Name: Digital Gold
Rating: 4.4 (194 reviews)
Author: Nathaniel Popper

What’s in it for me? Learn how Bitcoin can make us rethink money.

For thousands of years, humans have used the physical entity of money as a means of exchange. To this day, we continue to accept these small objects of value as a form of payment for virtually anything we desire. But have you stopped to wonder if this system is actually severely outdated in today’s highly technological and digital age?

Well, some people certainly think it is – and that’s exactly why the cryptocurrency of Bitcoin emerged. If you have yet to hear of Bitcoin and cryptocurrencies, here’s your chance to get informed.

With these blinks to Digital Gold, you’ll be walked through the world of Bitcoin, learning the essential ideas of what exactly it is and why it became so famous.

In these blinks, you’ll learn

how Bitcoin became connected with the Occupy Wall Street Movement;
how (and why) Bitcoin is managed communally; and
why it is so incredibly hard to hack it.

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.

Bitcoin embodies a new way of communally handling money.

After the financial crisis in 2008, people all over the world began to think about alternative ways of handling money. One major idea that became central to Bitcoin was communal management.

In fact, two key Bitcoin structures – the maintenance of the blockchain and system updates – are both managed communally.

Bitcoin’s first surge of popularity came from the drug trade on the underground website Silk Road.

We’ve all heard of the hidden black markets of the world, where shady dealers sell all kinds of illegal goods. But did you know there was an equivalent black market on the internet?

Hidden deep in the Darknet, a section of the internet only accessible with anonymizing software like TOR, the Silk Road marketplace once allowed buyers to purchase drugs and get them delivered to the address of their choice.

Argentina’s financial crises have shown how Bitcoin can transfer power from governments to the poor.

The citizens of Argentina are all too familiar with financial experiments. The country’s history is riddled with financial crises and severe inflation, and many failed attempts to mitigate them. So, at the second official Bitcoin meetup in Argentina, many people were excited about the possibilities of the new currency. Soon, Bitcoin would break down many of the government restrictions imposed to control the value of the Argentine peso.

For example, exchange rates for the US dollar had been placed artificially high, all PayPal transactions were banned and economists who spoke out against the policies were fined. And if you wanted to buy something overseas with a credit card, you had to deal with extended delays.

Key ideas in Digital Gold

What is Digital Gold about?

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.