Book review: The Age of Cryptocurrency: How Bitcoin and the Blockchain are Challenging the Global Economic Order by Paul Vigna and Michael J. Casey
The Internet Will Eat the World
I installed my first computer in my bedroom when I was nine. What a machine! This box ran Windows 95, which meant I could play games, and it had a modem, which meant I could email my best friend across the country and browse usenet groups. Then came this great software called Netscape that opened an entire world: pages on any topic I could dream of. My bedroom transformed into a library, making my world much larger than a rural Maine town. Opportunities seemed infinite.
Since those days, few things have made me so excited that I've lost sleep and forgotten to eat. All, though, have been related to this decentralized, world-opening, business-eating thing called the Internet.
Fast forward to July 2017 and my re-discovery of cryptocurrency: lost in the Quora rabbit hole, a post about something called "Etherium" caught my eye. It had been close to seven years since I had last thought about bitcoin--back when it was worth maybe a few dollars. Somehow, however, each "ether," as Etherium coins are called, was worth over $200, and the bitcoin price was also climbing into the thousands. Incredible! Hours passed with my eyes glued to streamers on YouTube, posts on reddit, and a Netflix documentary (called Banking on Bitcoin and highly recommended) on the topic.
I opened accounts on a few digital currency exchanges and started trading. I missed dinner. I went to bed late. I woke up early. I cancelled plans. In other words, I was hooked. A few weeks and much profit later, I thought it might be a good idea to learn more about history of these currencies and their potential. I picked up several books on the topic and started reading.
In the interest of my readers, I'm reviewing the most thorough introduction to cryptocurrency I found in print. The Age of Cryptocurrency: How Bitcoin and the Blockchain Are Challenging the Global Economic Order, by Paul Vigna and Micael J. Casey, is a thoughtful primer on how cryptocurrency was born of the cypherpunk movement, the adoption problems it faces, and its enormous potential to revolutionize the fairly unexciting, unchanging world of finance. For those new to digital currencies, this introductory text is invaluable to understanding what they could mean. For the skeptics wondering how cryptic-sounding, digital-only "money" could ever work in the real world, the authors may build your trust or, at least, demystify the theory behind it.
What the fiat is cryptocurrency?
"Fiat" means "let it be" in Latin. "Fiat currencies" are what most of us today consider to be money--that is, paper we can exchange for goods and services, backed by government promises of value. When we insert money into a vending machine, for instance, its owner accepts that fiat has a certain value, or, if we use plastic, our bank confirms that we have enough fiat in an account to approve this transaction, and the vending machine spits out a can of soda in exchange.
Behind this seemingly simple interaction are myriad hidden fees that drive up the cost of soda to the end consumer, the cost of accepting credit and debit card payments to the vending machine's owner, and even our company's electric bill, among others.
What if we could eliminate all of these fees by removing the intermediaries that drive up costs? Further, what if the transaction could be even more secure, without your bank knowing about your afternoon root beer habit? Vigna and Casey think cyrptocurrencies might be the answer:
The simple genius of this technology is that it cuts away the middleman yet maintains an infrastructure that allows strangers to deal with each other. It does this by taking the all-important role of ledger-keeping away from centralized financial institutions and handling it to a network of autonomous computers, creating a decentralized system of trust that operates outside the control of any one institution. At their core, cryptocurrencies are built around the principle of a universal, inviolable ledger, one that is made fully public and is constantly being verified by these high-powered computers, each essentially acting independently of the others. In theory, that means we don't need banks and other financial intermediaries to form bonds of trust on our behalf. The network-based ledger--which in the case of most cryptocurrencies is called a blockchain--works as a stand-in for the middlemen since it can just as effectively tell us whether the counter-party to a transaction is good for his or her money.
Let me emphasize one sentence a second time:
In theory, that means we don't need banks and other financial intermediaries to form bonds of trust on our behalf.
This is cryptocurrency's core promise: removal of the middleman. Without banks charging huge transaction fees, for example, moving money across international boundaries becomes more cost effective for everyone from small business owners to migrant workers. For the millions of cryptocurrency enthusiasts developing and evangelizing digital currencies and their underlying technologies, a world without middlemen and their cost to society is just over the horizon.
Will Cryptocurrencies Eat the World?
Cryptocurrency the term is a misnomer: currency is only the start. The blockchain technology underlying Bitcoin, Ethereum, Litecoin, and countless other "altcoins" are decentralized platforms allowing users to run currency as an application, alongside countless other applications best understood by re-reading your favorite science fiction novels.
Let's start with the most science fiction-esque example: using cryptocurrencies, machines can pay each other. In other words, human middlemen can be removed entirely from both mundane and complex transactions. My favorite example from Vigna and Casey:
Mike Hearn...used the example of a driverless taxi, one guided only by sensors and GPS technology. The one-car taxi service would be run by a smart software program plugged into an automated, electronic marketplace Hearn dubbed the Tradenet. There, prospective passengers could post ride requests and receive competing bids from multiple driverless cars...If all that sounds futuristic but feasible, try this additional feature of Hearn's imaginary taxi: it has no owner. The car owns itself--or, more precisely, the operating computer program owns it. The program would pay the car's running costs and take in its own revenue; all of this would be made possible by cryptocurrency and the invention of the blockchain....Because we could program it to provide the cheapest and most efficient service possible, Hearn's car would be focused on maximizing productivity and surviving, not building up a fat pile of retained earnings to spend on McMansions and trips to the Bahamas.
Less expensive services are great, but these technologies can also be astonishingly important for the billions of "unbanked" and the underrepresented in the banking system. The potential for billions of people to leapfrog traditional banks is huge and the case studies are promising. If you are a woman in many countries, including Afghanistan, for example, you are not allowed to have a bank account. Your money must pass through your husband, father, or brother. Vigna and Casey offer a powerful example of how cryptocurrency can help women keep and spend their own money:
Even though Parisa Ahmadi was in the top of her class at the all-girls Hatifi High School in Herat, Afghanistan, her family was initially against her enrolling in classes being offered by a private venture that promised to teach young girls Internet and social media skills--and even pay them for their efforts...Still, one of the other things most girls don't have in Afghanistan is a bank account...Ahmadi's luck would change in early 2014. The Film Annex's New York-based founder, Francesco Rulli, aware of the difficulty faced by women like Ahmadi and frustrated by the transaction costs he incurred in sending relatively small amounts of money around the world, implemented a sweeping change to the Film Annex's payment system. He would pay his bloggers in bitcoin...
For girls like Ahmadi, payment in bitcoin means the difference between access to money or no access:
Bitcoins are stored in digital bank accounts or "wallets" that can be set up at home by anyone with Internet access. There is no trip to the bank to set up an account, no need for documentation or proof that you're a man. Indeed, bitcoin does not know your name or gender, so it allows women in patriarchal societies, at least those with access to the Internet, to control their own money.
Written by finance journalists with a lay audience in mind, don't expect to gain a detailed understanding of the underlying technology. The Age of Cryptocurrency offers a detailed enough view of the technology to ease skeptics, while giving enthusiasts more background on the history and potential.
When was the last time you were so obsessed with something that you forgot to eat, forgot to sleep, and didn't care? Want to recapture that sensation of boundless opportunity we felt at the dawn of the Internet Age? Cryptocurrency may do it for you. It certainly has for me.
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