Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money
by Nathaniel Popper
30 popular highlights from this book
Key Insights & Memorable Quotes
Below are the most popular and impactful highlights and quotes from Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money:
It’s either going to change everything, or nothing,
Wences had first learned about Bitcoin in late 2011 from a friend back in Argentina who thought it might give Wences a quicker and cheaper way to send money back home. Wences’s background in financial technology gave him a natural appreciation for the concept. After quietly watching and playing with it for some time, Wences gave $100,000 of his own money to two high-level hackers he knew in eastern Europe and asked them to do their best to hack the Bitcoin protocol. He was especially curious about whether they could counterfeit Bitcoins or spend the coins held in other people’s wallets—the most damaging possible flaw. At the end of the summer, the hackers asked Wences for more time and money. Wences ended up giving them $150,000 more, sent in Bitcoins. In October they concluded that the basic Bitcoin protocol was unbreakable, even if some of the big companies holding Bitcoins were not. By
Decentralized technology was a rather natural fit for Gavin, who had little in the way of an ego. Despite going to Princeton, he had been happy serving as something of a journeyman programmer, working on 3-D graphics at one point, and Internet telephony software at another. For Gavin, the jobs had always been about what he found interesting, not what promised the most money or success.
Hoffman had finally gotten a satisfying answer to this at a dinner with Wences and David Marcus and a few other Valley power players late in 2013. Wences agreed with Hoffman that Bitcoin was unlikely to catch on as a payment method anytime soon. But for now, Wences believed that Bitcoin would first gain popularity as a globally available asset, similar to gold. Like gold, which was also not used in everyday transactions, Bitcoin’s value was as a digital asset where people could store wealth.
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The creator of Bitcoin, Satoshi, disappeared back in 2011, leaving behind open source software that the users of Bitcoin could update and improve. Five years later, it was estimated that only 15 percent of the basic Bitcoin computer code was the same as what Satoshi had written.
If there was ever a time that Silicon Valley believed it could revive the long-deferred dream of reinventing money, this was it. A virtual currency that rose above national borders fitted right in with an industry that saw itself destined to change the face of everyday life.
He did not know C++, the programming language that Satoshi had written Bitcoin in, so Martti began teaching himself.
Erik argued that it was the very virtual nature of Bitcoin that made it so valuable. Unlike gold, it could be easily and quickly transferred anywhere in the world, while still having the qualities of divisibility and verifiability that had made gold a successful currency for so many years.
From the beginning, Satoshi envisioned a digital analog to old-fashioned gold: a new kind of universal money that could be owned by everyone and spent anywhere. Like gold, these new digital coins were worth only what someone was willing to pay for them—initially nothing. But the system was set up so that, like gold, Bitcoins would always be scarce—only 21 million of them would ever be released—and hard to counterfeit. As with gold, it required work to release new ones from their source, computational work in the case of Bitcoins. Bitcoin
gosh I can’t sleep ! I keep thinking about this great stuff. To me Bitcoin is the ‘cyberspace gold.’ I’m just amazed.
In the very first recorded transaction of Bitcoin for United States dollars, Martti sent NewLibertyStandard 5,050 Bitcoins to use for seeding the new exchange. In return, Martti got $5.02 by PayPal.
Meanwhile, a month after the Bitcoin conference, protesters took over Zuccotti Park in Manhattan and began what became known as Occupy Wall Street, taking aim at the government’s decision to bail out the big banks but not the rest of the population. The Bitcoin forum was full of people talking about their experiences visiting Zuccotti Park and other Occupy encampments around the country to advertise the role that a decentralized currency could play in bringing down the banks.
As Dread Pirate Roberts, Ross became a kind of folk hero for his members, engaging with them on the Philosophy, Economics, and Law section of the forum and later on DPR’s Book Club, where he advocated for a world in which “the human spirit flourishes, unbridled, wild and free!
Bitcoin was, very simply, a new way of creating, holding, and sending money. Bitcoins were not like dollars and euros, which are created by central banks and held and transferred by big, powerful financial institutions. This was a currency created and sustained by its users, with new money slowly distributed to the people who helped support the network.
The Federal Reserve and other central banks could print more money only if they managed to get their hands on more gold.
The root problem with conventional currency is all the trust that’s required to make it work,” Satoshi wrote. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.
The essential quality of successful money, through time, was not who issued it—or even how portable or durable it was—but rather the number of people willing to use it.
Each piece of gold represented a slot on the ledger of all outstanding
In the 1970s and 1980s, though, mathematicians at Stanford and MIT made a series of breakthroughs that made it possible, for the first time, for ordinary people to encrypt, or scramble, messages in a way that could be decrypted only by the intended recipient and not cracked even by the most powerful supercomputers. Every
The only occasional gripe was about the volatile price of Bitcoin, which made it hard to know how much a vendor would be charging a week later. But Ross dealt with this by creating a clever hedging program that allowed customers and vendors to lock in a price.
For security, Satoshi relied on uncrackable mathematical formulas rather than armed guards. But
The weakness of the existing system had been evident during the financial crisis when the Wall Street bank Morgan Stanley needed a $9 billion infusion from a Japanese firm. The agreement was reached on a Sunday, but the money could not be sent because the wire network was down for the weekend and the next day was Columbus Day. It turned out that even banks couldn’t send each other money on holidays. In order to get around this, the Japanese bank cut an absurd $9 billion paper
The weakness of the existing system had been evident during the financial crisis when the Wall Street bank Morgan Stanley needed a $9 billion infusion from a Japanese firm. The agreement was reached on a Sunday, but the money could not be sent because the wire network was down for the weekend and the next day was Columbus Day. It turned out that even banks couldn’t send each other money on holidays. In order to get around this, the Japanese bank cut an absurd $9 billion paper check. With
Perhaps the most famous, if flawed, oracle of the Federal Reserve, former chairman Alan Greenspan, knew that money was something that not only central bankers could create. In a speech in 1996, just as the Cypherpunks were pushing forward with their experiments, Greenspan said that he imagined that the technological revolution could bring back the potential for private money and that it might actually be a good thing: “We could envisage proposals in the near future for issuers of electronic payment obligations, such as stored-value cards or ‘digital cash,’ to set up specialized issuing corporations with strong balance sheets and public credit ratings.
What is the value?” he would ask. “It’s that it is the ledger. You put the ledger on your neck to show power and wealth.
For many technology experts at banks, the most valuable potential use of the blockchain was not small payments but very large ones, which are responsible for the vast majority of the money moving between banks each day.
the conceptual advances made by Bitcoin weren’t just clever; they were useful in ways that could influence the future financial system.
One of the things that’s most fascinating about Bitcoin, I have learned, is that it entrances fanatical conspiracy theorists, clear-eyed pragmatists, and diehard skeptics alike.
The reason gold itself had been used as money was not that it was valuable; it had become valuable because it was used as money.
