Digital Gold

Digital Gold by Nathaniel Popper Read Free Book Online

Book: Digital Gold by Nathaniel Popper Read Free Book Online
Authors: Nathaniel Popper
longer possible to actually turn dollars in to collect physical gold. 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.
    Most economists approve of the move away from the gold standard, as it allowed central banks to be more responsive to the ups and downs of the economy, putting more money into circulation when the economy grew or when people weren’t spending and the economy needed a jolt. But the policy has faced impassioned criticism, particularly from antigovernment circles, where many believe that the end of the gold standard allowed central banks to print money with no restraint, hurting the long-term value of the dollar and allowing for unbridled government spending.
    Until 2008, though, this was a relatively niche issue, even among libertarians. That changed during the financial crisis, after the Federal Reserve helped bail out big banks and stimulate the economy by printing lots of money. This fanned fears that the new money flooding the market would make existing money and savings worth less. Suddenly, monetary policy was a mainstream political issue and the Fed was a sort of national villain, with “ END THE FED ” bumper stickers becoming a common sight. The issue became one of the first criticisms of the existing financial system that gained popular appeal after the financial crisis.
    When Satoshi released Bitcoin, just months after these bank bailouts, the design provided a tidy solution for people worried about a currency with no restraints. While the Federal Reserve had no formal limits on how much new money it could create, Satoshi’s Bitcoin software had rules to ensure that new Bitcoins would be released only every ten minutes or so and that the process of creating new coins would stop after 21 million were out in the world.
    This apparently small detail in the system carried potentially great political significance in a world worried about unlimited printing of money. What’s more, the restraints on Bitcoin creation helped deal with one of the big issues that had bedeviled earlier digital moneys—the matter of how to convince users that the money would be worth something in the future. With a hard cap on the number ofBitcoins, users could reasonably believe that Bitcoins would become harder to get over time and thus would go up in value.
    These rules were all a late addition to the code and Satoshi had not played them up early on. But now that he needed to sell it to the public, this feature of Bitcoin became a big draw. Martti Malmi, the young man who wrote to Satoshi in early May, proved the wisdom of emphasizing this. Martti didn’t know cryptography but as a political junkie he was immediately drawn to Bitcoin’s revolutionary potential.
    â€œThere’s no central bank to debase the currency with unlimited creation of new money,” Martti wrote on the forum.
    This was the first but not the last time that the Bitcoin concept’s many layers, and its openness to new interpretations, would allow the project to pick up crucial new followers.
    Satoshi quickly gave Martti practical suggestions for how he could help the project. The most important was the simplest: to leave his computer on with the Bitcoin program running. Five months after Bitcoin was launched, it was still not possible to trust that someone somewhere was running the Bitcoin program. When a new person tried to join, there were often no other computers or nodes to communicate with.It also meant that Satoshi’s computers were still generating almost all the coins. When Martti joined in, he quickly began winning them on his laptop, which he kept running except when he

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