The learning journey with Bitcoin
The topic of Bitcoin is a divisive one and almost everybody has an opinion on it. Some critics say it’s an elaborate Ponzi scheme, designed to make the early investors wealthy as newer participants enter the market with others believing it’s a speculative bubble that could burst at any time. Those that see Bitcoin in a more positive light believe it’s a truly decentralised cryptocurrency that offers a unique hedge against inflation. Despite these differing perspectives, one thing is certain, Bitcoin is a fascinating technology to explore.
Bitcoin’s mysterious beginnings with Satoshi Nakamato, its use for illegal and anonymous purchases on Silk Road and its associated price volatility has meant that the cryptocurrency is always drawing media attention. There is no shortage of news articles and opinion pieces on Bitcoin and many influential investors and critics alike are making their views heard. Such awareness has a huge impact on price, but it also affects our ability to form clear opinions on the cryptocurrency. I first really took an interest in the Bitcoin debate after reading Digital Gold in early 2017, a very enjoyable book that reads more like a thriller. The author Nathaniel Popper describes the mysterious origins of Bitcoin, its almost cult-like following during its inception and the questionable transactions that it was so often used for in the early days. The book moved on to explore the first Bitcoin millionaires/billionaires, the creation of cryptocurrency exchanges and the subsequent challenges with governments around the world.
As I became more and more interested in the topic, the whitepaper by the creator(s) of Bitcoin was a natural next step. It’s fascinating to read and regardless of your opinions on the merits of Bitcoin’s ability to act as a store of wealth/medium of exchange, the whitepaper is probably one of the finest examples of open source out there right now. The Wikipedia article for Bitcoin is also very informative and draws on a variety of further resources, one of those being the Austrian school of economics. Exploring that topic led me to Mark Spitznagel, the renowned black swan investor who has made huge returns by identifying and exploiting economic events that come as a surprise to most us. His excellent book, The Dao of Capital: Austrian Investing in a Distorted World doesn’t cover Bitcoin or cryptocurrencies, but it does provide valuable insights into hedges against inflation and government-controlled currency manipulation.
My current reading on the topic of Bitcoin isThe Bitcoin Standard: The Decentralized Alternative to Central Banking by Saifedean Ammous. This really is an important book that explores the concept and role of money in society, it’s turbulent history and how Bitcoin may become the digital cash of the future. While I enjoy learning about Bitcoin from that perspective, I’m almost more interested in digging deeper into the technology that underpins it. Blockchain, the underlying technology that serves Bitcoin as a public ledger, is almost as contentious as the cryptocurrency itself. Some advocates evangelise the merits of private blockchains and commercial applications of blockchain in areas like fintech and supply chain integrity. Blockchain critics believe this isn’t really achievable and that Bitcoin is probably the most sophisticated and appropriate implementation of the technology that we currently have to date.
On reflection, the rise and fall of the price of Bitcoin doesn’t really matter to me much. What I can say though is that the exercise of researching and learning about the topic has been the true reward.