,Introduction
Cryptocurrency is a new form of money. Since its first practical emergence, when Bitcoin fired up
on January 3, 2009, it represented a new kind of way in the history of humanity to store, transfer,
and represent value. What value? Well, that’s the question.
Every day, the majority of the people in the world pay for goods and services or accept payment
digitally. They dip a credit card, scan an Alipay or WeChat Pay QR Code (about a billion people
in China), tap a smartphone, pay by SMS (as with M-Pesa across parts of Africa), or click a button
to send their financial details to a website. Hundreds of billions of dollars annually are transferred
electronically by international migrant workers, sending remittances home.
These massive transfers of value electronically power and have accelerated the global economy.
Despite the ease with which many of them work, they are mostly somewhat to very inefficient
because of the number of parties involved, each of whom takes some piece of the action. And they
all rely on trust in the institutions involved.
Cryptocurrency is a way to remove intermediaries (and thus inefficiency and costs) while
replacing trust in the value, ownership, and transfer of something with proof based on
mathematics in the form of encryption implemented in a common set of software. At its heart,
that’s all it is, but the word “all” does a lot of work there.
Instead of moving around government-backed electronic equivalents of money (or even physical
currency), cryptocurrencies lock every transaction—every shift of ownership from one party to
another—in an immutable, verifiable fashion in a public record that nonetheless preserves many
aspects of anonymity.
Encryption allows the owner of cryptocurrency to demonstrate ownership in a manner that other
people, systems, and algorithms can validate without trusting that ostensible owner. With printed
currency, possession of the cash is proof of ownership; with cryptocurrency, possession of
encryption keys provides an analogous proof. (Just as with cash, your ownership may be disputed
by legal means, but you still possess the value until a change is forced upon you.)
At some level, cryptocurrency is just a more efficient way to hand a bag of cash to someone else;
at other levels, it’s an entirely new creature whose attributes haven’t yet been fully explored.
Regardless, the purported value of the two most popular digital coins—Bitcoin and Ethereum—
coupled with dozens of more specialized and niche ones is over $1 trillion, so it’s a beast to
examine carefully.
Skyrocketing exchange rates pushed cryptocurrency into heavy mainstream coverage across the
pandemic in 2020. And in early 2021, a way to sell a form of ownership of a digital work of art,
a non-fungible token or NFT, went from an obscure corner of the internet into a multi-billion-dollar
business in which the NBA, Christie’s, and other reputable and well-known parties participated.
,It’s all a little overwhelming, and this book is your key to unlock cryptocurrency’s innards.
It’s not a recommendation (nor a prospectus) to invest in it or purchase digital value. Nor is
about valuation, or what cryptocurrency is worth in dollars or euros or renminbi—that would delve
into investment advice and trying to understand why a market attributes a certain exchange range
to various coins.
Rather, what you’ll achieve by the end of this book is a solid working knowledge of all the pieces
that fit together in a cryptocurrency, plus an idea of how various ones may mature and what the
future brings.
The book spends a fair amount of time on background knowledge. You’ll learn how money and
cryptocurrency stand in relationship to each other and then all the fundamentals of a
cryptocurrency, like the blockchain, mining, and wallets.
Along the way, I introduce cryptographic concepts necessary to achieve a deeper insight,
like public-key cryptography. There’s very little math, however, and a perfect understanding of
cryptography isn’t critical to understanding how a cryptocurrency works—it just adds to your
expertise. (I separated some of the most technical bits into an appendix for reference.)
I also dig into the dangers cryptocurrency poses to the planet and to financial markets, as well as
risks you could experience from the dark sides, legal and otherwise.
With that understood, I explain how to buy, hold, and sell cryptocurrency; how to purchase digital
and physical assets with it; and what, in fact, an NFT really is. (Spoiler: It’s not precisely a digital
asset nor really ownership of a digital asset. It’s closer to bragging rights.)
My hope is that you’ll achieve a level of comfort and familiarity with the concepts and that whether
you become a participant in cryptocurrency in any way, or you say, “thanks, but no thanks,” you
do so from an informed position of comfortable knowledge.
Cryptocurrency Quick Start
Cryptocurrency can be overwhelming, so I recommend figuring out how you want to approach
learning about it. You can work your way sequentially through the book, which is designed to
build on knowledge. Or you can jump ahead to chapters on risk, buying or selling, or NFTs if you
want to dig into one of those subjects first.
Master the basics:
Start with first concepts as you examine what money is, where cryptocurrency fits in, and
learn about liquidity; see Understand Cryptocurrency.
Get to know all the elements of a cryptocurrency; see Learn How Encryption Binds
Cryptocurrency.
, Become an expert in mining, the reward-based mechanism that records permanent
transactions; see Dig into Currency Mining.
Learn the salient facts about each major cryptocurrency; see Discover How Major
Cryptocurrencies Work.
Understand the risks:
Hazards abound in the ongoing maintenance of cryptocurrencies; see Explore
Environmental and Structural Hazards.
You might experience danger to your finances, health, and freedom; see Avoid the Dark
Side of Cryptocurrency.
Participate in cryptocurrency:
Buy, sell, and purchase stuff with cryptocurrency; see Buy and Sell Cryptocurrency.
Peer into the future of unique digital purchases; see Understand Non-Fungible Tokens
(NFTs).
Understand Cryptocurrency
Cryptocurrency was once the province of geeks, people who believed leaving the gold standard
was a mistake, conspiracy theorists, black marketeers, speculators, criminals, and people with an
obsessive sense of curiosity—to name just a few categories. It was also of keen interest to modern
economic theorists, computer scientists, encryption researchers, and people who dabbled as a side
interest in one or more of those areas of study and practice.
The space opened up over time as the exchange value of Bitcoin and cryptocurrencies that followed
became significant—into the billions of dollars—and the tools that let people participate became
simpler. Originally, cryptocurrency required a good understanding of encryption, security, and
command-line interactions, including potentially installing and compiling software. But
participation evolved into friendlier, GUI-based “wallets” to hold currency and ultimately to
websites that perform the heavy lifting.
Along the way, more people began to participate by buying, holding, and selling cryptocurrency,
which led reported coverage of the field to grow from mentions in specialized publications to
mainstream business stories in widely read periodicals and websites.
Cryptocurrency’s reach and ability to appeal to more people grew as global politics and financial
markets roiled, unsettling enough people to a large enough extent to try to find safe ways to transfer
money into something they thought might be outside the vagaries of government oversight and
mismanagement. For some, that also meant largely outside the gaze of regulators, prosecutors, and
tax collectors.
Cryptocurrency is a new form of money. Since its first practical emergence, when Bitcoin fired up
on January 3, 2009, it represented a new kind of way in the history of humanity to store, transfer,
and represent value. What value? Well, that’s the question.
Every day, the majority of the people in the world pay for goods and services or accept payment
digitally. They dip a credit card, scan an Alipay or WeChat Pay QR Code (about a billion people
in China), tap a smartphone, pay by SMS (as with M-Pesa across parts of Africa), or click a button
to send their financial details to a website. Hundreds of billions of dollars annually are transferred
electronically by international migrant workers, sending remittances home.
These massive transfers of value electronically power and have accelerated the global economy.
Despite the ease with which many of them work, they are mostly somewhat to very inefficient
because of the number of parties involved, each of whom takes some piece of the action. And they
all rely on trust in the institutions involved.
Cryptocurrency is a way to remove intermediaries (and thus inefficiency and costs) while
replacing trust in the value, ownership, and transfer of something with proof based on
mathematics in the form of encryption implemented in a common set of software. At its heart,
that’s all it is, but the word “all” does a lot of work there.
Instead of moving around government-backed electronic equivalents of money (or even physical
currency), cryptocurrencies lock every transaction—every shift of ownership from one party to
another—in an immutable, verifiable fashion in a public record that nonetheless preserves many
aspects of anonymity.
Encryption allows the owner of cryptocurrency to demonstrate ownership in a manner that other
people, systems, and algorithms can validate without trusting that ostensible owner. With printed
currency, possession of the cash is proof of ownership; with cryptocurrency, possession of
encryption keys provides an analogous proof. (Just as with cash, your ownership may be disputed
by legal means, but you still possess the value until a change is forced upon you.)
At some level, cryptocurrency is just a more efficient way to hand a bag of cash to someone else;
at other levels, it’s an entirely new creature whose attributes haven’t yet been fully explored.
Regardless, the purported value of the two most popular digital coins—Bitcoin and Ethereum—
coupled with dozens of more specialized and niche ones is over $1 trillion, so it’s a beast to
examine carefully.
Skyrocketing exchange rates pushed cryptocurrency into heavy mainstream coverage across the
pandemic in 2020. And in early 2021, a way to sell a form of ownership of a digital work of art,
a non-fungible token or NFT, went from an obscure corner of the internet into a multi-billion-dollar
business in which the NBA, Christie’s, and other reputable and well-known parties participated.
,It’s all a little overwhelming, and this book is your key to unlock cryptocurrency’s innards.
It’s not a recommendation (nor a prospectus) to invest in it or purchase digital value. Nor is
about valuation, or what cryptocurrency is worth in dollars or euros or renminbi—that would delve
into investment advice and trying to understand why a market attributes a certain exchange range
to various coins.
Rather, what you’ll achieve by the end of this book is a solid working knowledge of all the pieces
that fit together in a cryptocurrency, plus an idea of how various ones may mature and what the
future brings.
The book spends a fair amount of time on background knowledge. You’ll learn how money and
cryptocurrency stand in relationship to each other and then all the fundamentals of a
cryptocurrency, like the blockchain, mining, and wallets.
Along the way, I introduce cryptographic concepts necessary to achieve a deeper insight,
like public-key cryptography. There’s very little math, however, and a perfect understanding of
cryptography isn’t critical to understanding how a cryptocurrency works—it just adds to your
expertise. (I separated some of the most technical bits into an appendix for reference.)
I also dig into the dangers cryptocurrency poses to the planet and to financial markets, as well as
risks you could experience from the dark sides, legal and otherwise.
With that understood, I explain how to buy, hold, and sell cryptocurrency; how to purchase digital
and physical assets with it; and what, in fact, an NFT really is. (Spoiler: It’s not precisely a digital
asset nor really ownership of a digital asset. It’s closer to bragging rights.)
My hope is that you’ll achieve a level of comfort and familiarity with the concepts and that whether
you become a participant in cryptocurrency in any way, or you say, “thanks, but no thanks,” you
do so from an informed position of comfortable knowledge.
Cryptocurrency Quick Start
Cryptocurrency can be overwhelming, so I recommend figuring out how you want to approach
learning about it. You can work your way sequentially through the book, which is designed to
build on knowledge. Or you can jump ahead to chapters on risk, buying or selling, or NFTs if you
want to dig into one of those subjects first.
Master the basics:
Start with first concepts as you examine what money is, where cryptocurrency fits in, and
learn about liquidity; see Understand Cryptocurrency.
Get to know all the elements of a cryptocurrency; see Learn How Encryption Binds
Cryptocurrency.
, Become an expert in mining, the reward-based mechanism that records permanent
transactions; see Dig into Currency Mining.
Learn the salient facts about each major cryptocurrency; see Discover How Major
Cryptocurrencies Work.
Understand the risks:
Hazards abound in the ongoing maintenance of cryptocurrencies; see Explore
Environmental and Structural Hazards.
You might experience danger to your finances, health, and freedom; see Avoid the Dark
Side of Cryptocurrency.
Participate in cryptocurrency:
Buy, sell, and purchase stuff with cryptocurrency; see Buy and Sell Cryptocurrency.
Peer into the future of unique digital purchases; see Understand Non-Fungible Tokens
(NFTs).
Understand Cryptocurrency
Cryptocurrency was once the province of geeks, people who believed leaving the gold standard
was a mistake, conspiracy theorists, black marketeers, speculators, criminals, and people with an
obsessive sense of curiosity—to name just a few categories. It was also of keen interest to modern
economic theorists, computer scientists, encryption researchers, and people who dabbled as a side
interest in one or more of those areas of study and practice.
The space opened up over time as the exchange value of Bitcoin and cryptocurrencies that followed
became significant—into the billions of dollars—and the tools that let people participate became
simpler. Originally, cryptocurrency required a good understanding of encryption, security, and
command-line interactions, including potentially installing and compiling software. But
participation evolved into friendlier, GUI-based “wallets” to hold currency and ultimately to
websites that perform the heavy lifting.
Along the way, more people began to participate by buying, holding, and selling cryptocurrency,
which led reported coverage of the field to grow from mentions in specialized publications to
mainstream business stories in widely read periodicals and websites.
Cryptocurrency’s reach and ability to appeal to more people grew as global politics and financial
markets roiled, unsettling enough people to a large enough extent to try to find safe ways to transfer
money into something they thought might be outside the vagaries of government oversight and
mismanagement. For some, that also meant largely outside the gaze of regulators, prosecutors, and
tax collectors.
