I’ve been aware of bitcoin longer than most people. A friend told me about the cryptocurrency (versus the technology and the blockchain behind it) and urged me to buy some early (circa 2010). At the time, I figured he may be on to something, but that the hassle of spending something like $15 on something that may go nowhere was just too much for me to sit down and do it.
That was a poor case of laziness on my part.
The currency shot up to $1147.08 per bitcoin in Q4 2013. Any person who would have spent $15 in 2010 when bitcoin was $0.05 would have held onto 300 bitcoins for a total valuation in Q4 2013 of $344,124. Some people did play bitcoin speculator and made tons of money. Others did and lost tons of money.
The media attention around the currency and the technology grew stronger and stronger. What was once something for internet geeks and libertarian nerds became something of interest to Wall Street traders and DC regulators.
Still, I knew very little about the general outlines of the technology, what made it so special, and what some of the broader implications were. Then I received a copy of Steve Patterson’s What’s The Big Deal About Bitcoin?
While most overviews of bitcoin tend to focus too much on either the technicalities of it or the regulatory burdens it faces, Patterson’s succinct (<100 pages) and well-written book comfortably straddles the line between being informative for a layperson or for somebody looking to gain a groundwork before moving onto more complex elements of the technology.
With it being so short, I don’t want to offer an in-depth review, but just some of the important points to be gleaned from the book. Before going on, I should note that Patterson explains each of these in greater detail. I highly encourage anybody with a curiosity about bitcoin to pick it up. I leave out many of the explanations for how the things below are achieved — Patterson’s book does that better.
The book is broken into three sections:
- Bitcoin Clearly Explained
- So What’s the Big Deal?
- Common Objections, Real Challenges
From each of these sections, there are major points that are important to understand about Bitcoin, bitcoin, and the blockchain technology that it is built off. I outline these below.
Bitcoin Clearly Explained
Bitcoin (the currency) (henceforth, BTC) is a decentralized, peer-to-peer digital currency.
- Decentralized: This means it exists in no one central place — no bank or trust holds onto BTC — rather, it exists on every computer that runs the software. These computers work together to “mine” (see below) new BTC and to verify transactions.
- Peer-to-peer: Unlike credit or cash that has to go through a processor, a bank, or a central bank in order to be transferred and to retain value, BTC is “pushed” from one user to another when transactions occur. When you buy dinner with your credit card at the restaurant, the restaurant “pulls” credit from your credit card company, which then will pull it from your bank. Bitcoin flips this process.
- Digital: The currency exists nowhere except on the Internet. There is no BTC central bank. There are no physical bitcoins (despite what articles on the topic tend to show). The supply of bitcoins is fixed by an algorithm at a certain amount over time until the year 2140. The supply cannot be manipulated by a central issuer.
- BTC can only be transferred from one address to another by a user who possesses one or more keys unique to that address.
BTC is, therefore, essentially digital gold. Whereas gold enters into an economy at a relatively fixed rate over time and maintains its value between users, BTC does the same.
Bitcoin is also the technology behind BTC, and has broader implications. The blockchain, the tech which makes BTC as a currency possible, is the decentralized ledger that records all BTC transactions over time, and cannot be changed (due to its decentralized nature).
So What’s The Big Deal?
The currency has some pretty strong implications because of its digital nature. It can essentially be programmed to only work in given circumstances. Keys can be issued for specific purposes (e.g., trips, emergency funds, company usage).
It also makes transferring very large or very small sums of money much easier, since it doesn’t have to go through a middleman who would then take a percentage of the cut. Whether it is a company transferring millions of dollars or a migrant worker sending remittances, the technology frees up the sending of money dramatically.
Most interesting is the implication that the blockchain technology has for non-currency related fields. There have been blockchain weddings where the evidence of the marriage is saved into the blockchain, rather than issued by a central courthouse. Patterson details some of the ways in which blockchain technology could be used by estate planning, by rescue teams, and for voting.
Common Objections, Real Challenges
Most of the concerns about bitcoin stem from a misunderstanding of how the currency and the technology works. Patterson puts these to rest in turn.
No, it is not a Ponzi scheme (this stems from a misunderstanding either of Ponzi schemes or how bitcoin speculators have operated). It has no intrinsic value, but that’s okay. It’s not backed by anything, but that doesn’t matter for it to succeed as a currency, and it may have been volatile in the past, but that’s to be expected for such a small market.
There are some very real concerns about Bitcoin, bitcoin, and the blockchain, though. While Patterson isn’t haughty enough to put them definitively to rest, he provides some reasons for why we shouldn’t think of government regulation, the year 2140, hackers, or a central group gaining control of mining and verification power to be a kill-all for Bitcoin.
What’s The Big Deal About Bitcoin? is not only impressive in how well-written it is, how well it avoids technical jargon while not ignoring how the technology operates, and in how succinctly put it is, but also simply for its organization. The book just feels like it flows, makes logical sense, and follows a good structure.
If you are looking to learn more about Bitcoin and the technology behind it, be sure to buy What’s The Big Deal About Bitcoin? on Amazon — Print / Kindle.
Alternatively, you can support Patterson in his mission to do philosophy professionally at Patreon and receive a copy through your support.