11 Jan 2018

Review: Digital Gold: Bitcoin, the Inside Story

I've been following bitcoin since I first tried to mine coins in 2010 (alas, I gave up when I couldn't get the software to work. Newbie mistake). Since then, I have been tracking the idea as an economist interested in how an entrepreneurial ecosystem develops through excess, crash and recovery. (I have a few bitcoins, but "hodl" as trading in and out is a fool's game.)

Bitcoin and the blockchain protocol are fascinating creations. Bitcoins are merely sets of digits. The blockchain makes them valuable by limiting their number (no copy and paste) and assigning their ownership (creating property rights). Satoshi Nakamoto (a person, I think) explained how to mine bitcoin and assign their ownership via the blockchain in a nine-page 2009 whitepaper [pdf] that anyone interested in the technology should read.

Many people have heard of bitcoin and many new crypto currencies (e.g., ether, litecoin, bitcoin cash, monero, etc.) due to the astronomical increase in their prices and the volatility of those prices. Yesterday, the price was $15,000 per BTC; now (22 Dec) it's around $12,000, down 40 percent from a few days ago. It may be up or down by the time you read this. Crypto is the new widowmaker...

So if you're curious about crypto, then you might want to read Natheniel Popper's 2015 book, Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money.

I don't actually have much analysis or comment on this book, nor will I summarize the plot, as the entire thing is a fast-paced read that begins in 2010 and covers the major events (the crash of MtGox and takedown of Silk Road among them) with lots of personal details on the people who supported bitcoin to change the world as well as those who just wanted to make a fast buck. I enjoyed the book for its insights into the complexities of "making a new market" out of thin air computer code and all of the ways that people guessed right or wrong on the way.

If there is any lesson in the book, it's "don't be greedy" as many of the men in the book (not a single woman plays an important role) were unable to see their weakness or listen to others advising caution. That perspective is as true today, when there are hundreds of new crypto business models vying for our attention, money and future.

Bottom line: I give this book FIVE STARS. Crypto (digital currencies and blockchain ledgers) are here to stay. You don't need to get rich off them to benefit from their value, so don't kill yourself trying. Just try to understand how they work, and use them if they make sense to you.

I'll add essays of interest here:

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