So the last thing I'm going to talk about this unit is bitcoin
which is a way to do digital cash in a completely decentralized way.
This means that there's no bank--there's no trusted authority--
but everyone who participates in the protocol is considered a peer,
and they all have an equal say as to what's valued and what's not.
Bitcoin combines lots of ideas from previous protocols,
but the particular way that bitcoin does it
was proposed by Satoshi Nakamoto in 2009.
The way it avoids needing a centralized bank
is to keep track of every single transaction that ever happens.
So in order to track transactions we have a chain of signatures.
So here's how that works.
Some coin comes in, and we'll have to talk
about how that value gets created, next.
For Alice to transfer that coin, what she'll do is to create a message
that includes the coin, includes that she's transferring it to Bob,
and she'll sign that with her key.
So then she sends that to Bob.
Bob can verify the signature.
For Bob to transfer the coin, he'll add transfer to Cathy to that
and then sign the whole thing with his private key.
And now Cathy would do the same thing--
take everything that Bob sent, add a transfer message to it,
and sign the whole thing with her private key.
And then she can transfer it on to Doug.
At every link in this chain--
as long as they have all the public keys they need--
can verify the entire history of transactions.
So Cathy can verify the signature of Bob--
open that up--
verify the signature of Alice inside it,
and verify that the original coin.
So this is a way to use public key cryptography
to keep track of an entire history of transactions.
Does it provide enough to provide digital cash?
So how many times can Bob spend the coin?
