Digital gold: Bitcoin and the inside story of the misfits and millionaires trying to reinvent money. Nathaniel Popper, Harper, 2015, 419 pages.
Digital gold, by New York Times technology reporter Nathaniel Popper, is a good read for anyone interested in bitcoin and the wide world of cryptocurrencies. Popper marries together the details of the technology with a narrative full of colorful characters as he describes how bitcoin moved from an idea to a real technology with worldwide adoption.
Some of the takeaways: It’s sometimes easy to forget the youthfulness of bitcoin and the blockchain. In October of 2008, Satoshi Nakamoto, the mysterious creator of bitcoin, released a white paper called Bitcoin: A peer-to-peer electronic cash system, to an email list of coders interested in digital privacy. Almost a year later, Nakamoto sent his first bitcoin via email and started inviting others to mine the coins (or maintain the blockchain, which is an essential function that makes the distributed platform function).
For a decade or more prior to Nakamoto’s release of the bitcoin white paper, various internet experts and enthusiasts were working to develop a form of e-cash, but most experiments failed because there was no clean way to prevent duplication or copying of digital money.
Part of what made the bitcoin system so intriguing to early adopters was that Nakamoto introduced the blockchain technology as a digital ledger, which provides a level of privacy for users, but also allowed others on the network to verify funds and transactions, which, in a sense, solved some of the issues that other electronic cash models faced.
In his book, Popper explains that some of the key people involved in the “early days” of bitcoin kept saying that, in terms of maturity, bitcoin is like how the internet was in the early 1990s, before a lot of the applications and services that made the web more accessible and useful, really took off.
The same logic applies to other cryptocurrencies—both the technologies and the use cases for the technologies are at an interesting life phase. Cryptocurrencies are old enough to show they are sustainable and adoptable, but still young enough that the full spectrum of their uses is unknown.
Another interesting thread that emerges from the telling of the bitcoin story is how the developer community formed and how, since the beginning, there has been varying degrees of tension about some of decisions that go into maintaining and updating the underlying blockchain. (If you ever hang out any of the bitcoin-related sub-Reddits, you understand that this is still an ongoing problem).
One really amazing thing is that in the early days there were several times when members of the fledgling bitcoin community made contributions to the blockchain code, or to the bitcoin mining process, that might have cut cross grains to their individual self-interest, but that were beneficial to the survivability of the network. More than once, contributors said they were more interested in making sure that bitcoin continued as an idea than they were about reaping profits from the coins they could mine by exploiting bugs in the code or the mining process.
In its very early days, bitcoin was readily adopted by people with strong feelings about digital privacy. Even though bitcoin transactions are not completely anonymous, privacy-minded people like that fact that the transactions were outside of the control of major payment networks and could be handled peer-to-peer. There was also a sense that bitcoin was an answer to what is viewed by some as a heavy-handed approach of governmental monetary policy (remember in the United States, the publication of Nakamoto’s white paper happened in the same month as federal government announced the Troubled Asset Relief Program in 2008).
As bitcoin grew, it started attracting investors and entrepreneurs, who valued the blockchain less as a private peer-to-peer transaction system outside of the control of government regulators, and more as a place to invest and create value.
There is still an unresolved tension between the two ways of looking at bitcoin: Is it a valuable commodity, or is it the next iteration of cash? Or is it both?
It must be challenging writing about something, like a new technology or something that is likely to have historical value, as it is unfolding. Popper’s book can’t answer whether bitcoin should be treated like cash or a commodity because the way bitcoin (and, by extension, other cryptocurrencies) are used and regulated will likely determine their value and place in the overall economy.
And so there is no really ending to the book, or no conclusion anyway. And even since its publication in mid-2015 a lot has changed in the cryptocurrency world. Nonetheless, this is a great story to start with to get caught up on how and why bitcoin was developed.