The definition of a Bitcoin is a “chain of digital signatures” that can be passed from one person to another using an electronic signature (hash). During this process, the sender passing the Bitcoin onwards, electronically signs the pervious transactions of the Bitcoin and the public key of the recipient they are sending the Bicoin to.
An analogy to this is signing for a package that you have received and then writing a forwarding address on the package before sending it onwards. Passing the Bitcoin from one person to another is like playing a game of pass the parcel, except each time the parcel is passed, the history of the parcels locations is written on it. This history creates the Bitcoin “Blockchain” which is essentially a ledger/log of the Bitcoin(s) transaction history.
Unlike parcels in the real world, digital parcels can be sent to more than one recipient at the same time (imagine sending the same email to multiple people). This is problematic as it could lead to people “double spending” their digital currency.
Bitcoin overcomes this problem as time stamps are used to ensure that whenever a Bitcoin is passed on, a duplicate copy of that coin cannot be double spent (fraud). Each transaction is time stamped and processed by the Bitcoin system in order of their respective time stamp. Therefore, if a coin is sent to two recipients, the coins will have different time stamps and hence the second coin sent will be automatically rejected by the system.
The Bitcoin system processes every transaction and “publicly announces” whenever a transaction takes place. This ensures that the system, along with its users, moderate the chain of transactions (blockchain) to ensure fraudulent activity does not take place. Using this method of moderating transactions ensures that a 3rd party is not needed and the Bitcoin system is truly decentralised.
Further to this, the participants of the system (computers/nodes) must agree on a single transaction timeline. If participants use different time lines, the double spending problem will reoccur and/or multiple block chains will be created (Mayhem!).
To avoid this, the majority of computers (nodes) in the network agree upon a singular timeline and process transactions relative to this time.