Right, nodes keep transactions in their working set until they get into a block. If a transaction reaches 90% of nodes, then each time a new block is found, it has a 90% chance of being in it.
Long before the network gets anywhere near as large as that, it would be safe for users to use Simplified Payment Verification (section 8) to check for double spending, which only requires having the chain of block headers, or about 12KB per day.
Another option is to reduce the number of free transactions allowed per block before transaction fees are required. Nodes only take so many KB of free transactions per block before they start requiring at least 0.01 transaction fee. The threshold should probably be lower than it currently is. I don't think the threshold should ever be 0. We should always allow at least some free transactions.
The main properties:
Double-spending is prevented with a peer-to-peer network.
No mint or other trusted parties.
Participants can be anonymous.
New coins are made from Hashcash style proof-of-work.
The proof-of-work for new coin generation also powers the network to prevent double-spending.
The project needs to grow gradually so the software can be strengthened along the way. I make this appeal to WikiLeaks not to try to use Bitcoin. Bitcoin is a small beta community in its infancy.
I've developed a new open source P2P e-cash system called Bitcoin. It's completely decentralized, with no central server or trusted parties, because everything is based on crypto proof instead of trust. Give it a try, or take a look at the screenshots and design paper:
Download Bitcoin v0.1 at
When a node receives a block, it checks the signatures of every transaction in it against previous transactions in blocks. Blocks can only contain transactions that depend on valid transactions in previous blocks or the same block. Transaction C could depend on transaction B in the same block and B depends on transaction A in an earlier block.
Broadcasts will probably be almost completely reliable. TCP transmissions are rarely ever dropped these days, and the broadcast protocol has a retry mechanism to get the data from other nodes after a while. If broadcasts turn out to be slower in practice than expected, the target time between blocks may have to be increased to avoid wasting resources. We want blocks to usually propagate in much less time than it takes to generate them, otherwise nodes would spend too much time working on obsolete blocks.
The problem of course is the payee can't verify that one of the owners did not double-spend the coin. A common solution is to introduce a trusted central authority, or mint, that checks every transaction for double spending. After each transaction, the coin must be returned to the mint to issue a new coin, and only coins issued directly from the mint are trusted not to be double-spent. The problem with this solution is that the fate of the entire money system depends on the company running the mint, with every transaction having to go through them, just like a bank.
