Ethereum Papers book chapter
Logos
Blockchains exist because Bitcoin solved the Byzantine General’s Problem. The thought experiment is this: imagine a city under attack by four generals. If all the generals attack at the same time, they are guaranteed to win and capture the city. If they attack at different times, they lose. They can send each other messages, but one of the generals is a traitor. There is no way to tell whether a message is legitimate and from one of the honest generals, or if the message is, in fact, a trick from the enemy.
How do you solve this problem? How do you defend the truth from fakes, frauds, and saboteurs? Satoshi Nakamoto’s answer was to create a game with three elements: randomness, costs, and rewards. First you set up a hard puzzle that gets increasingly difficult as more people try to figure it out. The puzzle is based on the SHA-256 hashing algorithm and the only computers capable of successfully mining for the answers today are specially made ones called Application Specific Integrated Circuits or ASICs. SHA-256 provides the randomness because each problem and solution is unpredictable. Buying, maintaining, and powering the ASICs are the costs. The rewards are the bitcoins (BTC) themselves. Everyone must pay to play. Only players who follow the rules can win. Who wins each round is random.