I got a review copy of “Bitcoin for the Befuddled” from No Starch Press (a publisher I’ve really enjoyed over the years). The title is an accurate description of where I’m at on Bitcoin – I have a basic understanding of it, but the intricacies are escaping me.
Sadly, Duning-Kruger being what it is, reading the book left me more confused, but most likely in a good way – at least now I can grasp the scope and depth of what I don’t understand. I’m in a better position to figure things out after reading the book, even if I don’t have all the answers now. (You can’t Google “blockchain” without knowing that the concept exists and is “Google-able”…)
Here’s a random sample of what I learned (in an attempt to cement my own knowledge, if nothing else):
- Bitcoin is a weird thing. Creating it was almost a magic discovery of some intersection between cryptography, economics, and game theory. The entire thing seems both precarious and stable, like a perfectly interlocking house of cards. It’s like a Mexican Standoff that works to everyone’s benefit.
- The guy (girl?) who “discovered” it did so in a 2008 paper anonymously published to a cryptography mailing list. He is known as “Satoshi,” but no one knows who he really is. He hasn’t been heard from in years. (Sounds like a movie plot, I know.) He claimed to be a 37-year-old man from Japan, but many people don’t believe that.
- The core logical basis of Bitcoin is that the ledger – the entire history of transactions – is public and everyone has it. So everyone can recreate the entire history of Bitcoin transactions, and everyone confirms that it’s valid every 10 minutes. With this process in place, no one can cheat the system because the entire history of the currency is in the open.
- This ledger is known as “the blockchain,” which is a – wait for it – chain of blocks, which are packets of information . Every block has a hashcode from the block before it. Think about that, for a second – if each block verifies the one before it, then you can trace the validity of the chain backwards to the very first block/transaction (the “genesis block”). The validation of the last block in the chain (they generate every 10 minutes or so), effectively validates the entire chain. That is just elegantly beautiful.
- There’s an astonishing amount of cryptography involved. Without crazy math, Bitcoin wouldn’t exist.
- There’s almost an equal amount of game theory involved. There are weaknesses in the system that are covered by other strengths which make pursuing the weaknesses non-profitable and therefore pointless.
- Storing Bitcoins can be a potentially complicated thing, depending on how much you have to store and how secure you want it. It can involve offline computers, “hot” or “cold” wallets, and even…
- …paper. Bitcoins can be stored on paper. So long as you can codify a cryptographic key value as a QR code, then there’s nothing stopping you from printing out $1 billion in Bitcoins, throwing away all digital record of it, and turning your filing cabinet into the most valuable piece of furniture in history.
- How big does the blockchain get before its unwieldy? The chain is something like 20GB now, which means a full copy of it might take days to download to populate your wallet. This will only get worse as Bitcoin gets more and more popular. (I did some research – people have put a lot of thought into this.)
- Doesn’t the system require Internet access? This point seems obvious, but I’m wondering how much of limitation this would be with wider adoption.
- How do nodes on the Bitcoin network connect? This is glossed over – nodes just seem to magically find each other. I assume they connect over some standard port/protocol, but then wouldn’t that be ripe for DOS attack? I know the book wasn’t intended as a networking reference, but at least some information on that would have helped visualize it my head.
The book has narrative sections, and interestingly, a full-length comic book right in the middle of it. There’s a chapter about the cryptographic basis of Bitcoin that had a lot of math and graphs. I admit to skimming that one a bit. There’s also perhaps an over-abundance of analogies. You start confusing them for each other after a while.
(Also, weirdly, the book is full of typographical errors. I found three of them in a two-paragraph stretch, at one point.)
All in all, the book fulfilled its promise. I was befuddled. I’m still a little confused, but I’m light years ahead of where I was. Let’s call this book a primer – it gets you started, and gives the basic knowledge required to learn more, if that’s what you decide to do. Honestly, I feel like I probably know enough at this point to trust Bitcoin and perhaps become a user of it. If I ever decided to mine it (something the book highly discourages) or develop against it, I would clearly need to know more.
But, for now, this is enough.
(If you want to see the first two chapters, which is where some of the core theory lies, the page at No Starch has a free download.)