Bitcoin, blockchains, and cryptocurrencies are fascinating to me because there are so many elements to understand. This multidisciplinary nature is one of the reasons I, and so many others, love the industry — it is easy to get sucked into the rabbit hole, and as you try to understand each element, every answer begets more questions. The journey starts with ‘What is Bitcoin?’ but the explanations and answers come from the disciplines of economics, law, computer science, finance, civil society, his- tory, geopolitics, and more. You could create a pretty comprehensive high school curriculum around Bitcoin and have plenty of material to spare. And this is the very reason why it is so hard to explain. This book is an attempt to cover the basics. It is aimed at the thinking person but assumes that the reader doesn’t have a detailed background in the various disciplines mentioned previously. Different people will find different parts interesting. I try to use analogies where I think they help explain some concepts, but be gentle with me: all analogies break down if stretched too far. And although I have tried to be accurate, there will still be oversimplifications, errors and omissions. What is true today may not be tomorrow: the pace of change is rapid. I am the first to admit that there are limits to my own technical expertise. Nevertheless, I hope that every reader comes away learning something new. Bitcoin¹ and Ether are two of the better-known cryptocurrencies or coins (note that the coin on the Ethereum network is called Ether, though is often mis- named in the media as ‘Ethereum’). These are assets or items of value that exist digitally, not physically, and are created by software. They have no issuer as such. No person, company, or entity backs these, and there are no terms of service or guarantees associated with them. Like physical gold, cryptocurrencies simply exist, and are created or destroyed according to the rules articulated in the code that creates and governs them. If you own some cryptocurrency, and we’ll see what that actually means later, it is your asset that you control. It has value, and can be exchanged for other cryptocurrencies, US dollars, or other global sovereign (or fiat) currencies. Its value is determined with- in marketplaces called exchanges where buyers and sellers come together to trade at mutually agreed prices. As well as ‘coins,’ units of cryptocurrencies may be described as digital assets. That is, unique data items whose ownership can be passed from account to ac- count. These accounts are technically called addresses, and we will explore what addresses are later. When these digital assets move from one account to another they are all recorded on their respective transaction databases known, because of some unique shared characteristics which we will look into later, as blockchains. Just to confuse everybody, some digital assets are described as tokens, as in ‘Is it a cryptocurrency or a token?’. Cryptocurrencies and tokens are both types of cryptographically secured digital assets, sometimes known as cryptoassets. These tokens have different characteristics from cryptocurrencies and from each other. Tokens can be fungible (one token being more or less replaceable by another), or non-fungible (where each token represents something unique). Unlike cryptocurrencies, these newer tokens are usually issued by known issuers who stand behind them, and the tokens can represent legal agreements (like financial assets), physical assets (like gold), or future access to products and services. Where the underlying item is an asset you could think of the token as a digital version of a cloakroom ticket, issued by a cloakroom clerk and redeemable for your coat. Indeed, these tokens are sometimes called DDRs — Digital Depository Receipts. Where the underlying item is an agreement, product or service, you can think of the token as something like a concert ticket issued by a con- cert organiser and redeemable for entry to a concert at a later date. To give some real examples, there are tokens that represent everything from gold bullion sitting in a vault somewhere², through to tokens representing unique ‘CryptoKitties’ — collectable digital cats with specific visual attributes determined by their ‘DNA’ code. What do all of these coins and tokens have in common? All transactions related to them, including their creation, destruction, changes of ownership, and other logic or future obligations, are recorded on blockchains: replicated data- bases that act as the ultimate books and records — the ‘golden source’ that represents the universal understanding of the current status of all units of the digital asset. Bitcoin’s blockchain is an ever-growing list of every Bitcoin transaction that has ever happened, right from the creation of the very first Bitcoin on 3 January 2009, through to the most recent transfer or payment from one account to an- other. Ethereum’s blockchain is a list of transactions involving the cryptocurrency Ether, a multitude of other tokens (including those representing CryptoKitties) and other related data, all of which is recorded on Ethereum. Different blockchains have different characteristics, so much so that nowadays it is almost impossible to make a general statement about ‘blockchain’ without being wrong for some particular example. Some blockchains, like the well- known Bitcoin and Ethereum chains, are public, or permission-less, meaning that their list of transactions can be written to by anyone, with no gatekeepers to ap- prove or reject parties who want to create blocks or participate in bookkeeping. Self-identification is not a requirement to create blocks or validate transactions. Other blockchains can be private or permissioned, in that there is a controlling party who allows participants to read or write to them. And finally, we need to distinguish between protocols, code, software, transaction data, coins, and blockchains. Bitcoin is a bunch of protocols: rules that define and characterise Bitcoin itself — what it is, how ownership is represented and recorded, what constitutes a valid transaction, how new participants can join the network of operators, how participants should behave if they want to be kept up to date with the latest transactions, and so on. These protocols, or rules, can be described in English or any other human language, but are best articulated in computer code, which in turn can be compiled into software — Bitcoin software — that enacts those protocols, i.e. makes them operate. When the software is run, Bitcoin coins are generated and can be sent from one account to another. These actions are recorded as transaction data, and this transaction data is bundled into bundles or blocks, and linked together to form the Bitcoin blockchain. So, to recap, Bitcoin protocols are written out as Bitcoin code which is run as Bitcoin software which creates Bitcoin transactions containing data about Bit- coin coins recorded on Bitcoin’s blockchain. Got it? Good. Not all other cryptocurrencies or tokens work this way, but it is as good a basis as any to start the journey. Some people think of Bitcoin as the next evolution of money — it is described as a (crypto) currency after all. So we need to understand a little more about money. What is money? Has it always been the same? How successful has money been? Are some forms of money better than others? Can the nature of money ever change, or is what we have going to be the same for evermore? Do cryptocurrencies sit easily alongside today’s money, fulfilling a niche or purpose that existing forms of money cannot serve, or are cryptocurrencies competitors to today’s money that threaten the status quo of state-issued currency? This book should give you a good well-rounded education into the basics of bitcoins and blockchains and assumes no specific starting expertise. We start by defining and understanding the nature of money. Then we dive into digital money and how value is really transferred around the world. We then explore a few key concepts from a branch of mathematics called cryptography, so that we can then move to cryptocurrencies themselves. In the cryptocurrencies sec- tion, we dive into the Bitcoin and Ethereum networks, and the Bitcoin and Ether digital tokens — what they are, how to buy, store, and sell them, how to explore their blockchains, and the risks in managing them, including the unique challenges in moving this new digital money around the world. Finally, we discuss the types of blockchain technology that are being explored by banks and big businesses to join up their databases and do more efficient business. Although I have my personal biases and interests, throughout the book I try to maintain a neutral position on the cryptocurrencies, tokens, and blockchain platforms. I try not to neither over-sell them nor be overly critical. I leave it up to readers to conclude for themselves whether these technologies are a trend or a fad, useful or useless, good or bad.