Understanding Bitcoin By Robert P. MurphySilas Barta

  • Author: Robert P. Murphy and Silas Barta


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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  •  Keiron Austwick

    Earning Bitcoin

    Hi All, Does anyone on here know of any websites or apps where you can earn or make bitcoin? The reason I ask is because I hear about people who were conned out of earning bitcoin so just to ask if you know of any genuine websites and apps?

    Jump to Discussion Post 1 reply
  •  patriz

    Black Market

    Hi Justin Please can you share the article “Only the Black Market Matters” I cannot find it and need it for research.

    Jump to Discussion Post 1 reply
  •  Anonymous

    ETH over 10 USD

    And we thought we were excited when ETH was 2.00 USD per ETH. 10 USD and up! Market cap is larger than all other crypto-currencies combined (minus BTC). Wouldn’t be surprised to see some pullback for a bit while short term traders take profits. https://coinmarketcap.com/currencies/ethereum/ https://coinmarketcap.com/      

    Jump to Discussion Post 9 replies
  •  Sam Patterson

    Introducing OpenBazaar

    Check out our new video on OpenBazaar. http://youtu.be/w4vtUPJEmqg Decentralized markets, along with Bitcoin, could usher in a new era of free trade.

    Jump to Discussion Post 6 replies
  •  Andrew Lepkowski

    Prepping for technological unemployment

    How will people generate income and/or put food on the table as A.I. and automation continue to become more capable, self-learning, and cheaper? Eventually humans will be “unemployable”, much like horses are “unemployable” today, except for narrow novelty purposes (entertainment, sport, horse drawn carriages, etc.). How do we prep for technological unemployment?

    Jump to Discussion Post 29 replies
  •  Jay Ⓥansen

    Changing to Bitcoin Subscription…?

    So… I originally didn’t have enough bitcoin to make it my preferred method for my Liberty.me subscription payment, but now I’d like to change and I can’t see any way to in my control panel or find the documentation on the site (if there is any; I’m assuming). A little help would be much appreciated! Grazi!

    Jump to Discussion Post 4 replies
  •  kellybe

    Capitalizing on the Main Street Adoption of Cryptocurrency

    Cryptocurrency Opportunists Investors and early adopters of cryptocurrency recognize the inevitable revolutionary change awaiting society and the huge income opportunity before them as they prepare to capitalize on the mainstream public adoption of this new technology trend in the next 24 to 36 months. The purpose of this whitepaper is to bring clarity to the marketplace to help investors and early adopters recognize where real value and opportunities lie. – Bob Wood , CEO, Nexxus Partners

    Jump to Discussion Post 0 replies
  •  Darren Atherton

    ETH Cloud Mining

    Is anyone out there doing any cloud mining of ETH? If so do you have any pros/cons regarding the experience? I found this and it looks interesting: https://www.cryptocompare.com/mining/hashcoins/mining-contract-ethash-medium/

    Jump to Discussion Post 0 replies
  •  Anonymous

    Bitcoin's demise? What?

    Bitcoin has drawn quite a bit of attention in the mainstream media since this story broke out a while back on the bitcoin forums and reddit. Are any of ya’ll taking this seriously or just looking at it as a buying opportunity?   Associated article (one of many):   Forbes   http://www.forbes.com/sites/jasonbloomberg/2016/01/18/something-rotten-in-the-state-of-bitcoin/#2715e4857a0b321bf5be4650

    Jump to Discussion Post 9 replies
  •  Jonathan Garneau

    Bitcoin p2p lending experience?

    I was wondering if anyone had any experience with p2p lending with bitcoins? I can see there seems to be a bunch of cryptocurrency p2p lending sites. Does anybody have any experience with them? I’ve already mined some bitcoins and was thinking it might be interesting to capture a yield on them. Alternatively, I was thinking if the p2p bitcoin is crap and it’s too risky not to get paid back, to take the other side of the trade: borrow (maybe to buy some more mining equipment) and then default on the loan…

    Jump to Discussion Post 8 replies