the following content is provided under a Creative Commons license your support will help MIT OpenCourseWare continue to offer high quality educational resources for free to make a donation or to view additional materials from hundreds of MIT courses visit MIT opencourseware at URL_TOKEN so to start we're gonna recap what happened last class and last class we were talking about how traditional payment systems work and some of the downsides when you had a bank in the middle even if you were using techniques like Chow me and E cash to try to manage what the bank was doing so just as a quick reminder we had this kind of setup where there was Alice and there was Bob Alice with in order to actually make transfers Alice had to interact with the bank and in the case of sort of the traditional payment system we saw that the bank could basically just say no right that it was always possible that a bank could decide that it didn't like Alice and it didn't want to process Alice's transactions we got a little better than this with Chow me and E cash but even with Tommy and ecash the bank was required to do something they were the ones minting the tokens and they were the ones redeeming the token so the banks still played an integral part in this system and you know that actually really does make a difference it's not just a theoretical problem there are many accounts of people with for example PayPal accounts who have their who have their funds frozen so they can't access the money that they have in PayPal so you know this often happens to merchants actually who end up accepting customers from different countries or things like this they can get flagged by PayPal's algorithms as being potentially fraudulent and that can put a hold on their funds in the case of Chow me and E cash you'll notice that we're not all running around using digital tokens issued by banks chummy me cash didn't really work out and that was in part due to the fact that banks weren't really interested in implementing this technique so okay so this is where we ended last class which was we're in this situation where the bank sort of has a lot of control over payments and how payments happen and and something I want to emphasize here as well is you know this isn't it's not just that we worry about this because we want to do a legal activity having an institution in the middle of payments and sort of being able to facilitate payments can can be a problem in other ways as well because it can just simply make things slower it can make things it's harder to innovate it's harder to introduce new features there's a sign-up process so you know there are reasons why we don't want to have an institution in the middle even if we're totally honest actors so the question so where we ended up was how do we build a decentralized digital token transfer so we ended with tell me Andy cash and now we're in this position where what we want to do is we want to figure out how to make payments without a bank in the middle so there's a few problems that we're gonna have to address in order to make this happen okay so first of all we really don't want it to be possible for other users to intercept a transfer of payment and steal funds if our system can't support this sort of very basic thing then no one's gonna use it no one's gonna trust it no one's going to rely on it so it's very important that we have
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