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- Herausgeber: Tracey McDonald Publishers
- Kategorie: Fachliteratur
- Sprache: Englisch
A highly readable account of a complex subject, In Math We Trust is all you need to find out about Bitcoin, cryptocurrency, the future of money and the journey to being your own bank. Money is the most important human invention after language. It provides tokens for the faith we have in each other and society, but that trust has been violated repeatedly throughout history by the middlemen and authorities we rely upon in order to transact with each other. Now a new kind of money promises to rescue us from these tyrants and return us to the roots of money, without relying on third-parties. Instead of putting our faith in banks and governments, we can trust math. Simon Dingle has been working with Bitcoin and other cryptocurrencies since 2011, designing products that make it easier to engage with this new world of money. He is also a broadcaster, writer and speaker who makes complex subjects simple for his audiences. Having led the product team at one of the world's first Bitcoin exchanges and on other popular fintech products, Simon continues to design and invest in projects that make money more fair, this in addition to his weekly radio show that helps people with technology more generally. In this book Simon looks at the evolution of human trust that not only explains how cryptocurrencies work and the origins of Bitcoin, but how you can use these networks to take control of your own financial universe.
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Veröffentlichungsjahr: 2018
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IN MATHWE TRUST
THE FUTURE OF MONEY
IN MATHWE TRUST
THE FUTURE OF MONEY
Bitcoin, Cryptocurrency and the Journey to Being Your Own Bank
SIMON DINGLE
First published by Tracey McDonald Publishers, 2018
Suite No. 53, Private Bag X903, Bryanston, South Africa, 2021
www.traceymcdonaldpublishers.com
Copyright © Simon Dingle, 2018
All rights reserved.
No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission from the publisher.
ISBN 978-0-620-77702-5
e-ISBN (ePUB) 978-0-620-77703-2
Text design and typesetting by Patricia Crain, Empressa
Cover design by Simon Dingle and Ron Olivier, incynq solutions
Digital conversion by Johan Koortzen
Printed and bound by Novus Print Solutions
For Cian and Gabriel
Table of Contents
MAKING THEWORLD GOROUND
Giving money and power to government is like giving whiskey and car keys to teenage boys.
P.J. O’Rourke
THE HISTORY OF MONEY is a story of trust.
Money has come with us from the beginning of our cultural evolution and is a symbol of the faith we have in each other. The first tokens of this trust were things like shells and bones and individuals in small tribal groups transacted directly with each other.
We simply relied on our fellow people and the tribe.
This trust relationship changed over time as our groups grew larger. Money had to evolve to keep pace with our abilities for interacting with each other on a larger scale. We left behind the shells, bones, beads and clay chips used by our earliest ancestors and began minting coins in precious metals, imprinted with the images of rulers who guaranteed their value.
Separate groups of people began to trade with each other and more sophisticated structures became necessary as our interactions scaled up. We no longer dealt directly with each other and had to outsource our trust to kings and banks that reinforced their authority with the mythology of gods and borders.
Our information became increasingly ethereal as it transitioned from cave walls onto clay, paper, and finally converted into bits stored digitally. Money, like data, went from something solid and tangible to becoming more temporal and mysterious. We made symbols in the real world from the stories we shared with each other and then brought those artefacts back into our narratives as we invented increasingly complicated games to play with each other, making up rules about value and quality.
As our myths became more elaborate the images of our rulers moved off coins and into newspapers and then the internet as their battles moved on from spears and swords to guns, rockets and, eventually, to news headlines and tweets.
As money transformed, so did its influence. The person with the most money had the most power, and that became more important than the physical objects money could buy. We agreed that things were worth a certain amount of money and so it was, for as long as enough of our peers agreed with us.
Digital money made trade faster and more efficient but meant that value became harder to define and impossible for most to understand.
Our modern forms of money brought much good with them on the one hand, while on the other creating innovative new ways for individuals to suffer as they were swept up in struggles between increasingly powerful and opaque authorities.
Wars have always been about power and power in the modern world is all about money.
Violent conflict has become less common over time as we refined politics and our appreciation for the value of life improved. Our financial systems grew iteratively more reliable and fair as layers of regulation were added and countries found better ways of supporting one another. Fail-safes were installed in attempts to protect us from failures of unscrupulous players in the economic system.
Not only did the average quality of life improve, but we now live healthier and longer lives than ever before during the most peaceful period of human history. This is true in even the poorest countries on the planet, with few exceptions. We owe much of this progress to new economic systems that rewarded innovations in all aspects of life.
But.
For all the good that came with it, the modern circle of economic influence unintentionally created downsides. Our free markets originated from cruel colonial exploitation that created artificial wealth in countries that took without providing value.
Global markets are obsessed with growth for its own sake and a reliance on making you feel inadequate so that you’ll spend money you don’t have on things you don’t need. It brings the comforts and benefits of modern living on one hand, while relying on individual uncertainty to sustain itself on the other. While our bodies are healthier than ever before, our minds are plagued with memetic disorders that we are only beginning to appreciate in their severity.
In order to fuel the growth machine people borrow from banks which in turn require more to guarantee their reserves, empowering central banks that control the supply of money and hold the levers controlling our economies. The more spending, the more debt. The more debt, the more new money is required. So the wheel turns as we live under the delusion that growth of business alone equals progress.
The obsession with unsustainable expansion has created a competitive environment in which corporations compete to channel our spending with advanced advertising technology that tracks, measures and optimises the flow of content.
Services like Facebook and Google have weaponised the capture of attention with sophisticated algorithms that were developed before we knew what consequences they would bring. While even the companies that created these systems are now fretting over the damage they’ve caused, their growth-obsessed clients applaud the likes of performance marketing and hypertargeting tools.
The entertainment and news that is most captivating attracts the highest revenues from advertising and nothing grabs individual attention more than fear. All advertising is designed to exploit insecurity. No matter how artistic the advertising content is, its sole purpose is to make you feel that something is missing from your life.
The result is that we’re caught in a cycle of daily news blaring at us from television screens and social media pages, having us believe that disaster is imminent to catch our attention so that we’ll see advertising.
Despite empirical evidence that the average person is safer now than at any previous point in history, many live in fear of impending doom. Things are getting better while it feels like they’re getting worse. The news provides the unintended but convenient effect for our authorities of making us feel less in control.
The subliminal message being created as a by-product is clear: trust the government to protect you. Trust the bank to make sure you’ll have what you want. Spend more than you earn on things you don’t need.
You don’t have enough and are not enough.
Fuck that.
We can have all the advances of modernity without having to compromise our self-esteem. Sustainable economic systems are possible without fear. We’re on the verge of a new era where not only are we safe and secure, but we know it too.
In 2009 the seeds were planted for a new idea about trust. One that doesn’t acknowledge our imaginary borders or discriminate based on privilege. It introduced a new way of doing money that is fair, safe and in the control of the individual. More importantly, it gives us the opportunity to abandon growth for its own sake and take a more considered view of scaling our markets.
This book is about that evolution of trust and how it’s changing everything from the way we pay each other and store value to how we establish contracts and fund companies.
The hero in our story is a new kind of money that doesn’t rely on powerful central authorities and challenges the mythology of nation states.
In this book you will learn what Bitcoin is, where it came from, and how to harness it in your own life. We’ll explore the notion of being your own bank, and what the new future of cryptographic economics – or cryptoeconomics – means for existing financial institutions.
***
People spend an inordinate amount of time thinking about money. Many lie awake at night worried about how they will pay the rent. Others are preoccupied with preserving their accumulated wealth in uncertain economies. We worry when we don’t have money, and when we have too much of it – while no one seems to have just enough.
Given the amount of time human beings spend thinking about money it’s remarkable how little is given to understanding its history, our economic systems, or where money comes from. These things have also become super complicated, making the job of understanding them harder.
Even the simple question of what money is can no longer easily be answered.
People have increasingly started thinking about these questions following recent economic disruptions and the rise of a new kind of money that isn’t controlled by government. These factors have raised questions concerning why banks are allowed to lend money to others, where cash comes from, and how the system works.
In discussing the new trust system being created by cryptocurrency it’s necessary to answer some of these questions. I’ve tried to do so as simply as possible in these pages.
To that end there are some concepts worth mentioning upfront that will make reading this book quicker and easier.
The first is the notion of ‘fiat currency’ that you will see mentioned repeatedly. ‘Fiat’ means ‘let it be done’ in Latin and describes the core legal principle of monetary supply in our current economic system. It basically means, ‘because I say so’. Fiat currency is the dollars, euros, rands, cents and other government-issued money that we all grew up with.
I will also often make reference to the ‘old world’, which is really a large portion of the current world. After 2009 the financial market split in two with the conventional system of central banks and fiat currency on the one side and Bitcoin, cryptocurrencies and related concepts on the other.
So when I talk of the ‘old world’ I am referring to the traditional system that is very much still alive and kicking but will increasingly make way for the ‘new world’ of cryptocurrency and decentralised trust networks over time.
The old world relies on centralised systems, while the new world consists of layered open networks, the dynamics of which are covered in a subsequent chapter.
You will also hear me express varying opinions about central banks, governments and other institutions that may give rise to assumptions regarding my political inclinations – so it’s probably best to nail my colours to the mast upfront.
In the words of Ferris Bueller, ‘Isms, in my opinion, are not good. A person should not believe in an ism. He should believe in himself.’ Or herself.
That pretty much sums up my opinion on ideologies, but were I to take a test gauging my political slant – and I have – it would identify me as being in the category of ‘libertarian socialism’.
This school of thought is anti-authoritarian and rejects centralised governance structures, while still believing in organisation around social good. It’s most notable proponent, according to Wikipedia, is the American author and philosopher Noam Chomsky. So I’m in good company.
Libertarian-socialists are inherently rebels, and therefore innovators. Innovation is about making changes to existing things, after all – and that cannot be done without breaking rules.
Politics aside, you will also find a lot of conspiracy theory in the cryptocurrency world, and I have intentionally ignored it all. I’d suggest Reddit or Twitter if you want to engage in conversations about the Bilderberg Group funding the development of Bitcoin or secret government mining farms that are controlled by the New World Order. Bring along your tinfoil hat and leave reason at the door should you choose to venture into those waters.
Unfortunately it’s near impossible to discuss money without at least touching on governments and their role in society, so I’m afraid we do need to discuss how badly governments have acted as arbiters of our value systems.
In another of my favourite quotes William Shakespeare said, ‘Nothing is either good or bad, but thinking makes it so.’
In our personal stories there are goodies and baddies, but in objective reality there’s just stuff happening. Some of it seems good but turns out to be detrimental, and sometimes what seems like the best thing ever leads us to dark places. Judgement is hard, yo.
We can’t say that everything about traditional governance and central banking is bad, but a lot of it certainly is.
Bitcoin has been around for less than a decade at the time of writing. In this short period it has become a household name, begun to transform the way we think about trust and value, and has been called everything from a Ponzi scheme to the most significant invention in human history. Moderate views on cryptocurrency are hard to find but I’ve tried to establish a middle ground between rampant anarchism and the good that comes from us looking out for each other in social structures.
Like most disruptive technologies Bitcoin seemingly came from nowhere and began taking the world by storm – but of course Bitcoin was not created overnight nor in isolation; it’s the combination of several big ideas and enabling technologies that were just never assembled in this way before. It also introduced the notion of digital scarcity for the first time, which is discussed at length in a later chapter.
Most people do not concern themselves with the operation of spark plugs, fuel valves, and the other bits and pieces that make up a car. You don’t need this knowledge in order to drive a BMW from point A to point B. Cars are also evolving beyond the internal combustion engines that made them go until fairly recently as the market grows for electric and self-driving vehicles.
Likewise, Bitcoin does not require knowledge of encryption algorithms, integrated circuits or Merkle trees in order for you to use it to buy a cup of coffee. Like cars moving to electric engines, Bitcoin is also evolving in its use of newer and better technologies that may replace or enhance the current components of the network.
I’ve tried to keep technical explanations of how Bitcoin works to a minimum, except where it’s just damn interesting, and rather focused on what these new trust systems can do for you – which I suspect you’d be more interested in anyway.
I hope this copy of In Math We Trust will be dog-eared and worn by the time you finish reading it, or full of highlights and notes on your Kindle. I’d also love to hear your criticisms, additional thoughts, or anything else, on Twitter where I’m @simondingle, or by emailing [email protected].
MONEY FOR THE INTERNET
The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.
Satoshi Nakamoto
THE STORY OF BITCOIN begins on Halloween of 2008 when a mysterious message was posted to an online cryptography mailing list. Mailing lists are groups of people that use email to discuss things. In the early days of the internet they existed for everything from woodwork to rocket science.
The message in question contained a link to a white paper, which is a document that guides readers through a complicated issue, and was signed by an author named Satoshi Nakamoto along with the message:
I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.
This now-famous sentence introduced a combination of ideas that had been progressing in cryptography and computer science since the early nineties, all centred on improving the way that people can trust each other in online interactions.
Another project that was prominent in these communities at the time is Hashcash, which was proposed by a British cryptographer named Adam Back in 1997.
Hashcash aimed to solve one of the biggest issues plaguing early use of the internet – junk email. The idea was to make sending an email more difficult computationally so that individual messages would become more expensive. Spammers rely on being able to send large volumes of messages to their victims and doing so would be impossible if it took longer and cost more.
The system would create a kind of digital stamp for email. These stamps would be generated by computers that would have to process a complex math sum by guessing what the answer was over and over again until they got it right. By providing the correct answer it could be proved which computer did the work and generated the stamp.
This offered an additional advantage in that it would allow receivers to verify the sender of an email message, further limiting the powers of spammers and criminals that often rely on making email messages look as though they were sent by someone else – like your bank.
With Hashcash you could trust that the sender of the email was who they said they were, because their digital stamp – or signature – could not have been created by anyone else.
The rate at which a computer can crunch through numbers is referred to as ‘hash rate’, hence the name.
The Hashcash algorithm was a big deal in computer science because it meant that computers could prove they had done something. This system was called ‘proof of work’. A computer could say, ‘I have the correct answer to this sum, therefore I must be the one that did all the work to arrive at it.’
From this background Bitcoin emerged as a way of using proof of work to create an electronic cash system. Like all the best ideas, it is simple to describe but was deceptively difficult to pull off.
Let’s break down Satoshi’s sentence and look at each bit to fully understand the significance of what was achieved in his proposal.
‘I’ve been working ...’
Who was Satoshi Nakamoto?
No one knows for sure.
After Satoshi first posted to the cryptography mailing list hosted by Metzger, Dowdeswell & Co., the Bitcoin white paper began being shared online by cryptographers and computer scientists. Some of these individuals emailed Satoshi offering to help with the development of the Bitcoin system.
This group of early Bitcoin developers had many interactions with Satoshi over the years following the publication of the Bitcoin white paper and until Satoshi went quiet in 2011, never to be heard from again.
One of the first people to respond to the message was a cryptographer by the name of Hal Finney who was also the first person ever to receive Bitcoin from Satoshi in February of 2009. Hal sadly passed away in 2014 from complications related to amyotrophic lateral sclerosis, and his body was cryonically preserved in the hopes that he can one day be cured and brought back to life.
We don’t know much about Satoshi and some have suggested that he was really Hal Finney. We’ll probably never know for sure.
Some people did claim to speak to Satoshi telephonically and reported that he had a young-sounding male voice. Others don’t believe Satoshi could’ve been a single person, given the quality of code in the original version of the Bitcoin software that he wrote that would have been difficult for a single person to produce, and the fact that he often referred to himself in the plural, for example in the Bitcoin white paper:
We have proposed a system for electronic transactions without relying on trust.
Satoshi may be a lady-person, or many people working together – but the name is traditionally only used for men in its native Japan.
An Australian computer scientist by the name of Craig Steven Wright claimed to be Satoshi Nakamoto in 2016, but has failed to produce any proof since then, despite promising that he would and throwing tempers on Twitter whenever confronted about it.
To prove that you’re Satoshi Nakamoto would be straightforward. All you’d have to do is publicly access some of the Bitcoin that Satoshi owns – kind of like logging into your Facebook account to prove to the world that it’s yours. Not a single bit of Satoshi’s Bitcoin has ever been accessed. Craig said that he would do so in public but then later withdrew this promise.
