Bitcoin is a distributed, consensus-based cryptocurrency. Most currencies are backed by nation states (or, as the Euro, groups of nation states), but other kinds of currencies exist: gold, silver, and diamonds have all been used as de facto currencies. Bitcoin resembles them in that you can exchange bitcoins for goods and there is a limited supply; it differs from them in that it is entirely computational (there’s no such thing as a physical bitcoin, at least not yet) and distributed by its very nature. All currencies require a certain level of trust, but bitcoin goes a long way toward building trust into the heart of the system.

Bitcoin is based on several main ideas, each of which is relatively simple.

The first involves signing a new digital block of data (which incorporates some of the currently pending transactions as well as a hash of the last block in the current blockchain) by including a secure hash of that block in the subsequent block, which then attests to the block being signed.

The second is to use a similar algorithm called a Merkle tree that signs all of the current transactions in a tree structure, which allows for efficient verification even for many transactions.

The third is providing a proof of work. This is done by solving a puzzle--in this case, the puzzle is to find a nonce for the current block that together with that block hashes to a string of bits with some number of leading zero bits. Once the puzzle is solved for a group of transactions, that block can be added to the blockchain, which serves as a kind of ledger to record those transactions. It’s a bit more complicated than that, though, as multiple parties might propose different blocks to add to the blockchain and because of the hashes from previous blocks.

There are 11 chapters after an introductory chapter. Four chapters cover the decentralized nature of Bitcoin, how it works, how to store and use bitcoins, and what bitcoin mining involves and how people are doing it now. Some of the material covered here is reasonably technical, but not overly so. The rest of the chapters cover various topics related to Bitcoin in rather less technical ways.

One chapter covers anonymity: how it may not be as anonymous as some say, but how breaching anonymity is likely to be difficult. This ties in with a chapter on Bitcoin’s legal status and asks about specifically legal implications. For instance, if Bitcoin can be anonymous, can it be used for money laundering?

Another chapter covers different types of mining puzzles--Bitcoins puzzle is well suited for running on specialized hardware; for the future, it is likely that such hardware, run by players with access to funding for hardware, and electricity are likely to dominate the area. Other kinds of puzzles might make mining more possible by a wider community.

The last three chapters offer other possible uses for Bitcoin, how Bitcoin fits into other kinds of cryptocurrencies, and related questions.

This book is a very nice introduction to Bitcoin, its structure, how it can be used (and possibly abused), and how it might evolve in the future. It includes an online set of “assignments” and brief bibliographies for each chapter.

Except for the most technical parts, which can easily be skipped if desired, the material is quite accessible and very readable. The authors have a relaxed tone and this book could easily be incorporated in an undergraduate curriculum.

On the downside, parts of the book feel a bit fanboyish--Bitcoin is proposed as part of a solution to many different kinds of problems and the authors certainly seem to believe that Bitcoin is likely to be the “one true cryptocurrency.”

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