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The Untold Story of Bitcoin
- Read in 12 minutes
- Audio & text available
- Contains 7 key ideas
Digital Gold (2015) tells the story of the many different individuals – including cypherpunks, nerds, investors, gamblers and visionaries – that contributed to the rise of the world’s most successful cryptocurrency, Bitcoin. The book gives an overview of the way Bitcoin developed, showing how its value rose from nothing to over $1 billion, and telling the story of its troubled early stages.
Key idea 1 of 7
Bitcoin is a new kind of money that is created, held and transferred by its users.
On January 9, 2009, a mysterious internet user hidden behind the pseudonym Satoshi Nakamoto brought forward an idea that would change the financial world forever: Bitcoin.
Bitcoin is a digital currency radically different from any traditional cash system. First of all, anyone can get involved by simply downloading its open-source code.
Anyone can look at the code, examine what is happening under the hood, so to speak, and even help make improvements. This contrasts with classic software programs like Photoshop or Microsoft Office, where a closed group of developers build a program whose code only they can see and change.
Another way Bitcoin differs from a typical currency is the total absence of a centralized authority.
Unlike a bank, where each user's holdings and transfers are stored privately, Bitcoin uses a communal database called the blockchain that everyone can see. The blockchain is like a giant public ledger that stores the record of all existing bitcoins and every transaction ever made. But instead of being located in one place, a brilliantly designed mechanism distributes this exact same record to every computer in the Bitcoin network.
As a result, Bitcoin is not as private as the international banking system, where only you and your bank can access your finances. However, there’s also no limit to the amount of Bitcoin accounts, called wallets, that a user can own. And unlike a bank, all you need to create a new wallet is an e-mail address, so anyone can open an account and Bitcoin has the potential to be used totally anonymously.
Bitcoin also updates traditional currencies by integrating powerful encryption techniques into its core. While a lot of cash withdrawals still rely on primitive PIN numbers, Bitcoin uses robust public-key cryptography that not even the most powerful supercomputers can crack.
Public-key cryptography has two components: a private and a public key. When a Bitcoin transaction takes place, the public key is recorded in the blockchain for everyone to see. But only the users who made the transaction have the private keys necessary to decrypt the transaction and access the funds. By using cryptography in this way, Bitcoin is able to bypass centralized security systems like banks.