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Continuing to review the series of dialogues between Dr. Craig S. Wright and Ryan X. Charles, where they discuss the Bitcoin White Paper line-by-line, we come to the section concerning the Timestamp Server. Dr. Wright is the inventor of Bitcoin and the Chief Science officer at nChain while Ryan is the founder of Money Button.
In short, a timestamp server is a way to document when an event occurred as well as prove that at some point the transaction existed. This process of using electronic timestamps has been utilized for decades for everything from credit card transactions to bank transfers.
Prior to electronic timestamps, Dr. Wright refers to the process of using a notary. Good notaries recorded the data in a book and maintained that information for future reference as needed. The integrity of the information was at risk of loss perhaps due to physical damage to the book such as a fire or other unforeseen risks.
There are two basic types of timestamp servers. One is using a trusted third party and the other is distributed trust using hash headers. When it comes to Bitcoin, the nodes aka Bitcoin miners, are a distributed set of timestamp servers. These timestamp servers take a hash of a block that has been timestamped then post or distribute it publicly. Each of the timestamps include the previous timestamp in its’ hash creating a chain, therefore reinforcing the one before it. All of which takes place automatically using the Bitcoin system that is in place.
The security within Bitcoin actually requires a large amount of SPV nodes (not the actual Bitcoin mining nodes) across the network to be used thus widely recording block headers globally. This is how the system is scaled and becomes more secure by having the information spread out in more places. The SPV nodes are only storing the block headers of the timestamps which allows them to store more data including any forks or splits.
A banking system such as SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is an EDI (Electronic Data Interchange), can ultimately be replaced by Bitcoin and scaled. While it does have a widely used set of standards, it is a single key system.
If the single key is compromised, the entire history of the transaction is compromised whereas Bitcoin using public/private keys and widely distributing them reduces the potential for fraud. Someone gaining your public key can do nothing with it. If someone gets your single SWIFT key, they potentially can access your information and manipulate your account. Additional security issues with using SWIFT to transfer money globally is due to the transactions passing through multiple gateways.
