What is in the Bitcoin white paper?

The Bitcoin whitepaper outlines how Satoshi Nakamoto’s ambitious protocol would work, including:

How Bitcoin transactions work.

How network consensus and validation are achieved.

How the network is protected from attacks.

The document is akin to a technological constitution. It is the governing document for a new form of money that is stateless and fully decentralized.

Transactions

Satoshi claimed that by using existing cryptography and emerging blockchain ledger technology, it was possible to create a digital payment system that did not rely on trusted intermediaries.

Instead, it was proposed that the system be operated by a peer-to-peer network of volunteers, similar to how the Tor network operates. Coupled with digital signatures generated using complex math and cryptographic algorithms, users could unambiguously prove their ownership of funds without revealing sensitive information.

Notably, Bitcoin also gave users the ability to approve transactions autonomously.

Network consensus

In order for users to be able to approve their own transactions without a trusted intermediary, there needed to be a system to prevent invalid transactions from being processed — that is, double spending of the same funds.

Satoshi solved this problem by adopting a consensus mechanism pioneered by cryptographer and Blockstream CEO Adam Back. A consensus mechanism is a system that encourages a distributed group of users (most of whom do not know each other and should not trust each other in any way) to act honestly when agreeing on a single data entry.

Back's mechanism is called proof-of-work (PoW), and it requires users to invest time and computing power to win a cryptography-based competition before they can perform the vital role of data verification. By forcing volunteers to participate, the likelihood that they will act dishonestly is greatly reduced.

Network Security

Satoshi Nakamoto recognized that a peer-to-peer network can only be secure if the majority of users act honestly according to the rules encoded in the protocol.

As new blocks of transaction data are added to the blockchain and verified by at least 51% of the network, an "honest" chain is created that everyone agrees is the true history of valid transactions. Even if an attacker tries to create their own invalid blocks, the rest of the network will reject them in favor of the longest chain.

But what if a majority of the Bitcoin blockchain is controlled by a single attacker or a group of colluding attackers? Such an attack, known as a 51% attack, would give the attacker the power to change the order of incoming transactions or even block incoming transactions if they were able to overtake the longest chain and replace it with their own.

However, they cannot create new units of Bitcoin or change the issuance rate at will. These parameters are controlled by the underlying code of the protocol, not by the network validators.

Satoshi likened this to the gambler's ruin problem, where unless attackers are consistently successful in the early stages of their attack, they are unlikely to launch attacks and build longer attack chains.