Quote from: pringesgood on January 02, 2013, 11:50:33 PM

what if there's a malicious version of this system and a large population is using this malicious version of the bitcoin system, would't that damage the system?

If lots of people want to run a program that tells them they have a million bitcoins, more power to them. It won't hurt anyone who isn't running such a program.

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ok so lets say there's a fail safe that all individual computer routinely checks with the 'original system', then what if that 'original was tampered with' ?

Unlike most other systems which determine what data is valid by who holds it or where it is held, Bitcoin has a set of objective rules for determining what data "wins" that looks only at the content of that data. So introducing bogus or nonsense data into the system does no harm. If it wins by the rules, then it's valid and not bogus or nonsense. If it loses by the rules, then it will be ignored.

If I create some chunk of data that says I have a million bitcoins, one of two things will be the case:

1) By the rules, this data is valid. In this case, I actually *do* have a million bitcoins because that's what it means to have a million bitcoins.

2) By the rules, this data is invalid. In which case, everyone will ignore this data because it's invalid. It doesn't matter who I send it to or where it's stored.

Bitcoin does *not* rely on any central authority of what is valid and what is invalid. Data is validated by objective rules that look only at the content of that data. The only exception to this is blockchain checkpoints.

The Satoshi client enforces all these rules. If sent data that doesn't comply with the rules, the client ignores it. If sent data that does comply with the rules, it accepts it. It isn't reliant on trusting some authority to tell it what data is valid or invalid.

The two vulnerabilities the system has in this area are the 51% attack (where more than half the computing power conspires to undo a transaction) and the Sybil attack (where someone cuts you off entirely from any source of data).