James A. Donald wrote:
> The core concept is that lots of entities keep complete and consistent
> information as to who owns which bitcoins.
> 
> But maintaining consistency is tricky. It is not clear to me what
> happens when someone reports one transaction to one maintainer, and
> someone else transports another transaction to another maintainer. The
> transaction cannot be known to be valid until it has been incorporated
> into a globally shared view of all past transactions, and no one can
> know that a globally shared view of all past transactions is globally
> shared until after some time has passed, and after many new
> transactions have arrived.
> 
> Did you explain how to do this, and it just passed over my head, or
> were you confident it could be done, and a bit vague as to the details?

The proof-of-work chain is the solution to the synchronisation problem, and to \
knowing what the globally shared view is without having to trust anyone.

A transaction will quickly propagate throughout the network, so if two versions of \
the same transaction were reported at close to the same time, the one with the head \
start would have a big advantage in reaching many more nodes first.  Nodes will only \
accept the first one they see, refusing the second one to arrive, so the earlier \
transaction would have many more nodes working on incorporating it into the next \
proof-of-work.  In effect, each node votes for its viewpoint of which transaction it \
saw first by including it in its proof-of-work effort.

If the transactions did come at exactly the same time and there was an even split, \
it's a toss up based on which gets into a proof-of-work first, and that decides which \
is valid.

When a node finds a proof-of-work, the new block is propagated throughout the network \
and everyone adds it to the chain and starts working on the next block after it.  Any \
nodes that had the other transaction will stop trying to include it in a block, since \
it's now invalid according to the accepted chain.

The proof-of-work chain is itself self-evident proof that it came from the globally \
shared view.  Only the majority of the network together has enough CPU power to \
generate such a difficult chain of proof-of-work.  Any user, upon receiving the \
proof-of-work chain, can see what the majority of the network has approved.  Once a \
transaction is hashed into a link that's a few links back in the chain, it is firmly \
etched into the global history.

Satoshi Nakamoto