Book Review: The Basics of Bitcoins and Blockchains

The Basics of Bitcoins and Blockchains: An Introduction to Cryptocurrencies and the Technology that Powers Them by Antony Lewis

My rating: 5 of 5 stars

The is the best investment of my 10 hours and $10 dollars this week. This is such a great introduction to the whole crypto ecosystem. After hours of YouTube and dozens of attempts at crypto trading, I have come to realization that I am not getting any better at understanding crypto or its underlying technology blockchain. So, I thought it’s time to get back to old fashioned way to learning. By reading cover to cover of a book and understanding the fundamentals.

The first few chapters deal exclusively with money in general. It dives into history of ‘money’ and briefly explains how things evolved to what it is today. Fun fact – As much as people make it sound that ‘barter system’ is how our ancestors traded, history shows us barter was actually pretty messy with very little adoption and didn’t actually last too long. What found mass adoption is the ‘credit’ system. I borrow an egg from you today, and in the future, I am obliged to give you corn. The book does a good job in explaining how banking system in general works and the various parties involved when you make bank transfer. Things get wildly complicated if it is a cross border foreign currency bank transfer. Hence the need of various entities like the ‘clearing’ bank, ‘correspondent banks’, SWIFT codes etc. Author does a very good job in covering the basics of cryptography. Even if you work in Information Technology, it is a good reminder of the use cases of PGP, Hashes, symmetric, asymmetric encryption and digital signatures.

By the time the author gets to bitcoin and blockchain, he has pretty much laid out the context and helped you appreciate how complex, inefficient and centralized the current financial system is. He talks mostly about Bitcoin, why its formed, how its formed and how it works as placeholder for cryptocurrencies. His explanation of distributed ledger is pretty solid and easy to understand. Many things of blockchain technology like block creation process, how minders work are covered at a high level but not very useful as it requires a lot more attention and effort and certainly beyond the scope of an intro book. But it does a good job of highlighting and educating you on the various challenges of the technology that exists today and very clearly distinguishes ‘Proof of Work’ and ‘Proof of Stake’ approaches to blockchain.

The perils involved with operating crypto wallets and trading via exchanges are pretty well explained. While the lack of decentralization and regulation give you a lot more freedom and power, that also means it is a breeding ground for miscreants. You could easily fall into their traps if you are not prepared enough before playing with your money. The book talks about exchange trading fees, gas fees and the price fluctuations, reward mechanisms at a high level. Later part of the book covers Ethereum pretty well and highlights the differences with Bitcoin. Tokens also introduced how they are different from cryptocurrencies. It briefly talks about private blockchains such as Corda, Hyperledger fabric and JP Morgan Quoram.

To me the highlight of the book is how it covers blockchain basics. The very fundamentals of why a blockchain is different from a database. While ledger immutability can be achieved via a ledger database, what blockchain adds over ledger immutability is decentralization and the “Trust boundaries”. Trust boundaries really determine whether you need a private blockchain or a public blockchain. It dispels the common myth that parties involved in a blockchain are anonymous which certainly is not true for private blockchains. It talks about when you need a private blockchain and when to use a public blockchain.

Overall, this is a pretty solid introduction to cryto and blockchain. It broadly covers everything you need to know from history, financial systems, technology, investing and what the future holds. I am going to (re)read this book again in 6 months’ time. Highly recommended. Neither oversimplified nor complicated, just right for an introduction book.

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