Part of list:
An Almost-working Decentralized Ledger
The big insight that bitcoin makes here is that the ledger doesn't have to be centralized.
Going back to the town example, imagine that instead of having a chalkboard ledger in the middle of the town, you instead had everyone keep an up-to-date notebook containing the balances of themselves and everyone else in the town. Then, if you wanted to pay someone, you'd have to update the balances of yourself and your counterparty not only in your own personal ledgers, but you'd also have to update them in everyone else's ledgers as well. If you could do this, you'd have what would collectively be called a decentralized ledger, consisting of all the information across everyone's notebooks.
The problem though is that every transaction would have to be broadcast to everyone else instantly in order for the system to work, which isn't possible in our example. Otherwise, you could do a transaction with someone, then run over to someone else who hasn't updated their notebook yet and do yet another transaction with them that would put you into a negative. Below is an example of this:
The ability to do multiple transactions before everyone updates their notebooks is called the double-spending problem , and until bitcoin came out, the double-spending problem completely precluded the implementation of a working decentralized ledger. In essence, before bitcoin, we needed Bank of America to exist as a neutral third-party who could: