The requirement of this method is that there must be enough people who don’t want to depend on a third-party. Only then can this group maintain the register on their own.
“It might make sense just to get some Bitcoin in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy.” ~ Satoshi Nakamoto in 2009
How many are enough? At least three. But for our example, we will assume ten individuals want to give up on banks or any other third-party that manages transactions. Upon mutual agreement, they have details of each other’s accounts all the time — without knowing the other’s identity.
Everyone starts off with an empty folder. As transactions happen, all these ten individuals will keep adding pages to their currently empty folders. And this collection of pages will form the register that tracks the transactions.
Next, everyone in the network sits with a blank page and a pen in their hands. Everyone is ready to write any transaction that occurs within the system.
#2 wants to send $10 to
To make the transaction,
#2 shouts and tells everyone, “I want to transfer $10 to
#9. So, everyone, please make a note of it on your pages.”
Everyone checks whether
#2 has enough balance to transfer $10 to
#9. If she has enough balance, everyone then makes a note of the transaction on their blank pages.
First transaction on the page
The transaction is then considered to be complete.
As the time passes, more people in the network may want to transfer money to others. Whenever they want to make a transaction, they announce it to everyone else. As soon as a person hears an announcement, (s)he writes it on his/her page.
This exercise continues until everyone runs out of space on the current page. Assuming a page has space to record ten transactions, as soon as the tenth transaction is made, everybody runs out of space.
When page gets filled
It’s time to put the page away in the folder and bring out a new page and repeat the process from the step 2 above.
Before we put away the page in our folders, we need to seal it with a unique key that everyone in the network agrees upon. By sealing it, we will make sure that no one can make any changes to it once its copies have been put away in everyone’s folder — not today, not tomorrow and not ever. Once in the folder, it will always stay in the folder — sealed. Moreover, if everyone trusts the seal, everyone trusts the contents of the page. And this sealing of the page is the crux of this method.
[Jargon Box] It is called ‘mining’ on the page to secure it, but for the simplicity of it, we’ll keep calling it ‘sealing.’
Earlier the third-party/middleman gave us the trust that whatever they wrote in the register would never be altered. In a distributed and decentralized system like ours, this seal will provide the trust instead.