. The ledger itself can also be programmed to trigger transactions automatically.