Understanding Bitcoin By Robert P. MurphySilas Barta

  • Author: Robert P. Murphy and Silas Barta

Description

This book is the one resource that liberty lovers need to learn the essentials of how Bitcoin works, and the economic implications of it. The authors received no funding for this project, and respectfully ask for donations from readers who find the guide useful. Donation addresses can be found here.

From the introduction:

This booklet is intended as a guide for the liberty lover on the subject of Bitcoin, which is the first and most popular of a new type of financial instrument called “crypto-­‐currencies.” Although Bitcoin is a fascinating subject in its own right, regardless of its possible political implications, it would be naïve to pretend that the public interest in Bitcoin today is merely one of commercial application and/or intellectual curiosity. Just as the development of the Internet has had a tremendous impact on the prospects for liberty, today’s ideological proponents of Bitcoin hope that Satoshi Nakamoto’s solution to the “double-­‐spending” problem in a decentralized payment system heralds a new tool in the struggle against oppressive States. In this respect, the appeal of Bitcoin is that—by its very nature—it cannot be commandeered by powerful third parties, which means that it is forever secure against unpredictable inflation.

In the case of the Internet, the liberty lover doesn’t have to know exactly how it functions to appreciate its potential. The same is true for Bitcoin: Individuals can buy and sell with bitcoins, without having the slightest idea of what’s really going on. However, to fully appreciate the beauty of Bitcoin—and to defuse some of the more popular objections to it—one must learn at least the basics of public key cryptography.

In this guide, we will serve both types of reader, giving intuitive explanations that provide the “big picture” of Bitcoin’s economics but in separate sections we will delve into the actual mechanics of Bitcoin for the reader wanting to know more. At any point in this guide, if you the reader begin to feel overwhelmed by the technical details, we urge you to skip ahead to the next section. So long as you at least give each of the sections a chance, we are confident you will walk away understanding the mechanics and economics of Bitcoin much better than at the start.

Before diving in, let us offer three caveats that we urge readers to remember as they work through this guide:

– We are NOT recommending Bitcoin as an investment. Rather, we are describing its operation as a currency and a payment system, both in terms of the cryptography and the economics. We want to teach readers how Bitcoin works. Whether the exchange value of individual bitcoins (quoted in terms of other currencies for example) will rise or fall in the coming years is not our concern in this guide.

– In this guide, we will refer to Bitcoin specifically, but much of what we write is applicable to crypto-­‐currencies more generically. We definitely believe that some form of Bitcoin-­‐like currencies are now here to stay, but it is entirely possible that future developments will render the actual Bitcoin protocol obsolete, and that humans in the year (say) 2050 will use a more advanced crypto-­‐currency that is superior to Bitcoin.

– Anyone is free to distribute and maintain copies of this guide. We merely ask that proper attribution be given to the original authors (Barta and Murphy). The guide will constantly be a work in progress; we welcome constructive feedback, and readers should check to see that they have the latest version, available at: http://understandingbitcoin.us/. We have made the PDF available to the world, and ask those who benefit from it to consider a Bitcoin donation (details at the end of the guide).

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Discussions

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