Satoshi envisioned a digital analog to old-fashioned gold: a new kind of universal money that could be owned by everyone and spent anywhere. Like gold, these new digital coins were worth only what someone was willing to pay for them—initially nothing.

This, then, is not a normal startup story, about a lone genius molding the world in his image and making gobs of money. It is, instead, a tale of a group invention that tapped into many of the prevailing currents of our time: the anger at the government and Wall Street; the battles between Silicon Valley and the financial industry; and the hopes we have placed in technology to save us from our own human frailty, as well as the fear that the power of technology can generate.

But even if it does collapse, it has already provided one of the most fascinating tests of how money works, who benefits from it, and how it might be improved. It is unlikely to replace the dollar in five years, but it provides a glimpse of where we might be when the government inevitably stops printing the faces of dead presidents on expensive paper.

Every user of the new technology, known as public-key cryptography, would receive a public key—a unique jumble of letters and numbers that serves as a sort of address that could be distributed freely—and a corresponding private key, which is supposed to be known only by the user.

The unique relationship between each public and private key was determined by complicated math equations that were constructed so cleverly that no one with a particular public key would ever be able to work backward to figure out the corresponding private key—not even the most powerful supercomputer.

Money is to any market economy what water, fire, or blood is to the human ecosystem—a basic substance needed for everything else to work.

What Hal, Chaum, and the Cypherpunks wanted was a cash for the digital age that could be secure and uncounterfeitable without sacrificing the privacy of its users.

The search for a better form of money has always been about finding a more trustworthy and uniform way of valuing the things around us—a single metric that allows a reliable comparison between the value of a block of wood, an hour of carpentry work, and a painting of a forest.

Good money has generally been (imagine a dollar bill printed on tissue paper), portable (imagine a quarter that weighed twenty pounds), divisible (imagine if we had only hundred-dollar bills and no coins), uniform (imagine if all dollar bills looked different), and scarce (imagine bills that could be copied by anyone). But beyond all these qualities, money always required something much less tangible and that was the faith of the people using it.

cryptographic hash functions. These are math equations that are easy to solve but hard to reverse-engineer, just as it is relatively easy to multiply 2,903 and 3,571 using a piece of paper and pencil, but much, much harder to figure out what two numbers can be multiplied together to get 10,366,613.

As was typical in this community, Satoshi gave no information about his own identity and background, and no one asked. What mattered was the idea, not the person.

“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party,” the e-mail began.

The computer that won the race was responsible for inscribing the most recent block of transactions onto the blockchain. Equally important, the winner also received a bundle of new Bitcoins—50 Bitcoins when the network actually started operating. This was, indeed, the only way new Bitcoins could be brought into the world.

People who joined the Bitcoin network were, quite literally, both customers and owners of both the bank and the mint.

The gold standard was the most popular global monetary system at the start of the twentieth century. Not only did gold link paper money to something of physical substance; the standard also served as a mechanism for imposing restraint on central banks. The Federal Reserve and other central banks could print more money only if they managed to get their hands on more gold. If they ran out of gold, no more money and no more spending.

In 1971 Richard Nixon finally decided to cut the value of the dollar loose from any anchor and end the gold standard permanently. The dollar and most other global currencies would be worth only as much as someone was willing to pay for them. Now the value of the dollar arose from the commitment of the United States government to take it for all debts and payments.

With a hard cap on the number of Bitcoins, users could reasonably believe that Bitcoins would become harder to get over time and thus would go up in value.

The software also had the capability to attach specific instructions to each coin so that the coins could behave in a particular way, according to the users’ wishes. A coin on the blockchain could, for example, be programmed to move from one address to another only if it was signed off on by three or four different private keys, enabling its use in the types of legal transactions that currently required cumbersome and expensive middlemen.

But like all forms of money, Bitcoin did rely on its users’ trusting the ideas and integrity of the system supporting it—in this case, code and math—and the small elite of cosmopolitan coders was more than willing to do that.

he knew that if confidence in the system was undercut his coins would be worthless. The market incentives were working as they were supposed to work.

If politicians didn’t like the ideas of a particular group, government officials could ask banks and credit card networks to deny the unpopular group access to the financial system, often without requiring any judicial approval. The financial industry seemed to provide politicians with an extralegal way to crack down on dissent.

“Trust is Bitcoin’s biggest barrier to success. I don’t think there is anything we can do to speed up the process of getting people to trust that Bitcoin is solid; it takes time to build trust.”

jujitsu gained renown as a way for smaller, less muscular people to disarm and defeat larger opponents. Libertarianism and Bitcoin were alluring to Roger and Jesse for much the same reason, owing to the deceptively simple answers they promised for much bigger problems.

But Erik argued that it was the very virtual nature of Bitcoin that made it so valuable. Unlike gold, it could be easily and quickly transferred anywhere in the world, while still having the qualities of divisibility and verifiability that had made gold a successful currency for so many years.

When people entrust money to financial institutions, they generally don’t have the expertise or time to make sure the institution is doing its job. In most cases, it is much more efficient for people to band together and pool resources to ensure that their banks and exchanges are on the straight and narrow. Thus were created government agencies like the Federal Deposit Insurance Corporation, which backs up American bank accounts against losses, and checks to make sure that banks aren’t putting deposits in danger.

The only occasional gripe was about the volatile price of Bitcoin, which made it hard to know how much a vendor would be charging a week later. But Ross dealt with this by creating a clever hedging program that allowed customers and vendors to lock in a price.

The primary tool that brought accountability to this anonymous market was the same sort of feedback mechanism used by eBay and Amazon. When a customer received a Silk Road product through the mail, he or she was asked to rate the transaction on a scale from 1 to 5. Even if no one knew the real name of a seller, the reviews attached to a seller’s screen name would allow customers to determine if that particular vendor was trustworthy.

In Argentina, dollars had to be purchased through shady money changers, and were saved in closets or under the mattress. The promise of a virtual currency that could be bought and stored online, accessed from anywhere, and secured with a private key looked like a significant improvement.

books on the history of money, most significantly Debt: The First 5,000 Years, a cult favorite in the Occupy Wall Street movement and in certain transgressive corners of Wall Street. The book, by anthropologist David Graeber, argued that historians and economists have wrongly assumed that money grew out of barter.

The reason gold itself had been used as money was not that it was valuable; it had become valuable because it was used as money. And it was used as money because it did what all good money did: it served as a sort of physical ledger on which society could keep track of who was owed what. Each piece of gold represented a slot on the ledger of all outstanding gold, which anyone could verify by checking the mass and volume of the gold.

Bitcoin, Wences came to believe, was a purer version of that sort of ledger—a commonly verifiable place where everyone could keep track of who owned what.

The question then becomes, is Bitcoin viable if the government digital ledger systems are just as good? We think yes, for two reasons: 1. There will always be transactions for which “official money” is less good than Bitcoin 2. If you live outside the US, it is dangerous to have all your money controlled by a state where you have no rights.

In the world of trading, though, the most valuable thing an exchange can offer is liquidity or, more simply, people buying and selling. An exchange with the best technology in the world isn’t worth anything if no customers are there offering to buy and sell.

THE UNMISTAKABLE IRONY of these wild days was that a technology that had been designed, in no small part, to circumvent government power was now becoming largely driven by and dependent on the attitudes of government officials.

The Chinese government had stepped right into the middle of the ongoing debate about how to define Bitcoin and had actually found itself in agreement with Wences Casares and many other advocates for Bitcoin, who believed that in 2013 the files on the blockchain were more similar to commodities, like gold, than to currencies, like dollars and euros, because Bitcoins were not yet widely or easily used as a medium of exchange or as units for accounting. Beyond those qualities, the Chinese government had also said that Bitcoin lacked the most important characteristic of a currency: government backing.

This was an eminently practical use of Bitcoin to deal with the inflationary mess in Argentina, but it was so practical that it actually swung around into the domain of the ideological ambitions that Satoshi Nakamoto and the Cypherpunks had imagined.

Whereas in the United States, banks were unwilling to do work unless they were explicitly given a green light by regulators—and sometimes not even then—in the Wild West of China, the banks would try just about anything until they were explicitly told it was not allowed.

Bitcoin was unlikely to catch on as a payment method anytime soon. But for now, Wences believed that Bitcoin would first gain popularity as a globally available asset, similar to gold. Like gold, which was also not used in everyday transactions, Bitcoin’s value was as a digital asset where people could store wealth.

Bitcoin’s standing as a universal money, answerable to no government—and beyond the reach of any one government—had opened the way for companies like Mt. Gox, companies that took advantage of the fact that in the Bitcoin industry, each person could make up his own rules. This wasn’t a problem with the protocol but it was an issue with one of the central ideas that had motivated Bitcoin: the supposed benefit of releasing money from all the outdated rules and regulations that governed the existing financial system.

If Visa’s systems came under attack, all the stores using Visa were screwed. But if one bank maintaining a blockchain came under attack, all the other banks could keep the blockchain going.

Given that a blockchain could be taken over and subverted if an attacker controlled more than 50 percent of the computing power on the network, a blockchain was only as secure as the amount of computing power hooked into the network. A blockchain run by a few dozen banks would be much easier to overwhelm than the Bitcoin network, which now commanded more raw computing power than all the major supercomputers combined.

He was a person who liked thinking about the world—not himself—and this is one of the most useful characteristics for someone trying to create great things.

As had happened with several previous decentralized systems, this one had naturally tended toward greater centralization because of the efficiency made possible by specialization. This looked, increasingly, like Napster giving way to iTunes. In that case, the old power brokers—the record labels—were destroyed, but they were mostly just replaced by a new set of power players.

He then spoke directly to the work that Gates was doing, and noted that the foundation had been pushing people in poor countries into expensive digital services that came with lots of fees each time they were used. The famous M-Pesa system allowed Kenyans to hold and spend money on their cell phones, but charged a fee each time.