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Bitcoin is digital money for a digital age and although often associated in the public mind with instability, wild fluctuations and illicit dealings it could yet be poised to launch an economic revolution.
Paul Vigna and Michael J. Casey, two long time Wall Street Journal business reporters attempt to cut through the hype and demystify crytocurrency, detailing its origins, its functions, where it could go and what it could do in their book The Age of Cryptocurrency: How Bitcoin and Digital Money are Challenging the Global Economic Order.
Much of the book is clearly brilliant, well written and wonderfully informative. Other portions can only make your eyes glaze over if you are not a a true computer geek.
The real goal of crypto currency is to cut out the banking middlemen whose role is to process and verify transactions. It is intended to allow a network of thousands of redundant computers, to do this job more accurately at far lower cost than that imposed on our economic system by centralized banks and related financial institutions. It could also enable a third of the world without access to banks, to be able to send and receive money thus increasing trade without the excessive existing costs in our current credit card and banking systems.
Crypto computer based currencies have been around for 20 years with no real success until a still unknown genius named Satushi Nakamoto figured out a system that worked and gave it to the world all but anonymously then disappeared from the internet without a trace. No one knows from what country he or she or they originated, and it is likely we will never know. The last transmission from Satushi Nakamoto was December 12, 2010.
In the previous years Nakamoto shared a system that had two major breakthroughs — an inviolable universal ledger, which he dubbed the blockchain, against which anyone could verify the validity of transactions as well as a unique set of monetary incentives to encourage the network’s computer owners to keep the ledger up to date. Although the authors try very hard to explain what a block chain is numerous times through the book, let me just summarize by saying it is a vast chain of computers working in a coordinated manner under the same computer code that quickly verifies the accuracy of any transaction making any fear of fraud, double dealing or cheating impossible.
That may sound simple but it took years and true genius to develop this full proof system. It draws from mathematical concepts that are unfamiliar to most of us. However few us fully understand the entire US banking system yet we trust our money to it.
In exchange for participating in the blockchain you receive computer codes and computer puzzles to solve which if successful lead to obtaining some bitcoin currency as a form of payment for your effort. By no means enough to get rich as new bitcoins are only released in small quantities on a time release basis, but enough incentive for both the money and the satisfaction of success. Some folks have combined their computers in efforts to “mine” the bitcoins. One college student spent all his spare time working at it but only earned the meager sum of $200 a month.
The authors have actually traveled the world in their work allowing them to explain how crypto currency could have avoided a financial meltdown in Argentina and how it is working in Kenya.
Because the cryptocurrency sytem requires no bank, and no government control it is truly disruptive and multiple agencies described by the authors are already trying to block it or control it. An interesting outgrowth of this in the authors eyes is that bitcoin has attracted libertarian leaning techies and in some parts of the book it is clear that they themselves have a strong libertarian bent. Concurrently however it appears that bitcoin becomes like a religion to many of those that have helped foster its growth and acceptance.
In tracking down this community the reader will be overwhelmed to find that Vigna and Casey, over the course of their investigations either directly or indirectly gained information to describe 174 people (my count) who have contributed to the growth of crypto currency in the past decade.They back this up with 309 footnotes. Some in its initial development and even more developing applications to make the bitcoin system more useful and user friendly.
Most readers will ultimately agree that this is a bit of overkill but it seems they desired to leave out none of their research. In deference to their comprehensive approach they state Bitcoin “did not explode in a void. Like any brilliant invention, it is built on the backs of prior inventors. Writ large, cryptocurrencies can trace their roots through centuries of innovations that have enhanced human communication and exchange, from the printing press through the telegraph to the internet.”
At the end of the book the authors lay out two opposing scenarios for the future. One where bitcoin withers and dies and one where it leads to a future economic revolution that benefits the entire world. Either way it is exciting to understand what is at stake.