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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  •  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
  •  Robert Heimowitz

    Goldmoney $XAUMF

    This company is basically a full reserved bank that would be fully approved by Murray Rothbard himself. Their metals broker-dealer business is their cash cow today but they are creating a payment network that disintermediates banks and saves their customers money. They have a crypto broker-dealer and storage business as well but as prudent financial advisors the company’s management tries to educate the public about the virtues of gold ownership. The company acts like a fiduciary and seems much more trustworthy than market leaders like coinbase. Expanding into China with a customary 50/50 JV with a local company. Tough to predict the companies FCF going forward but it trades under 2x book value. Let me know what you guys think.

    Jump to Discussion Post 0 replies
  •  CryptoAuthor

    Latest Crypto Updates

    Australian Beach Town, Agnes Water to Become Nation’s First Digital Currency Town Agnes Water, Australian Beach town is a reckoning as the nation’s first digital currency town. The Beach town is initiating its step towards enhancing digital currencies. This was first started after real estate agent Gordon Christian began accepting payments in cryptocurrencies. Read news here: https://coinpedia.org/news/agnes-water-become-nations-first-digital-currency-town/ SBI Japanese Financial Exchange to Launch New Virtual Currency Services On Monday, SBI Japanese financial exchange’s CEO Yoshitaka Kita disclosed that it is coming up with new virtual currency services. Basically, this feature came live after it got delayed for certain security concerns. Bestowing to the Business Insider Japan, the firm is offering Blockchain stage for exchanging symbolic digital forms of currency such as Bitcoin, Ethereum, Bitcoin Cash, and Ripple. Read Detail info here: https://coinpedia.org/news/sbi-launch-new-virtual-currency-services/ Eat BCH on Mission to Feed Humanitarian in South Sudan The application of cryptocurrency or blockchain technology will be enormous if used for the social cause. There is one such charity firm, Eat BCH which aims to feed humanitarian in Venezuela by purchasing food with BCH donations. Read Detail info here: https://coinpedia.org/news/eat-bch-mission-feed-people/ Indonesia’s Regulator Sets Green Signal for Crypto Futures Trading The Trade Ministry’s Futures Exchanges Supervisory Board (Bappebti) of Indonesia has given a green signal for crypto futures trading. But, it is surprised to see that the Bank of Indonesia still doesn’t recognize cryptocurrencies as a mode of payment. Read news here: https://coinpedia.org/news/indonesias-regulator-sets-crypto-futures-trading/

    Jump to Discussion Post 0 replies
  •  Diana Dsouza

    Trending Cryptocurrency Exchanges News- Coinpedia

    Keyport Applications Accepts Encrypted Messages Built on BCH Blockchain The Keyport application, a platform that utilizes the OP_Codes of BCH network enables to send and accept encrypted messages. It is built on BCH Blockchain and Toku Protocol which encrypts the message and fix in OP_Return of a transaction. Read more here: Keyport Applications Accepts Encrypted Messages Built on BCH Blockchain Hitbtc Crypto Exchange suspended Services in Japan Due to unauthorize financial regulatory, Hitbtc has suspended its services in Japan. The citizens with Japanese IP addresses were asked to provide their residency details within exchange’s KYC process to prove they are not resident of Japan. Read more here: Hitbtc Crypto Exchange suspended Services in Japan Huobi Crypto Exchange to Team up with Newmargin Capital and Kiwoom Securities Singapore based crypto exchange; Huobi has revealed its new partnership to create a blockchain startup investment fund in China and South Korea. Recently, Huobi has announced cryptocurrency exchange traded fund offerings. Read more here: Huobi to Team up with Newmargin Capital and Kiwoom Securities Bittrex Gets Bank Approval to Help Clients Buy Bitcoin with Dollars Bittrex, the Seattle-based crypto exchange has signed an agreement with Signature Bank in New York, on Thursday 31st, 2018. The firm will directly allow customers to trade digital currencies using US dollars. Read more here: Bittrex Gets Bank Approval to Help Clients Buy Bitcoin with Dollars   

    Jump to Discussion Post 0 replies
  •  Diana Dsouza

    Crypto Investor Dan Morehead Says Its Good Time to Buy Bitcoin Now!!!

    The founder of Pantera Capital Management, Dan Morehead suggests to buy bitcoin while it is cheap now. According to Coinmarketcap Bitcoin was trading at $7,508.60 USD. One of most popular cryptocurrency, Bitcoin had reached the heights of $20000 in last year. Due to volatile nature of cryptocurrency, this year in month of February, it has dropped below $6000. According to Dan Morehead, crypto investors told CNBC that, “All cryptocurrencies are very cheap right now. So now is a good time to buy now and participate in the rally as it goes”. Although there is a hype in cryptocurrencies are still unregulated industry. Due to its price fluctuations and unstable characters, market keepers are still into consideration crypto regulations. Dan Morehead’s suggestion to investor concern ‘once a currency break its 230-day moving average, make a purchase and wait for a year and sell’. Watch here what Dan Morehead Says: https://coinpedia.org/news/dan-morehead-good-time-buy-bitcoin/

    Jump to Discussion Post 0 replies
  •  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 8 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 5 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 28 replies