The Age of Cryptocurrency: How Bitcoin And Digital Money Are Challenging The Global Economic Order

Physical Copy:

Audiobook:

By: Paul Vigna & Michael Casey

Rating: B

I am sure you have heard of Bitcoin by now, unless you have been living under a rock. Most of the folks online touting it fall into a pretty narrow bucket that I am uncertain whether or not I want to belong to yet. So I wanted to grab a book that gives some history and context to the subject.

Summary:

Money has value when it is based on a system of trust.

For money to have value, there needs to be a shared agreement on its use as a medium of exchange.

In the earliest days of “money”, gold or silver were used as coins. Gold and silver had intrinsic value. People valued them and agreed that they could be used to buy things. 

However, if you traded with a culture that didn’t value gold or silver, the coins were worthless.

To create a shared trust of money the supply must be controlled. If anyone can create new money, money would lose its value. If there is a high likelihood of fluctuations in value, trust is hard to establish.

Bitcoin is money because people agree it can be used as a unit of exchange.

Although the number of Bitcoin supporters grows every day, many people have a hard time considering it “real” because you can’t see or touch it.

BUT

People are increasingly using it as a medium of exchange, which is building trust in it.

One of the first exchanges was in 2010 when a guy bought 2 pizzas for 10,000 bitcoins ($41 at the time). Today those 10,000 bitcoins have a value of just under $500 million.

Bitcoins are mined and there is a public record of all transactions called the blockchain.

Gold is “mined” with a pickaxe. Bitcoins are “mined” with computers.

Computers mine bitcoins by solving complex math problems. When a problem is solved, a Bitcoin is given to the miner. This requires a significant amount of computational power. 

When a new Bitcoin is mined, a new block is created, validated, and added to the blockchain. 

The blockchain is the public record of all transactions ever made in the network.

Like banks, Bitcoin keeps a record of all owners’ balances and transactions to ensure the same Bitcoin isn’t spent twice using unique and encrypted numbers. This is another purpose of the blockchain and why everyone has access to it. 

Bitcoin removes all middlemen and keeps both the sellers and buyers anonymous.

Every time you swipe your credit card or transfer money, banks and credit card companies skim a little bit off the top. 

Bitcoin doesn’t.

Bitcoin removes the middleman, which makes transactions cheaper and more efficient.

The middleman between savers and borrowers are our banks. Banks are one of the most wealthy and powerful sectors in the world. Bitcoin wants to give that power back to the people. Whatever that means.

Every credit card transaction involves a complex web of back office accounting and verifying that doesn’t put the money in the seller’s account until after 3 business days. This costs time and money. Bitcoin is almost instantaneous.

Bitcoin is called a “crypto” currency because it obscures the identities of the buyer and seller in every transaction through encryption.

Bitcoin has become a global business.

In 2013, over $1 Billion was spent globally on building computers specifically designed for mining Bitcoins.

Mining Bitcoins requires a YUUUUGE amount of computational power and electricity.

Venture Capital investment increased from $2 million to $88 million in 2012 to 2013.

There is a lot of interest from the business community. (i.e. Elon Musk buying $1.5 Billion USD worth of Bitcoin recently.)

The different Cryptocurrencies aside from Bitcoin all have slightly different approaches to integrating with the global economy. This is the most fascinating part to me. This will have wild implications for our world.

The author mentions Ethereum as a future app store-like platform. Where you can use the open-source model to build things like “smart contracts”. Think of something like a loan for your car. If you miss a payment, the smart contract deactivates your car or programs it to drive back to the lender’s lot.

Bitcoin could have a huge and positive impact on the developing world.

There are about 2.5 Billion people worldwide who don’t have money in banks. We call these the unbanked.

Having a bank account allows you to buy and sell goods and services far easier. It allows you to save and prepare and level up in life.

With the internet and smartphones, the unbanked can easily enter the global marketplace.

This gives access to 2.5 Billion more potential customers and contributors to the global economy. 

Reaching the unbanked is a huge need that will bring incredible opportunities to all!

Bitcoin still has many weaknesses and is difficult to regulate.

Downsides…

How do you regulate it? As a commodity? Stock? Currency?

Bitcoin’s price is still very volatile.

Any bad press that comes out has a drastic effect on the price.

The distributed network it is built on makes it practically impossible to shut down given the need.

The anonymity of the platform makes it very difficult for law enforcement to investigate its use in crime like selling drugs or even hiring hitmen.

Conclusion:

The author argues that the price of Bitcoin will remain volatile until it reaches a level of adoption and price high enough that it stabilizes. Investors in Bitcoin are speculators. The real investment value will come with the businesses that are built on the back of Bitcoin and blockchains.

Next Action:

I am going to read more about how to integrate blockchain with my industry. This will be a need in the future.