Starts well. Women in Afghanistan were expected to hand over the money they make to their husbands but their lives changed dramatically when they were paid by Bitcoin.
Has fun statements at the beginning of the chapters. For instance ‘Money is like muck; not good except it be spread – Francis Bacon’
First the good part – he demystifies the financial system well and the bitcoin technology for non geeks well. He conveys the frenzy and appeal of the bitcoin to extreme libertarians and why it spread to mainstream.
Read it for these, and for the nice history of bitcoin origins, what went before bitcoin by way of e-cash experiments and why bitcoin succeeded when others did not. But don’t get taken in by the excessive zeal and erroneous conclusions of the author who seems to have been carried away by the hyped up promise of the bitcoins. More of it later.
The author talks of the potential revolutionary nature of the technology, if not the coin itself. He describes how the banks got so powerful being intermediaries of ‘trust’ between the two sides of a transaction – which is exactly what a bank is and how it slices off a small portion of the money for this privilege, earning enormous returns. The author is right that the technology behind the bitcoin (blockchain technology) strikes at the very roots of the current economic organization and therefore has a disruptive power equal to anything in the past.
Excellent introduction as to the fundamental necessity of money as a trust instrument primarily. Also makes you think about what money really is. Or what is the intrinsic worth of a substance like gold and how it derives its value.
The initial struggle of the elusive Nakamoshi to establish bitcoin as an accepted medium of trust among cypherpunk community is new material to many and is fascinating. (His communication was using cryptography and so could not be traced to the real email and/ or to the real person).
Nice introduction on the earlier efforts at cryptographic transaction efforts and how DigiCash almost did in the 90s what bitcoin did later.
I thought initially that the authors argue that bitcoin would have eliminated the wicked governments from creating the great recessions and the irresponsible bailouts, you take it with a truckload of salt. I do concede that bitcoin eliminates forgery and fraud because the blockchain cannot be tampered with (in theory). Unfortunately even that is not now true as the theft of about $70 million using a flaw in the software demonstrated recently. Since this was written before that event, we will forgive the authors’ assumption that the blockchain is an inviolable register of transactions. But even then, society could not function without debt right? Do the authors envisage a purely cash society using bitcoin with no debt? Do they know how slow the economic growth will be? Once you get debt into the picture, the bitcoin’s power vanishes and you are back in the abuse of financial instruments and the resultant recessions (the highs and lows of the market).
But read on and they are very balanced in their view. They admit to all the hacking into Bitcoin sites and theft of coins, candidly describe all the issues bitcoin faces and why it has not become more popular than it is, despite a fanatic fan base that is spread across the globe and also argue how economics would be served by having a currency that cuts out the middlemen and their endless cuts in every transaction. Fascinating. They also are frank about the risks – once you have given it to someone, you cannot get the bitcoin back – for instance if the goods promised were not delivered. They talk about how you can lose forever the coins you have saved if you forgot the long key or password to the account. They talk about the currency volatility which is the most known risk of bitcoin.
The speculations of the world in uncovering Satoshi Nakamoto’s identity and the ‘scoop’ of newsweek in identifying him as Dorian Nakamoto only to be denied in a cryptic email by Santoshi that ‘I am not Dorian’ are fascinating.
The rise of alternative digital currencies (dubbed altcurrencies) triggers not euphoria among bitcoin fans but fear. Strange.
There is a very nice discussion on how bitcoin mining has become an arms race and how there is diminishing potential for miners. No longer will people become millionaires by mining unless they are the very high end. Also great is the description of how transaction costs come creeping in as bitcoins dwindle as previously programmed. The mining produces transaction confirmation as a byproduct, a nice setup where selfish mining produces communal benefit of transaction confirmation. In short a well rounded, balanced discussion despite what I thought initially.
He talks of the resistance to digital currencies and how in China solutions already exist using traditional infrastructures (like WeChat) that help the poor do most of the things digital currencies do, without the volatility.
While giving the number of financial entities slicing off a bit in every transaction (with the example of buying that Starbucks coffee) they also make a point that cashier these days is an increasingly anachronistic job title. I never thought about it that way but now that it has been pointed out to me, I cannot seem to unthink it! Very true statement.
They talk of the electronic pay and other innovations that make the centralized system of payments easy and therefore slow down the adoption of the decentralized systems like bitcoins.
The conclusions are great. The authors explore the scenarios where alternate currency systems compete for dominance, bitcoin as an exchange network for world currencies, digital dollar where US dollar becomes digital and crypto currency as a barter like medium of exchange. Very nice, very thought provoking stuff.
6/10
– – Krishna