Mastering Bitcoin, Chapter 1 Synopsis

My takeaways and summary of Andreas M. Antonopoulos’ Mastering Bitcoin: Programming the Open Blockchain Chapter 1

This was almost the Glossary and Chapter 1 Synopsis. I thought I’d start by reading the “Quick Glossary” before Chapter 1, but then I discovered it was inaccurately named, and it would be anything but quick. But, I made a mental note that it was there and I could refer to it as I went along and encountered terms I forgot or didn’t know.

Chapter 1 is really just an introduction to how this whole thing works in practice, and it goes into a bit of bitcoin’s history. Some of Chapter 1 seems like it might be somewhat informative for a nontechnical audience, but the “What is Bitcoin?” section might have a nontechnical reader’s eyes glazing over a bit. Chapter 1 explains what bitcoin is, how it came to be, and why and how one get started using it.

What is Bitcoin?

The simplest, most popular answer to that question is “a cryptocurrency.” But the most accurate answer is much more complicated than that. This book defines bitcoin as “a collection of concepts and technologies that form the basis of a digital money ecosystem.” Whoa, ok. This section unpacks that, and introduces us to the concepts of a distributed system, mining, decentralization, the blockchain (the public ledger of validated transactions), consensus rules, and the proof-of-work algorithm, at a pretty high level. Chapter 2 gets more into detail about all of that (I know that because I read it already, but I am behind in this documentation exercise).

History of Bitcoin

This section is short, as the inception of bitcoin is somewhat mysterious. We learn about Satoshi Nakamoto, the alias of the person(s?) who published “Bitcoin: A Peer-to-Peer Electronic Cash System,” in 2008. Satoshi, whoever he or she or they are disappeared a few years later, but bitcoin rolls on.

Bitcoin Uses, Users, and Their Stories

This begins what feels like the most approachable section for a nontechnical reader. It introduces several use cases, and having read this made it easier for me to answer the “Do people even use this yet?” question at a party the other night. We meet several different fictional people in this section who all use bitcoin for different purposes and reasons.

Getting Started

Now that we’ve met a few fictional people who are using Bitcoin, we’re introduced to various categories of bitcoin wallets, which can be categorized in different ways, for example, by their platform or by their level of autonomy. I was somewhat familiar with the categorization by platform, or at least it made intuitive sense to me (desktop, mobile, web, hardware, or paper wallets), but the concepts behind the categories relating to autonomy were totally new to me.

Those three include:

• a full-node client, which stores the entire history of all bitcoin transactions and thus can independently validate the entire blockchain (whoa),
• a lightweight client, which stores the user’s wallet locally but can interact with and connect to those full-node clients for transaction info
• a third-party API client, which does not connect directly to the bitcoin network, rather it interacts with the network via a third party

The book notes that various wallets will fall into a few groups and that those distinctions can be a bit blurry. That helped me conceptualize them a little better.

Quick Start

Here’s where we learn a little more about Alice, who we met in “Bitcoin Uses, Users, and Their Stories.” She’s introduced to bitcoin by a bitcoin-bro friend, Joe, who is loudly extolling the virtues of bitcoin at a party (we all know this guy, c’mon). The rest of the chapter details Alice’s journey to her first bitcoin acquisition from Joe.

I actually really appreciated this example. It includes screenshots of Mycelium, a wallet for Android (and one of Joe’s faves, apparently), points out Alice’s bitcoin address, and explains that her wallet app has generated a private key that will correspond to that address. Her address isn’t known by the network yet, because there are no transactions associated with it.

Next, we walk through some of the ways a new user can acquire their first bitcoin, including

• buying from a friend
• using a classified service to buy bitcoin for cash in person (this sounds kind of creepy to me???)
• sell something and take bitcoin as payment
• find a bitcoin ATM (our tiny city has one, who knew?)
• use a currency exchange

Alice decides to buy from her friend, bitcoin-bro Joe. The exchange rate is fluctuating like crazy, so they look up the current one to determine what Alice can get for 10 USD. She hands Joe 10 bucks, and hits “Receive” in her Mycelium wallet. Joe hits “Send” on his wallet, and scans the QR code displayed on Alice’s wallet. He enters “10” in the USD field, and here, the book notes that he “carefully checks to make sure he has entered the correct amount, because he is about to transmit money and mistakes are irreversible🙀.” [emphasis and emoji mine ]

So then, the network learns that Joe has 10USD fewer bitcoin, and Alice has 10 more. At this point, Alice’s address is known by the network, and the transaction propagates to all the nodes.

Stay tuned for my Chapter 2 recap!