I first stumbled upon bitcoin in mid-2011. My immediate reaction was more or less “Pfft! Nerd money!” and I ignored it for another six months, failing to grasp its importance. This is a reaction that I have seen repeated among many of the smartest people I know, which gives me some consolation. The second time I came across bitcoin, in a mailing list discussion, I decided to read the white paper written by Satoshi Nakamoto, to study the authoritative source and see what it was all about. I still remember the moment I finished reading those nine pages, when I realized that bitcoin was not simply a digital currency, but a network of trust that could also provide the basis for so much more than just currencies. The realization that “this isn’t money, it’s a decentralized trust network,” started me on a four-month journey to devour every scrap of information about bitcoin I could find. I became obsessed and enthralled, spending 12 or more hours each day glued to a screen, reading, writing, coding, and learning as much as I could. I emerged from this state of fugue, more than 20 pounds lighter from lack of consistent meals, determined to dedicate myself to working on bitcoin.
Two years later, after creating a number of small startups to explore various bitcoin-related services and products, I decided that it was time to write my first book. Bitcoin was the topic that had driven me into a frenzy of creativity and consumed my thoughts; it was the most exciting technology I had encountered since the Internet. It was now time to share my passion about this amazing technology with a broader audience.
This book is mostly intended for coders. If you can use a programming language, this book will teach you how cryptographic currencies work, how to use them, and how to develop software that works with them. The first few chapters are also suitable as an in-depth introduction to bitcoin for noncoders—those trying to understand the inner workings of bitcoin and cryptocurrencies.
The leafcutter ant is a species that exhibits highly complex behavior in a colony super-organism, but each individual ant operates on a set of simple rules driven by social interaction and the exchange of chemical scents (pheromones). Per Wikipedia: “Next to humans, leafcutter ants form the largest and most complex animal societies on Earth.” Leafcutter ants don’t actually eat leaves, but rather use them to farm a fungus, which is the central food source for the colony. Get that? These ants are farming!
Although ants form a caste-based society and have a queen for producing offspring, there is no central authority or leader in an ant colony. The highly intelligent and sophisticated behavior exhibited by a multimillion-member colony is an emergent property from the interaction of the individuals in a social network.
Nature demonstrates that decentralized systems can be resilient and can produce emergent complexity and incredible sophistication without the need for a central authority, hierarchy, or complex parts.
Bitcoin is a highly sophisticated decentralized trust network that can support a myriad of financial processes. Yet, each node in the bitcoin network follows a few simple mathematical rules. The interaction between many nodes is what leads to the emergence of the sophisticated behavior, not any inherent complexity or trust in any single node. Like an ant colony, the bitcoin network is a resilient network of simple nodes following simple rules that together can do amazing things without any central coordination.
The following typographical conventions are used in this book:
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The examples are illustrated in Python, C++, and using the command line of a Unix-like operating system such as Linux or Mac OS X. All code snippets are available in the GitHub repository in the code subdirectory of the main repo. Fork the book code, try the code examples, or submit corrections via GitHub.
All the code snippets can be replicated on most operating systems with a minimal installation of compilers and interpreters for the corresponding languages. Where necessary, we provide basic installation instructions and step-by-step examples of the output of those instructions.
Some of the code snippets and code output have been reformatted for print. In all such cases, the lines have been split by a backslash (\) character, followed by a newline character. When transcribing the examples, remove those two characters and join the lines again and you should see identical results as shown in the example.
All the code snippets use real values and calculations where possible, so that you can build from example to example and see the same results in any code you write to calculate the same values. For example, the private keys and corresponding public keys and addresses are all real. The sample transactions, blocks, and blockchain references have all been introduced in the actual bitcoin blockchain and are part of the public ledger, so you can review them on any bitcoin system.
This book is here to help you get your job done. In general, if example code is offered with this book, you may use it in your programs and documentation. You do not need to contact us for permission unless you’re reproducing a significant portion of the code. For example, writing a program that uses several chunks of code from this book does not require permission. Selling or distributing a CD-ROM of examples from O’Reilly books does require permission. Answering a question by citing this book and quoting example code does not require permission. Incorporating a significant amount of example code from this book into your product’s documentation does require permission.
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This book represents the efforts and contributions of many people. I am grateful for all the help I received from friends, colleagues, and even complete strangers, who joined me in this effort to write the definitive technical book on cryptocurrencies and bitcoin.
It is impossible to make a distinction between the bitcoin technology and the bitcoin community, and this book is as much a product of that community as it is a book on the technology. My work on this book was encouraged, cheered on, supported, and rewarded by the entire bitcoin community from the very beginning until the very end. More than anything, this book has allowed me to be part of a wonderful community for two years and I can’t thank you enough for accepting me into this community. There are far too many people to mention by name—people I’ve met at conferences, events, seminars, meetups, pizza gatherings, and small private gatherings, as well as many who communicated with me by Twitter, on reddit, on bitcointalk.org, and on GitHub who have had an impact on this book. Every idea, analogy, question, answer, and explanation you find in this book was at some point inspired, tested, or improved through my interactions with the community. Thank you all for your support; without you this book would not have happened. I am forever grateful.
The journey to becoming an author starts long before the first book, of course. My first language (and schooling) was Greek, so I had to take a remedial English writing course in my first year of university. I owe thanks to Diana Kordas, my English writing teacher, who helped me build confidence and skills that year. Later, as a professional, I developed my technical writing skills on the topic of data centers, writing for Network World magazine. I owe thanks to John Dix and John Gallant, who gave me my first writing job as a columnist at Network World and to my editor Michael Cooney and my colleague Johna Till Johnson who edited my columns and made them fit for publication. Writing 500 words a week for four years gave me enough experience to eventually consider becoming an author. Thanks to Jean de Vera for her early encouragement to become an author and for always believing and insisting that I had a book in me.
Thanks also to those who supported me when I submitted my book proposal to O’Reilly, by providing references and reviewing the proposal. Specifically, thanks to John Gallant, Gregory Ness, Richard Stiennon, Joel Snyder, Adam B. Levine, Sandra Gittlen, John Dix, Johna Till Johnson, Roger Ver, and Jon Matonis. Special thanks to Richard Kagan and Tymon Mattoszko, who reviewed early versions of the proposal and Matthew Owain Taylor, who copyedited the proposal.
Thanks to Cricket Liu, author of the O’Reilly title DNS and BIND, who introduced me to O’Reilly. Thanks also to Michael Loukides and Allyson MacDonald at O’Reilly, who worked for months to help make this book happen. Allyson was especially patient when deadlines were missed and deliverables delayed as life intervened in our planned schedule.
The first few drafts of the first few chapters were the hardest, because bitcoin is a difficult subject to unravel. Every time I pulled on one thread of the bitcoin technology, I had to pull in the whole thing. I repeatedly got stuck and a bit despondent as I struggled to make the topic easy to understand and create a narrative around such a dense technical subject. Eventually, I decided to tell the story of bitcoin through the stories of the people using bitcoin and the whole book became a lot easier to write. I owe thanks to my friend and mentor, Richard Kagan, who helped me unravel the story and get past the moments of writer’s block, and Pamela Morgan, who reviewed early drafts of each chapter and asked the hard questions to make them better. Also, thanks to the developers of the San Francisco Bitcoin Developers Meetup group and Taariq Lewis, the group’s co-founder, for helping to test the early material.
During the development of the book, I made early drafts available on GitHub and invited public comments. More than a hundred comments, suggestions, corrections, and contributions were submitted in response. Those contributions are explicitly acknowledged, with my thanks, in Early Release Draft (GitHub Contributions). Special thanks to Minh T. Nguyen, who volunteered to manage the GitHub contributions and added many significant contributions himself. Thanks also to Andrew Naugler for infographic design.
Once the book was drafted, it went through several rounds of technical review. Thanks to Cricket Liu and Lorne Lantz for their thorough review, comments, and support.
Several bitcoin developers contributed code samples, reviews, comments, and encouragement. Thanks to Amir Taaki for example code snippets and many great comments; Vitalik Buterin and Richard Kiss for help with elliptic curve math and code contributions; Gavin Andresen for corrections, comments, and encouragement; and Michalis Kargakis for comments, contributions, and btcd writeup.
I owe my love of words and books to my mother, Theresa, who raised me in a house with books lining every wall. My mother also bought me my first computer in 1982, despite being a self-described technophobe. My father, Menelaos, a civil engineer who just published his first book at 80 years old, was the one who taught me logical and analytical thinking and a love of science and engineering.
Thank you all for supporting me throughout this journey.
Many contributors offered comments, corrections, and additions to the early-release draft on GitHub. Thank you all for your contributions to this book. Following is a list of notable GitHub contributors, including their GitHub ID in parentheses: