This is a comprehensive summary of “The Age of Cryptocurrency” by Paul Vigna and Michael J. Casey. The book explores how bitcoin and digital money are challenging the global economic order.

what’s in it for me? learn the real stories behind bitcoin and how it works.#

Introduction

paul vigna and michael j. casey the age of cryptocurrency how bitcoin and digital money are challenging the global economic order

whether you heard from the news or online or from a friend who claimed it's the best investment for the future, you're probably aware of bitcoins by now.

this is the digital currency sweeping into conversations from the government to wall street to chat rooms.

how does this currency work without any paper money?

how do you know if you can trust it to have any value?

how can you be sure it won't be hacked, turning your bitcoins into a bunch of worthless numbers on a screen?

take a listen to these chapters to find answers to all those questions as well as a brief history of bitcoins.

money has value when it’s based on a system of trust.#

chapter number 1 money has value when it's based on a system of trust what is money exactly?

it's not the bills in your wallet.

those bills don't have any inherent value.

they're just bits of paper.

so why can you buy stuff with them?

for money to have value, there needs to be a shared agreement on its use as a medium of exchange.

in money's earliest days, gold or silver was often used to make coins.

these coins were different from our modern bills because gold and silver have intrinsic value.

however, there was only one reason why these coins functioned as money.

the people using them valued gold and silver and agreed they could be used to buy things.

if you traded with a culture that didn't value gold or silver, your coins were worthless.

cultures don't always value the same things.

the micronesian island of yap, for example, had a peculiar currency system that puzzled early visitors from europe.

they used huge stone wheels called fey as currency.

these stones were so heavy that they often remained with the previous owner after an exchange.

the system worked because the yapis agreed that the ownership, or partial ownership, of fey could be used to settle debts.

a society needs some kind of trust in its money to have a controlled supply of currency.

if just anyone could create new money, money would lose its value.

there needs to be a limited amount of it for the system to work.

in the 1920s, the weimar republic learned this the hard way.

germany had tremendous debt following the versailles treaty and tried to pay it by printing more and more bills.

the value of the bills became so low that people began using them as wallpaper because it was cheaper than buying actual wallpaper.

this hyperinflation caused the economy to collapse and people lost their faith in the monetary system.

bitcoin is money because people agree it can be used as a unit of exchange.#

point number 2 bitcoin is money because people agree it can be used as a unit of exchange.

the number of bitcoin supporters is growing every day.

but many people still have a hard time viewing it as real because you can't see or touch individual bitcoins.

bitcoin has already proved itself to be a viable currency, however.

bitcoin functions as money because people trust that it has value, just like normal money.

when people started to see that real things could be bought using it, trust increased.

bitcoin's rising price reflects this trust.

in the first three months of 2013, the value of a single bitcoin rose 800% from $129 to $1,165.

also, bitcoin doesn't have a central bank like other currencies.

bitcoins are mined, which keeps them from spiraling out of control.

we'll learn more about this later in these chapters.

ultimately, we can know that bitcoin is money simply because people accept bitcoins as units of exchange.

consider the story of laszlo haniec, a coder from florida.

on may 21st, 2010, he made an unusual purchase.

his purchase wasn't unusual because of what he bought, but rather the way he did it.

at the time, bitcoin had only existed for a year, but haniec was an early adopter.

in 2010, he owned about half of all bitcoin in the world.

no one accepted bitcoin then, and haniec didn't know what to do with his money.

he decided to pay 10,000 bitcoins, worth about $41 at the time, for two papa john pizzas.

he found a fellow bitcoiner through the bitcoin forum and had him buy two pizzas using a credit card.

haniec then paid him in bitcoin for the pizza.

bitcoin was accepted as a unit of exchange.

by august 2014, the value of the 10,000 bitcoin haniec spent on the pizza had risen to roughly $5 million.

bitcoins are mined and there’s a public record of all transactions called the blockchain.#

chapter number 3.

bitcoins are mined and there's a public record of all transactions called the blockchain.

you can't create gold at home.

you have to work hard finding it and mining it.

bitcoin works in a similar way.

instead of pickaxes, however, bitcoins are mined with computers.

computers mine bitcoins by solving highly complex mathematical problems.

solving these problems requires significant amounts of computational power.

when a problem is solved, a bitcoin reward is given to the miner and a new problem is issued.

so, the faster your computer, the more likely you are to be rewarded.

the number of bitcoins awarded is also halved every fourth year, so there's an incentive to mine as many as you can before they run out.

in total, 21 million bitcoins will be released.

according to one estimate, the last bitcoin will be mined in 2040.

every time a new bitcoin is created, the blockchain is updated.

the blockchain is the public record of all transactions ever made in the network.

when a new bitcoin is mined, a new block is created, validated and added to the chain.

just as a bank keeps a careful record of every account balance, there's a bitcoin record of all owners' balances and transactions to ensure the same bitcoin isn't spent twice.

this is the purpose of the blockchain, which everyone has access to.

every bitcoin owner has an address, a unique and encrypted number assigned to them in the bitcoin network.

addresses help keep track of who is who.

so if you buy a coffee at a cafe that accepts bitcoin, the network will register a request to send btc.0.008 or 1 eight thousandth of a bitcoin from your address to the cafe's.

bitcoin removes all middlemen and keeps both the sellers and buyers anonymous.#

tactic number four bitcoin removes all middlemen and keeps both the sellers and buyers anonymous.

every time you swipe your credit card or transfer money, banks and credit card companies skim a bit off the top.

wouldn't it be great to get rid of this?

bitcoin does.

it removes the middleman and makes transactions cheaper and more efficient.

in the 14th century, the medici family served as a middleman between savers and borrowers.

they kept a careful record of their accounts and transactions, for a fee of course.

this was the birth of the banking system and it led to an explosion in economic activity.

it also made the medici family one of the richest and most influential in europe.

since then, banks have only become more powerful.

they have a huge impact on our society, especially because they now influence our politicians through lobbying.

bitcoin sprung from a movement that wanted to change this system by giving power back to the people.

through the blockchain, everyone has access to the distributed network that bitcoin is based on.

this ensures that no single person or institution can control the system as a whole.

although buyers don't always pay a fee, sellers often do, which means that this value has to be added to the price.

this is why shops often won't accept cards for purchases under a certain amount.

without a middleman collecting fees, however, bitcoin makes transactions cheaper and faster.

with cards, there is also a hugely complex and time-consuming process behind the scenes of every transaction.

when you buy a coffee at starbucks with your credit card, it usually takes three business days for them to receive the money.

with bitcoin, the transaction is completed almost instantly.

bitcoins are important because they obscure the identities of both the buyer and seller.

indeed, a key feature of cryptocurrencies is their anonymity.

crypto means hidden.

bitcoin protects its users by keeping their identities secret.

bitcoin has become a global business.#

chapter number 5 bitcoin has become a global business bitcoin has only been around a few years, but the number of bitcoin believers has grown quite rapidly.

all across the globe, people are devoting themselves to bitcoin.

it's becoming very profitable to do so.

huge amounts of money are now invested in bitcoin mining every year.

according to one estimate, over $1 billion was spent on building rigs of super-fast computers designed specifically for mining bitcoins between april 2013 and april 2014.

the processors now used to mine bitcoins are about 3 million times faster than they were when bitcoin was founded.

the computational expansion of the industry is simply unparalleled.

manufacturers of these supercomputers have a hard time keeping up with the demand.

some people even claim that if the industry keeps growing at its current rate, it'll cause an environmental catastrophe because it uses up so much electricity.

bitcoin has spawned entire new areas of innovation and investors are catching on.

communities where people come together to work on bitcoin-related projects are springing up all over the world.

20 mission in san francisco, founded in 2012 by bitcoin enthusiast jared kenna, is one example.

it's become a hub where young bitcoin entrepreneurs can work, sleep, and socialize.

innovations created at 20 mission have included madesafe, a solution that lets users rent out their free disk space over a decentralized network, and zeroblock, an app that shows bitcoin prices in dollars along with notifications when there are any price changes.

investors were initially wary of putting their money into these kinds of projects, but this attitude has changed dramatically.

surveys conducted by the news site coindesk have shown that the amount of venture capital going into bitcoin-related companies increased from $2 million to $88 million between 2012 and 2013.

bitcoin could have a huge and positive impact on the developing world.#

chapter number 6 bitcoin could have a huge and positive impact on the developing world there are about 2.5 billion people worldwide who don't have money in banks.

they lack many of the freedoms people in developing countries take for granted.

bitcoin could change all this.

bitcoin can give people in developing countries more economic freedom.

fatima, a mother of five who lives in a refugee camp in mali, is an example of this.

mali is one of the poorest countries in the world.

like many malians, fatima's husband went to the ivory coast to find work and sends money back to her.

since neither of them can access a bank account, he sends her cash, which often disappears along the way.

once they have smartphones, however, they'll be able to send each other money using bitcoin.

they'll be able to send and receive it without banks or other institutions taking any of it away.

phone companies are investing heavily now in sending their products to more of the developing world.

bitcoin will also help people to keep their money more securely, a crucial step toward escaping poverty.

bitcoin can also empower women around the world and help increase equality.

parisa ahmadi, a young girl in afghanistan, has already benefited from this.

she took part in a class held by film annex, an arts project based in the united states that pays about 300,000 filmmakers and bloggers to produce small movies and write blog posts.

ahmadi is an avid film lover and began publishing movies about her life on the site.

she also started writing reviews of other films and earning a small income from them.

however, ahmadi didn't have a bank account, like most women in afghanistan.

so the founder of film annex started paying her in bitcoin.

he also set up an e-commerce site where people can buy gifts from amazon using bitcoins.

ahmadi used hers to buy a new laptop.

bitcoin still has many weaknesses and is difficult to regulate.#

chapter number 7.

bitcoin still has many weaknesses and is difficult to regulate.

so given all these benefits, what are the downsides of bitcoin?

bitcoin software is still far from bulletproof, which means that its price is very volatile.

people learned this the hard way on february 10, 2014.

gavin anderson, the chief scientist at the bitcoin foundation and the developer behind bitcoin's core software, got flooded with panicked messages.

mount gox, one of the biggest bitcoin exchanges in the world, was on its knees.

a bug had been revealed in bitcoin software that made it possible to create fake transactions and receive unwarranted payments.

anderson tried to remedy the situation, but it was too late.

hackers started exploiting the vulnerability, mount gox collapsed, and the price of a single bitcoin plummeted from $703 to $535 in just one day.

imagine the consequences if a major currency like the dollar lost this much value overnight.

bitcoin is also difficult to control because of its distributed network.

paul barron, a computing pioneer, developed this concept.

in a distributed network, every point is connected to all other points, so the information is sent across the entire web.

this means it's practically impossible to shut down.

there's no bitcoin ceo or cto who can get slapped with a subpoena.

another problem is that bitcoin can be used for criminal purposes like selling drugs or even hiring hitmen.

silk road is an example of this.

it's an anonymous online marketplace that uses bitcoin as currency.

after it was founded, it quickly became a hotspot for trading all kinds of illegal substances.

since the buyer's and seller's identities are hidden, it's very difficult for law enforcement agencies to investigate these crimes.

final summary#

Conclusion

you've just heard our chapters to the age of cryptocurrency by paul vigna and michael j.

casey.

the key message of this book is that anything can function as money as long as people agree it has value.

bitcoin has only existed for a few years, but the industry has boomed and people's trust in bitcoin as a form of currency has only increased.

it has the potential to radically change our global economy by removing middlemen and providing anonymity.

despite their currently volatile nature and other downsides, cryptocurrencies are undoubtedly the future.

last thing, we'd love to hear what you think about our content.

just drop an email to rememberatsummarybook.org with the age of cryptocurrency as the subject line and share your thoughts.

Discover more book summaries in the same category or by the same author.

Fooled by Randomness

Economics20 min read

Fooled by Randomness

by Nassim Nicholas Taleb

4.6

Digital Gold

Economics14 min read

Digital Gold

by Nathaniel Popper

4.4

Extraordinary Popular Delusions and The Madness of Crowds

Economics19 min read

Extraordinary Popular Delusions and The Madness of Crowds

by Charles Mackay

4.4

The Age of Cryptocurrency

Table of Contents

Book Summary

what’s in it for me? learn the real stories behind bitcoin and how it works.#

money has value when it’s based on a system of trust.#

bitcoin is money because people agree it can be used as a unit of exchange.#

bitcoins are mined and there’s a public record of all transactions called the blockchain.#

bitcoin removes all middlemen and keeps both the sellers and buyers anonymous.#

bitcoin has become a global business.#

bitcoin could have a huge and positive impact on the developing world.#

bitcoin still has many weaknesses and is difficult to regulate.#

final summary#

You Might Also Like

Fooled by Randomness

Digital Gold

Extraordinary Popular Delusions and The Madness of Crowds