Digital Gold, book review: A cryptocurrency primer

If you've been wondering about bitcoin and its antecedents, this book is an excellent starting point, covering the technology and a cast of colourful characters equally well.

Digital Gold: The Untold Story of Bitcoin • By Nathaniel Popper • Allen Lane • 398 pages • ISBN: 978-0-241-18061-7 • £20

"Change who controls the money, and you change everything," says the jacket flap of Digital Gold: The Untold Story of Bitcoin. Covering bitcoin's evolution from dismissible crackpot idea in 2008 to Bill Gates's first public acceptance in 2014, New York Times reporter Nathaniel Popper goes behind the scenes to tell the stories of the currency's creators, earliest users, and investors: the mysterious Satoshi Nakomoto, MIT scientist Gavin Andreson, Argentinian entrepreneur Wences Cesares, Silk Road owner Ross Ulbricht, the Winklevoss twins, Bitcoin Foundation director Patrick Murck, and many more.

During those years, the exchange rate between bitcoin and US dollars veered crazily from 8.5 cents in 2009 to $940 in early 2014 to about $625 at the book's close; today it hovers around $235.

Cryptocurrency history

Popper begins with bitcoin's antecedents: 1990s discussions on the Cypherpunk mailing list and early experiments such as Adam Back's hashcash and David Chaum's Digicash, which both pioneered ideas that eventually became building blocks for bitcoin. The goal, both then and later, was to create a form of electronic money that could be used anonymously, that eliminated the costs and frustrations of dealing with banks and other financial institutions, and that was safe from government prying and appropriation.

Popper captures particularly well the varying meanings of bitcoin across the world. In the US, bitcoin segued relatively smoothly from libertarian gold-replacement dream to unromantic business interests grappling with regulators. In Argentina, bitcoin seemed a safer way to store assets than pesos, which were deflating so fast that supermarkets saw customers trying to pay up before the prices could change. In China, it appealed to a nation of bettors. Given bitcoin's wildly fluctuating prices against the world's major national currencies, the Chinese may have been nearest right. At least, at the time: these days, people in suits are making a serious business case for the blockchain.

Popper also does an excellent job of explaining the technical concepts at the heart of bitcoin -- cryptography (as I know from personal experience) is arcane stuff and demanding to explain simply. He also does a good and entertaining job of following the stories of his colourful and dramatic characters.

In many ways, the story of bitcoin parallels the story of the development of the internet itself. From its experimental beginnings in the minds of impassioned idealists, bitcoin found rapid adoption among a variety of players who didn't share those ideals. While Silk Road customers -- for years the biggest users of bitcoin -- helped ramp the system up, the notoriety did bitcoin no favours in terms of public respectability. By the end of Popper's book, bitcoin's incoming pragmatic businesspeople are accepting that they will have to deal with regulators and participating in the first such discussions -- for example, at the 2014 Computers, Freedom, and Privacy Conference in Washington, DC, where Patrick Murck and lawmakers appeared together for the first time.

A good place to start

So: if you've been wondering about bitcoin, this book is a good place to start. Five years on from bitcoin's first release, it's clear that this is an important technology, even though its eventual impact is likely to be different from what its creators hoped. Yes, its price has crashed many times, but remember the 2000 dot-com bust: everyone agreed the internet had been hyped and its startup companies' share prices had been ridiculously bubbled. But everyone also believed it would be a whole lot bigger in 2010. Popper's warts-and-all account makes it clear that the same will be true of bitcoin.