Tag: bitcoin

A Book That Will Help You Understand Why Bitcoin is Amazing

My friend Steve Patterson – a brilliant and clear thinker, excellent writer, radical, tech enthusiast, and scholar – has written what I think is the best intro to bitcoin you can find.  It’s sufficiently basic, so even a tech noob like me can grasp it, but it doesn’t shy away from delving into the details of how the technology works.

downloadWhat’s the Big Deal About Bitcoin is the kind of book that, as you read it and immediately after, make you feel like you completely grasp the intricacies of bitcoin.  After a few days you can’t really explain or recall exactly what had you so excited.  That is a sign of a book that does a great job boiling down really complex ideas.  Big ideas take a while to understand, longer to be able to explain to others, and longest to become second-nature.  A book this small that can give you the complete intellectual understanding of the concept immediately is rare.  One encounter will convince you of the power of bitcoin.  Another will help you be able to explain it.  I’m reading it for a third time as I try to gain a level of understanding sufficient to convey it to others!

Prior to reading Steve’s book I was excited about bitcoin as currency from primarily a theoretical standpoint.  I know the dangers and limitations of government issued currency and the power and beauty of competitive, market-based currencies.  I was also very interested in bitcoin as method of payment as a practical solution to the archaic, costly, time-consuming methods currently available to individuals and businesses.  Transferring money is ridiculously cumbersome, and the fact that I’ve had to physically enter a bank branch twice in the last month – with several paper documents in hand – is absurd and annoying.  I knew bitcoin had potential as both a currency and method of payment, and I loved buying and transferring small amounts to play around with it.  What I did not understand was the real source of bitcoin’s value and power, the blockchain itself.

The blockchain is nothing more than a public ledger, but one that is completely decentralized and essentially eliminates fraud and most of the biggest problems that have long plagued both physical and digital financial transactions.  But the blockchain is more than just a financial innovation.  It’s a unique distributed software process that can be applied to anything where proof of ownership is incredibly valuable and forging such proof is low cost. (Copying paper money, or paper titles, for example).  It makes units of digital information, which by nature are infinitely copy-able, into unique, scarce pieces of data.  That single innovation has the power to transform the world, and the number of applications and technologies than can be built on top of it are endless.

Don’t get too bogged down trying to understand my explanation – I’m reading the book again to get better at explaining it, but I’m not there yet!  Pick up a copy and read it for yourself.  I’ll be surprised if you don’t walk away thinking bitcoin is the biggest innovation since the internet.

 

 

Bitcoin – Because Everyone Has to Say Something

Whatever it is, whatever it will become, Bitcoin is pretty cool.

I’ve enjoyed watching it get a lot of attention, and draw attention to big ideas and questions like the role of money, decentralized orders, radical choice, polycentrism and the digital future.  It’s also a little depressing to read the flow of articles on Bitcoin coming from most journalistic outlets.  Not because they like or dislike Bitcoin, or because they describe it correctly or incorrectly, but because their grasp on the economics of money, from its origin to its uses and history, is shaky at best.

No one need be an expert on economics – especially the conceptually difficult arena of monetary economics – to write for a newspaper.  But when you are writing about money, and confidently, it behooves you to dig in and discover what this money is all about.  Rothbard’s famous quote applies here,

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

Thankfully, none of this economic ignorance matters as it regards Bitcoin itself.  Bitcoin doesn’t care what journalists think.  The always quotable and insightful Jeff Tucker summed up why very nicely in a recent Facebook post,

“It’s so strange how this how thing is becoming some kind of fight between pro- or anti-BTC, as if this were some policy thing. It’s not. This is a market technology. It either works or it doesn’t. It’s like being for or against email, for or against online media, for or against Skype. I mean, if you don’t like it, don’t use it. Whether it succeeds or not is up to any intellectual; it’s up to the market.”

The downside of journalistic economic ignorance is that it may result in confused ideas among the public, and therefore create incentives for confused policy from lawmakers.  I’ve heard journalists claim that government guarantees are the best and only sign of a sound money, (because, you know, hyperinflation never happens) and that the core purpose of a currency is price stability (because, of course, markets have been traumatized when trying to adjust to the rapidly falling prices in, say, the tech industry).  It’s sad to see such silliness, but it’s also great to see discussion everywhere about what makes a currency.

It can be helpful to compare money to language.  Both are spontaneous orders.  Both are tools that facilitate exchanges between people.  Both are wholly dependent on the individuals involved for their value and evolution; yet neither can be controlled by any one person.  Try introducing a new language, or even a single new word to an existing language.  Not easy.  Yet anyone is free to try, and new words emerge constantly.  They stick around only so long as they are perceived as valuable ways to facilitate an exchange of ideas.  It doesn’t really matter what experts think makes for a good word or language.  It matters what actually takes root in the world – a world where people face trade-offs and try to get the most value for the least effort.

Bitcoin kind of reminds me (as an admitted computer ignoramus) of programming languages.  Computer programmers have developed and become conversant in all kinds of languages that mean almost nothing to me.  These emerged out of nowhere in a relatively short period of time.  Some lived, some died.  Today, they provide an incredibly valuable function that serves not just programmers, but all of us, even though almost none of us speak the language.  Perhaps Bitcoin could evolve similarly.

Even if never the dominant currency “above the table” so to speak, it may find a powerful place in behind the scenes markets among niche experts, just as programming languages do all around us.  Maybe you or your friend or your uncle will never own Bitcoins – none of you probably write computer code either – but perhaps the crypto currency will be busy at work facilitating exchanges among many market participants you interact with.

I don’t really know, and I’d rather spectate than speculate.  It’s pretty fun to watch, and it’s even better to hear the chatter about a lot of topics I never expected to see in the public conversation.  Money is a mysterious and complex thing.  It’s prudent in such matters to refrain from confident proclamations.  I’m as likely to buy-in to someone’s prediction of Bitcoin as I am their prediction of which words will fall in and out of use in the next ten years.