A Beginners Guide to BITCOIN AND AUSTRIAN ECONOMICS E-Book

Aaron Koenig

• Herausgeber: FinanzBuch Verlag
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2015

Seitenzahl: 160

Beschreibung

In 1976, Nobel Prize Laureate Friedrich August von Hayek called for the abolishment of the state monopoly on money and the introduction of freely competing currencies. Few people could imagine such a free market of money at the time. Today the denationalization of money is in full swing: digital currencies like Bitcoin are fully independent of banks and governments. This book explains the phenomenon of decentralized, stateless money in an easily understandable and entertaining way. It also provides a basic insight into the Austrian School of Economics. The Austrian School's most prominent masterminds, Ludwig von Mises, Friedrich August von Hayek and Murry N. Rothbard, have explained why we must overcome our present debt-based monetary system, which widens the gap between the rich and the poor. Bitcoin is the world's first global payment system that is open to anyone on this planet with Internet access. Payments are cheap, fast and cannot be blocked. With interviews of Bitcoin experts Roger Ver – Stephanie Murphy – Moran Shaked – Eddy Travia – Julia Touranski – Marek Palatinus – David Johnston – Susanne Tarkowski Tempelhof – Satoshi Nakamoto.

Leseprobe

The Deutsche Nationalbibliothek

Lists this publication in the Deutsche Nationalbibliographie; detailed bibliographic information is available online at http://d-nb.de.

1st edition 2016

© 2016 by FinanzBuch Verlag

an imprint of the Münchner Verlagsgruppe GmbH

Nymphenburger Straße 86

D-80636 München

Tel.: [phone]

Fax: [phone]

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of the publisher, nor be otherwise circulated in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

The information and opinions have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith, but is not guaranteed as being accurate, nor is it a complete statement or summary of the securities, markets or developments referred to.

The information mentioned is not intended to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments.

The details and opinions are provided without any guarantee or warranty and are for information purposes only.

Proofreading: Hella Neukötter

Jacket design: Aaron Koenig

Image on the cover: Marcin Dzieniszewski

Composition: inpunkt[w]o, Haiger

ISBN Print 978-3-89879-963-8

ISBN E-Book (PDF) 978-3-86248-875-9

ISBN E-Book (EPUB) 978-3-86248-877-3

Contents

Foreword by Rick Falkvinge

Introduction

Interview–Roger Ver

1. La Revolución Bitcoinista – Bitcoin in Argentina

Interview–Stephanie Murphy

2. The Austrian Way – An Introduction to Austrian Economics

Interview–Eddy Travia

3. Let There be Money – Why The Money Monopoly is Evil

Tip 1 – What can I buy with Bitcoins?

Interview–Julia Tourianski

4. As Good as Gold – The Basics of Bitcoin

Tip 2 – Where can I get Bitcoins?

Tip 3 – Which Bitcoin wallet shall I use?

Interview–Marek Palatinus

5. The Ledger Lives On – The Blockchain – Satoshi’s Disruptive Invention

Tip 4 – Secure Storage (I): Paper Wallets

Tip 5 – Secure Storage (II): Armory

Tip 6 – Secure Storage (III): Hardware Wallets

Tip 7 – What is Multisig?

Interview–Moran Shaked

6. Bitcoin CEO Bans China – Popular Falsehoods about Bitcoin

Tip 8 – How can I find out more about Bitcoin?

Interview–David Johnston

7. Blockchainification – Decentralizing All Aspects of Life

Interview–Susanne Tarkowski Tempelhof

8. Agora 2.0 – Towards A Free Society

Interview–Satoshi Nakamoto

Bibliography

Thank You!

About the Cover

List of Images

Foreword by Rick Falkvinge

Bitcoin, like file sharing before it, the Internet before it again, BBSes, and indeed computers themselves before that again, has been seen as something unworthy, largely because it was the domain of tinkers, geeks, and makers.

A Beginner’s Guide to Bitcoin and Austrian Economics is a good book to start understanding why Bitcoin is as important as the internet, as important as computers, and as important as sharing. If not more important, significantly more. Bitcoin builds on top of all of these, and while computers and the Internet challenged whole classes of industries, no technology before Bitcoin has had the power to challenge nation-state governments as a concept.

Yes, it’s that big. This book will outline why and how, in broad strokes of the brush.

In 2006, when it was all about file sharing challenging the copyright industry, I made a prediction in front of an entrepreneur crowd: Any company that builds its business on the idea of preventing people from sharing interesting things with their friends will not survive. A company that tolerated it would survive. But to really thrive in the coming environment, I explained, a company would need to absolutely depend on people sharing interesting things with their friends, at complete odds with the then-dominant distribution monopoly model.

A mere decade later, Facebook has built a business ten times the value of the record labels by encouraging people to share everything they touch with their friends, and Spotify, Pandora, and Netflix are eating the breakfast, lunch, and dinner of the copyright industry’s old model.

Bitcoin’s disruption will be far greater. Not just in how it changes behavior and entertainment patterns, like Pandora and Netflix do, but in how it enhances the understanding of the nature of money itself. For the first time, using money will lead you to ask some very pertinent questions about the nature of the money you’re using, and all of the answers to those questions are incredibly embarrassing to the old world.

The first obvious question is “where does a Bitcoin come from?”. And in order to understand that, you need to juxtapose the answer with the origins of a euro, a dollar, or a yen. That’s when you gradually come to understand that banks have had the power and the right to conjure money out of thin air and lend it out at interest, and are using this power to speculate between them on the value of residences, via mortgages.

If people in general understood this, there would be riots.

In contrast, Bitcoin’s value is in its predictability. Nobody can start the printing press and hyperinflate you out of your savings. For as history tells us, a government will always save itself first. Many people cried in Greece and Cyprus as they naively thought that money deposited in the bank were somehow theirs. The lesson learned – that money deposited in a bank is the bank’s money, which the government can and will confiscate if it desires – was expensive, dire, and hurting to many.

With Bitcoin, money is completely yours. Not the bank’s, not the government’s, not the central bank’s. It has been issued through a common agreement on what constitutes money, which means a government can’t point a gun at somebody and tell them to change the agreement. This, in itself, is profound.

With real ownership of money, there will also inevitably be a better understanding of market economics. If your previous money was subject to planned economics – which was the case with a central bank – and you’re now holding market-economy money in your hands, and you discover that it brings both power and understanding, it’s easy to start applying that understanding to other fields of the economy. This book does a good job of introducing those concepts and their place in history; even how Bitcoin conceptually was wished for as a “government-independent, market-driven form of money” by thought leaders of the Austrian economic school, long before it was technically feasible.

The greatest power in society comes from holding the ledger. The accounting master copy. Being able to dictate true from false. Being able to interpret – and change – who owns what. Nation-state governments have not just held this right, but have taken this right by use of force – and applied it by use of force. The Bitcoin technology revokes that contract and brings the ledger back to a common understanding, where no government can change who owns what, no matter the force applied.

In this way, governments stand to lose their major enforcement mechanisms – and also access to their primary revenue streams, as merchants increasingly turn to Bitcoin to circumvent the expensive banking system, for purely commercial reasons.

This is just touching the surface of the changes that Bitcoin will bring. To really understand the power shift underway, one can observe that today’s wealth holders are the heirs of the oil barons of the 1850s. Those wealth holders are directing research and development toward the same things as ever: new transportation lanes, better fossil fuel engines, carbon extraction. When Bitcoin takes off, those who took all the risk and were early into Bitcoin will take the new throne of primary wealth holders, superseding the oil heirs.

What research will be funded by that new class of wealth holders? It won’t be a better diesel engine. It won’t be a marginally better undersea gas pipeline. More likely, it will be the end of global poverty through Austrian economics, terabit-per-second Internet connections, space exploration, enhancement of the senses, and next-generation power plants of all kinds.

It will be a new frontier entirely.

Rick Falkvinge is the founder of the first Pirate Party and campaigns for sensible information policy. (Image by Anna Troberg)

Introduction

In his 1976 book The Denationalization of Money, Nobel Prize laureate Friedrich August von Hayek called for the abolishment of the state monopoly on money and the introduction of freely competing currencies. At the time, such a free money market was virtually unimaginable.

The world has changed significantly since 1976, when only the US military and a few scientists used the Internet. Back then, computers were the size of wardrobes and were rarely used outside of large companies or government agencies. Only a few crazy, free-thinking hippies such as Steve Jobs and Steve Wozniak envisioned a world in which personal computers were a common possession – in fact, Jobs and Wozniak founded Apple the same year Hayek released his revolutionary book.

The Austrian School of Economics, of which Hayek was a member, was nearly forgotten in the mid-70s. Today, this school of thought favoring the free market and rejecting government interference with the economy has gained significant popularity, most notably among young people. The fact that only the Austrians had predicted both the economic crisis of 1929 and the one of 2007–2008 correctly has surely contributed to this renaissance.

We are now able to harness to power of the Internet, peer-to-peer networks and cryptography in order to realize Hayek’s vision of money separated from state. But why does it matter? Why shouldn’t we allow states to create money? And how can a stateless monetary system be implemented?

These are the questions I seek to answer within this book, which focuses on what is by far the most popular and successful stateless money project: Bitcoin, a digital payment system and currency. But Bitcoin is just the tip of the iceberg. Satoshi Nakamoto, Bitcoin’s inventor, has successfully created the first payment system that works without a central institution. It has no single point of failure and as a result it is impossible for governments to forbid or eliminate its use.

Governments and banks may not like it, but they are powerless in the face of this new financial force. The clever ones among them will try to cope with the changes decentralized money brings, and to exert as much control over the system as possible.

Even if they succeed in this, the genie is out of the bottle. There are already hundreds of decentralized currencies built upon the same principles introduced by Satoshi Nakamoto. It may not be Bitcoin itself, but one or more of its successors who will win the competition and end the era of centralized monopoly money.

Furthermore, the Blockchain technology upon which Bitcoin is based can be utilized for many purposes beyond payments. It can replace any kind of public register, be it for land ownership, companies or marriages. Whenever humans need to keep records of any kind, they can now do so on the publicly available, immutable Blockchain. Governments are no longer required to act as middlemen and gatekeepers.

This invention has the potential to change the world even more so than the Internet. Many people have yet to recognize this. They still see Bitcoin as a kind of toy money for geeks. You hear the same silly prejudices and handwringing about Bitcoin that you heard about the Internet in the early 90s. If you fell for the media hype back then or were simply too young to jump on the Internet bandwagon, then don’t miss the next great technological development and the many opportunities it brings. It pays to know the basics of Bitcoin. And you don’t have to understand any cryptographic algorithms to use it – or do you think about the TCP/IP protocol when you surf the net?

This book explains the phenomenon of stateless, decentralized money for people who are more interested in economics and politics than in computer science and mathematics. Its main focus is the relationship between Austrian Economics and digital currencies like Bitcoin. Luckily, you don’t have to be an economist or an Austrian to read it – everything will be explained in plain English.

You will find some practical tips in the info boxes. Interviews with Bitcoin insiders provide you with personal insights into the world of digital money.

We will begin by traveling to a country where people are likely more open to Bitcoin than anywhere else in the world, a place that has experienced all the evils of financial tyranny and the struggle that it comes with.

Interview

Roger Ver

Tokyo

What fascinates you about Bitcoin?

Thanks to Bitcoin, for the first time in the history of the world, anyone can now send and receive any amount of money with anyone else. It doesn’t matter where they were born, where they are a citizen, where they live, or what color their skin is. Anyone can participate without requiring permission, and there is nothing, even governments, can do to stop it. Bitcoin is a platform that allows permission-less innovation.

How did you get involved with Bitcoin?

I spent my youth studying economics and using computers. When I heard about Bitcoin on www.freetalklive.com’s radio show, I fell in love with it as soon as I understood the characteristics.

What are your activities now?

I was the first person to start investing money into Bitcoin related startups. I created the first website (Bitcoinstore.com) with a wide range of products, that could be purchased in Bitcoin. From 2011 to 2014 I ran national radio ads promoting Bitcoin, and put up several billboards promoting Bitcoin in Silicon Valley.

I did everything I could to get more people to understand how amazing the Bitcoin technology is. As of January 2015 I am an investor in over a dozen active Bitcoin related startups, so I spend my time helping them and Bitcoin as a whole gain more traction in the world.

What are the most important use cases of Bitcoin as money and payment system?

I’m most excited about seeing Bitcoin used in instances where the state is violently interfering in the peaceful interactions of others.

What has to happen for Bitcoin to gain mainstream adoption?

We are currently seeing all the pieces of the puzzle coming together to bring Bitcoin to the mainstream:

1.Easy to use and secure wallets.

2.Easy to use exchanges, accessible to all.

3.Merchants directly accepting Bitcoin.

4.Businesses paying bills and employees with it.

All of those are happening, but still will require some more time and work.

Where do you see the biggest obstacles for that? How can they be overcome?

The biggest obstacles will be legal issues. Hopefully they can be overcome via education on both economics and morality.

What else can be done with Blockchain technology? Which useful applications can you imagine?

In the short term, I’m excited by distributed apps. Uncensorable versions of social media, and financial platforms will be interesting. Eventually we will see uncensorable computing platforms. It is hard to even imagine what interesting and creative things will be enabled with this.

How can Bitcoin and Blockchain technology change the way we live? What are the implications for society?

Bitcoin and Blockchain tech will create a separation of money and state. This will lead to a vast increase in the world wide rate of economic growth. It will lift billions more out of poverty. It will likely bring an end to wide spread wars because governments will no longer have a way to finance them. In the end, I think it will make the world a much more productive and peaceful place.

How do you imagine the world after Bitcoin and Blockchain technology have gained mainstream adoption?

I envision a world with much less institutionalized coercion. People anywhere on the planet will be able to interact with anyone else, without requiring the permission of any government.

1. La Revolución Bitcoinista

Bitcoin in Argentina

“Cambio, cambio, cambio” – you hear it all over the pedestrian area of central Buenos Aires, where moneychangers stand at every corner. Buying dollars, euros and other foreign currencies is strictly regulated in Argentina. If Argentinians want to officially change pesos into dollars through their bank, they need to prove that they intend to travel abroad and submit their tax return before completing the exchange. Even after submitting proof, they are only entitled to limited amounts of foreign currencies. As a result, the black market for dollars and euros is flourishing.

Bitcoin is popular in Argentina

Argentinians don’t call this free market black, but blue, which is Argentina’s national color. Although exchanging dollars on the free market is officially illegal, Argentinians do it anyway. The Blue Dollar’s exchange rate is posted across websites and discussed in the finance pages of major newspapers.

Inflation and Frozen Accounts

Argentinians have a variety of reasons for their distrustfulness of the ever-devaluing peso, in their government, and in banks. To save money, Argentinians prefer to buy dollars on the “blue market” and hide them in their house – it would be unthinkable to leave large amounts of money in a bank account.

The memory of the 2001 Corralito (“the little corral”) is still fresh. During the Corralito, bank accounts were frozen for nearly a year and only small amounts of money could be withdrawn. Then, the peso was massively devalued, and as a result people lost significant portions of their personal savings. Similar measurements of capital control were applied in Cyprus 2013 and in Greece 2015. But while Europeans may still consider this to be out-of-the-ordinary, Argentinians have come to expect such behavior from their banks and governments. They have suffered repeatedly through hyperinflation, government defaults and currency devaluations.

In the late 19th and early 20th century, Argentina was one of the richest countries in the world, blessed with natural resources, fertile soils and a rapidly growing immigrant workforce. “Rico como un Argentino” (“rich as an Argentinian”) was a common Spanish expression. But for decades the country was ruled by socialist politicians who ruthlessly tampered with the economy, and as history is teaching us again and again, even a naturally rich economy can be run down by socialist experiments.

It is no coincidence that the Bitcoin scene in Argentina is one of the most vibrant in the world. Money that cannot be manipulated by politicians and which works without banks – you don’t need to explain to an Argentinian why that is a good thing!

The Espacio Bitcoin

The Espacio Bitcoin in the center of Buenos Aires

Not far from the “blue money changers,” in a major location of central Buenos Aires lies a four story building with 500 square meters of rentable space: the Espacio Bitcoin. Many Bitcoin startups have their offices here, and many meetups and public lectures on digital currencies take place in its meeting hall. On the ground floor there is a pirate-themed restaurant where waiters wear red bandanas and black vests, and where you can pay for your meal in Bitcoin.