Economics » Finance

The best books on Cryptocurrency

recommended by David Birch

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony by David Birch

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony
by David Birch


Proselytes for cryptocurrencies such as Bitcoin extol them as a liberation technology to free us from big government. Sceptics insist that while they have been the source of useful technologies, as units of value, account and exchange, they will remain marginal. Here, digital currency expert David Birch chooses five books to help you understand the utopian roots of cryptocurrencies, the technology behind how they work, their functions and uses, and their broader place in the long history of money.

Interview by Benedict King

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony by David Birch

The Currency Cold War: Cash and Cryptography, Hash Rates and Hegemony
by David Birch


Before we get to the books, we’d better get straight what a cryptocurrency is. All currencies are digital now, more or less. What distinguishes a cryptocurrency?

There are lots of different ways that you could create digital currencies. Cryptocurrencies are only one of them. They’re not equivalent. The point about a cryptocurrency is that the value of the currency is determined only by cryptography. It’s not determined by some other thing. So, for example, if I were to make something like Bitcoin and issue it against a 100 per cent reserve of gold, that wouldn’t be a cryptocurrency. It would be a digital version of gold, because its value is not maintained by cryptography. Its value is maintained by the peg to the gold. A cryptocurrency like Bitcoin or Ethereum is not pegged to anything. Its value is only determined by—as its adherents would say—the power of mathematics. I would say by the power of popular delusion, but that’s a different point.

I understand that a currency might only be accessible through cryptography or solving an algorithm, but how can that currency, once it’s in circulation, be free from government control in some form or other, given that money, in a general sense, is a social technology?

The government prints 50-pound notes and they circulate. The government doesn’t control how they circulate. There are no rules about what you can or can’t do with the 50-pound note. You could certainly make an electronic version of a 50-pound note, if you wanted to. I’m not sure that we actually want to.

I think there’s a different debate to be had. One of the tenets of my book is that we’ve got it slightly the wrong way around. We should be having the discussion about what kind of money society wants and then getting the technologists to implement that, rather than the technologists giving us a menu of options, which we may or may not have to take.

“It should be society that is deciding how we want the money of the future to work”

For example, people will often say that if you’re going to have an electronic version of cash, then you have to find a way to replicate electronically the anonymity of cash because that’s one of its key characteristics. And that’s not obvious to me. It’s not obvious to me at all that cash should be anonymous. I can see many good reasons why it should be private. That’s a different argument.

What’s the a priori requirement for cash to be anonymous? I don’t get it.

What is the distinction you’re making there between private and anonymous?

If something’s private I can send you some electronic money without you having the slightest idea who I am and without the bank knowing either. But, if it turns out I’ve committed some sort of crime, then the police can turn up with a warrant and somebody, depending on the structure of the system, will tell them who I am. But they won’t tell you. You’re private as long as you behave yourself, but if you break the law, then you won’t be private anymore.

There’s a big difference between this kind of conditional anonymity or pseudonymity and unconditional anonymity which, to me, is very important—but quite possibly only to me.

And those that advocate unconditional anonymity believe it’s crucial that electronic money is unidentifiable under all circumstances?

Correct. And one of the bogus arguments that you see from time to time is that it should be anonymous for small amounts. So, if you’re going to store up to 500 pounds in your electronic wallet, then it should be anonymous. But I don’t buy that argument, because I think that if you have any non-zero amount of anonymity, then you have anonymity because, if I’m a criminal, I’ll just get a million of those £500 wallets, and now I’ve got 500 million anonymous pounds.

The point I’m making is that it should be society that is deciding how we want the money of the future to work, given that it can exhibit all sorts of counterintuitive properties that physical money can’t. It should be society that then goes to the technologists and says, ‘Implement that’. That’s not what we have at the moment.

I don’t know if you’ve looked at the Bank of England’s current consultation document on digital currency. It’s actually a very good document. And I think they’re edging towards what I would regard as a decent solution. There’s a paper from the Brookings Institution that came out recently about the design options for a digital currency, which is very similar in its conclusions to a draft paper that I have just submitted to the Journal of Payments Strategy and Systems on the same thing. I can see some of the thinking beginning to coalesce actually.

What is the basic thrust of the Bank of England’s piece?

The basic thrust is that you don’t want the bank to manage the digital currency itself, for two reasons. One, because it can’t—although actually I don’t think that’s quite the barrier they think it is. Gmail has two billion users or something. I’m sure you can download a bit of software that will let you manage a couple of hundred million, so maybe that’s not such a barrier.

But, as I’m sure you’re well aware, there’s an impact on commercial banks if you take away their money creation role. You want to leave credit creation in the hands of commercial banks and then have the commercial banks distribute digital money on behalf of the central bank.

The cheapest and simplest way to implement a digital currency would just be to get everybody to log into the Bank of England and get a digital currency account. Then everybody would be able to send everybody else digital money at zero cost. That would easily be the most efficient way. In those circumstances, what would the banks do? That might just be a little bit too disruptive.

“It was ironic that the US Treasury was printing and posting stimulus checks in the same week that the Chinese were piloting digital currency in four cities”

What the Chinese have decided to do is to go with what they call a ‘two tier system’ and I think the Bank of England is going to go down the same route, in which the Bank of England will manage the digital currency—they will set the overall parameters—but people will interact with commercial banks as they do now. And, by the way, a system of that sort was launched 25 years ago in the UK in Swindon. People have completely forgotten about it now, but NatWest launched a system called Mondex, which has just had its Silver Jubilee. I recorded a little video with some of the key players. I’m quite nostalgic about it, really. People have forgotten Swindon’s crucial role in the future of money, but there’ll be a plaque there at some point, or maybe a statue of some kind next to the one of Don Rogers.

Your book is called The Currency Cold War. What is the currency cold war and what arguments are you building in this book about the future of money?

The book is in three parts. The first part talks about what digital money is. It explains what a digital currency is and what a cryptocurrency is.

The second part of the book addresses why we are talking about this now, which I think is quite interesting because the technology has been around for a while. What is it about now that’s making us discuss all this stuff?

And the third part talks about what the implications of it might be. And that is where this ‘cold war’ idea comes from. Mark Carney has said that we need some form of what he called ‘a synthetic hegemonic currency,’ in other words a digital currency to deal with—again, his words not mine—‘the destabilizing dominance of the US dollar.’

Big picture people—Niall Ferguson is a good example—have spotted that if there are global digital currencies that allow people to trade safely and securely, but are no longer under the control of the US Money Center Banks’ clearing system in New York, that will have interesting consequences. There are a great many countries, not only America’s enemies, but its allies also, who find America’s ability to exert soft power through the financial system ‘irksome’ as Ferguson put it, which I think is a lovely word for it.

People think of digital currencies in terms of making domestic markets more efficient—and the Bank of England’s calculations on that were unequivocal. I can’t remember off the top of my head, but I think they said that if we issue a central bank digital currency to the value of a third of GDP, this would permanently raise GDP by as much as 3%, partly because of efficiency cost savings, but also partly because it provides a platform for innovative new products and services. So going over to digital currency is a good thing.

“It’s not obvious to me at all that cash should be anonymous”

But it has international implications. What if the Chinese digital yuan becomes the standard trading currency all the way along the ‘Belt and Road’? You’d have a couple of billion people who were no longer using US dollars. The demand for US dollars would fall, as would the demand for US dollar-denominated securities. America’s cost of funding its deficit would begin to climb. And the next time America tried to impose sanctions and say, ‘If you don’t do this we will cut you off in the international financial system’, the targeted country will just say, ‘Whatever. We’ll just use yuan instead.’

When I was writing the book I had two different kinds of metaphors in mind. I was thinking that it’s like a space race. The Chinese decision to go with a digital currency is like a Sputnik moment to which the US will have to respond, because I just thought it was ironic that the US Treasury was printing and posting stimulus checks in the same week that the Chinese were piloting digital currency in four cities. There are a couple of people I quote in the book who do say it is a kind of space race. In the end, I decided I would use Facebook’s Libra and China’s digital currency to illustrate this tension between private and public, East and West, all this sort of thing. I decided that would be a better central narrative for the rest of the book. Given that, the story felt more similar to a cold war for control over the financial system. In any case, The Currency Cold War was a better title than ‘The Currency Space Race’.

The point you made about the Belt and Road and the possibility of imposing sanctions feels more like the sort of interaction between the Soviet Union and the US during the Cold War, when both sides were running around the developing world trying to hold out carrots and sticks to try and get people on their side.

It does seem more like that.

Going back to the middle section, you mentioned that the technology had been there for a while, but there were specific reasons that it has kicked off now. Is that specifically around China’s attempt to build something that’s outside the American global financial system?

I think it’s more a question of several things all coming together at the same time. On the one hand, we have had the technology for a while. There have been some business ideas around this. You’ve got platforms moving into it. You have several of these things all happening at the same time. And then you have the stimulus of China doing it. But China is not reacting to Libra. The Chinese digital currency has been planned for a long time. Maybe the timing has changed a bit, but it goes back years.

Is it that the American overuse of what the Economist called ‘financial carpet bombing’ has got to a cusp? Possibly. Is it that the cost of technology has fallen considerably? Possibly—everyone’s got a smartphone now. Is it because of Chinese long-term planning? Possibly. Is it because the arrival of what we’ll temporarily call ‘smart contracts’—even though they’re neither smart, nor contracts—opens up some innovative new possibilities? It could be that but, in reality, it’s the combination of all of these things coming together.

Let’s move on to the books you’ve chosen to better understand cryptocurrency. First up is The Age of Cryptocurrency: How Bitcoin and Blockchain are challenging the Global Economic Order by Paul Vigna and Michael Casey.

This book is excited about the new technology. They’re journalists and it’s very well written. It’s a very nice read and, even though I knew a lot of the things in it, I actually enjoyed reading it as part of this bigger overall narrative. It’s a very nice introductory book. If you read books by the crazy Bitcoin people, you don’t get that bigger narrative. This book stands up well and, if you want to an introduction, it’s a good place to start.

It’s perfectly accessible to the intelligent but generalist reader?

Yes. Absolutely.

And what’s their overarching theme; what’s the story they’re telling?

The story they’re telling is that this is a genuinely new thing. This isn’t progress in the sense of putting a Band-Aid on credit cards, so that you can use them to hold hotel reservations. This is a genuinely new way of doing things. And actually, I think they’re right. It was a genuinely new thing.

It touches on the relationship between the global financial crisis and cryptocurrency, which I think is interesting. They’re a little breathless about the blockchain, but that’s okay. I suppose I would see Bitcoin as much more of a protest movement now than I did when I was reading this book originally in 2016.

What do they say in the book about the role of cryptocurrency specifically, relative to digital currency in general?

They talk quite a bit about the mistrust of the financial systems. I think some of that idealism is gone now. They say that financial markets are especially ripe for Blockchain innovation, the idea that, in the long run, the most innovative part of it might be the smart contract stuff that you run on top of it, rather than the underlying currency. I think that’s probably true. It tells that story quite nicely. In short, I think that, if you don’t know much about the topic and you want to know a little bit about what this Bitcoin thing is all about, this is a nice book to start with.

Let’s move on to Digital Cash: The Unknown History of the Anarchists, Utopians and Technologists who Created Cryptocurrency by Finn Brunton. What bit of the story of cryptocurrency does this book tell?

I think people who are crazy about Bitcoin have an almost religious attitude to it and see it as a kind of revelation. But, of course, the truth is that Bitcoin is part of a much longer evolutionary family tree of electronic cash technologies, which because of my great age, I’ve been involved with for a very long time. What Brunton does very well is to talk about this longer history and context—where did Bitcoin come from? It built on all of these previous developments and came out of a certain context. It talks about the cypherpunk groups and the libertarian ideologies that underpinned these earlier developments.

Bitcoin wasn’t something that dropped down from heaven. It’s something that evolved. I find that fascinating and so will readers who are more interested in what it does than how it works. I really like his writing style. It’s a very nicely written book and I enjoyed reading it very much.

What are Bitcoin’s antecedents?

He’s talking about things like David Chaum’s DigiCash in the 1990s, Adam Back and Hashcash, Bit Gold and these kinds of things. He talks about how different people were building and developing different parts of it. It’s a bit like the steam engine story. Somebody had a steam engine, then someone else invented a condenser and then somebody else invented a governor and, all of a sudden, you had steam engines that could do a hundred miles an hour. It’s that sort of story he’s telling.

How does utopian anarchism fit in?

He talks about this idea of the Wild West. People in that community talk about this world of Bitcoin being the Wild West, but they have a very romanticized and essentially fictional image of what the Wild West was. After all, if the Wild West was all that they say it was, we would still be in it. But it wasn’t. It wasn’t very good. That’s why we don’t have it anymore.

Get the weekly Five Books newsletter

Uncharitable people might see it as a sort of teenage, angry-white-male pseudo-libertarianism. It’s not real political libertarianism. It’s more a mom-won’t-let-me-buy-a-PlayStation sort of libertarianism. Anyway, it’s a very good book about the fact that this is an evolutionary tree, which by implication, will continue to evolve.

Even if it was started by libertarian types, it’s obviously been taken up by a much broader swathe of people now. Is the point that these currencies were initiated by people with radical utopian dreams, but actually they have been mainstreamed for other reasons now?

I think you’d be hard-pressed to persuade me that Bitcoin has been mainstreamed. You might be able to persuade me that publicity about Bitcoin has been mainstreamed. But the number of people that hold Bitcoin is still small. I think most Bitcoins are still held by ‘whales’, as they call them. It’s a very thin and opaque market that’s subject to transparent manipulation. And most holdings are utterly speculative. Nobody actually uses Bitcoin for anything.

That’s why Brunton’s view of it as part of a growing and evolving phenomenon, which will continue to evolve, is appealing to me.

But do you see a way in which it could evolve from this current narrow base of people? Does it have any obvious use in mainstream finance?

No, I don’t think it does. It’s probably like the Newcomen steam engine that was used for pumping water out of Cornish mines. It was a first, it was hopelessly inefficient, but it was the only way of doing some particular thing, so the inefficiency was tolerated. But you didn’t put a Newcomen steam engine on wheels to create the Flying Scotsman, you carried on evolving the technology and I think that’s what will happen.

Let’s move on to A History of Money: From Ancient Times to the Present by Glyn Davies, a book that covers a lot more than just cryptocurrency. 

This is one of my absolutely favourite books. Many years ago, when I worked on Mondex in Swindon, I very quickly realized, being an intelligent person, that actually this whole money thing was much more interesting than I’d realized. And, what’s more, as soon as you’re forced to sit down and write some computer code for it you realize nobody understands it. So, I wanted to understand a bit more about it and its history. And I went out and bought this book and it is just wonderful. I read it like a novel, wanting to know what’s going to happen next. I love the whole thing. It’s beautifully written and really interesting.

There are many others I could point to now. There’s Niall Ferguson’s The Ascent of Cash. There’s Money Changes Everything by William Goetzmann. But this one still holds its own.

“People have forgotten Swindon’s crucial role in the future of money”

When I was younger, I organised a conference about digital money. And I called up Glyn Davies, who didn’t know me from Adam, and asked if he would come and give a talk to set the historical context. He very kindly came along and delivered a fabulous talk about the history of money. I just love that book. It’s terrific. He is sadly no longer with us.

I can see we’re now at the fourth edition of the book. When did he write it?

It was first published in 1994.

Does it have some sort of overarching theme?

Yes. The overarching theme of it is that every innovation in the history of money has served to lessen centralized control. And the last great evolution involved the settlement between the monarch and the merchant classes, which led to central banking and national currencies and all that sort of thing. And that’s the future. Future technological developments will continue to lessen central control.

And is digital money likely to further develop that trend?

I think you can make the argument that it has already happened. The question is whether it is going to be decentralized yet further and the answer to that, I think, is probably ‘yes’. In any case, I don’t think you can think about the future of money if you don’t understand where it came from and how it has worked in the past. And Davies is great in providing that perspective.

Let’s go on to Paid: Tales of Dongles, Checks and Other Money Stuff, edited by Bill Maurer and Lana Swartz. What story does this book tell about cryptocurrency?

A fair few years ago, when I was trying to read about the history of money and trying to figure out where money was going, I started to read things by social anthropologists like Jack Weatherford and others. And I began to realize you couldn’t really understand money just by looking at technology and financial services. You had to look at the bigger picture to understand it and I felt that anthropology contributed something very special.

This book’s subtitle is Tales of Dongles, Checks and Other Money Stuff and it talks about cheques, credit cards and dongles and smartphones, not from a technical perspective, but trying to ask, ‘what do these mean?’ And for somebody like me, who’s not an expert on that side of the subject, it’s a very nice introduction to thinking about money objects in a different way. Recently, I was at the annual conference of the European Association of Social Anthropologists. They very kindly invited me to take part in a session about digital money and I’m just very fascinated by all of that stuff. If you’re interested in a topic, dipping your toes in the anthropological side of it is very useful.

Support Five Books

Five Books interviews are expensive to produce. If you're enjoying this interview, please support us by .

There are some fabulous books about the evolution of money that I could recommend a thousand times over, like Debt: The First 5,000 Years by David Graeber, James Buchan’s Frozen Desire: The Meaning of Money and Niall Ferguson’s The Cash Nexus. I can point to all of these books and they’re all fabulous, but Paid is a nice little book which just delves into that more anthropological side of things. I just remember enjoying reading it very much, so I thought that people might like it, as something a bit different.

The final book is The Basics of Bitcoins and Blockchains by Anthony Davies. What light does this book shed on cryptocurrency?

I thought I should probably include something that covers technical details. This book is very clear. It’s a good place to start for an intelligent non-technical reader and I thought I should include one book like that. It’s a couple of years old. It’s written with some useful perspective about how things have actually evolved and developed.

What’s your next book about?

The one I’m working on at the moment is called Will Robots Need Passports? It’s about digital identity. My obsessions are digital money and digital identity. Having just done a couple of books about digital money, I’m now writing a book about digital identity. I thought it would be an interesting angle to talk about how, despite the fact we haven’t actually fixed the identity problem for people, there’s already a much bigger problem coming in relation to things. We’re going to be connecting vastly more things to the internet than people and we don’t know what any of those are either.

Is this about making sure that things have consistent identities so they can talk to each other?

That’s part of it. By ‘things’ I mean that quite generically. It’s also linked to issues about artificial intelligence. At one level, there’s the trivial question of how do I give your car permission to park in my garage. That sounds very easy when futurists put it up on a PowerPoint slide and say, ‘Well one day your car will be able to negotiate its own car parking.’ That is true, but when you drop down one level of detail, there’s absolutely nothing there. How on earth do you know it’s my car? How did you know it was allowed to park there? How do you know that I gave my car permission to park in the garage? Etc., etc.

But things are also going to be made vastly worse by the arrival of artificial intelligence. For instance, if I see something on Twitter, how can I know it even came from a person, let alone which person it came from? I’ve just got off a call with the Tony Blair Institute—I didn’t even know there was such a thing. They were calling me about government policy on identity. I had to break it to them gently that there isn’t one, which I think was a little disappointing to them.

The point is that we’re in enough trouble as it is, because we haven’t figured out how to manage people’s identities online and we’re about to put billions more things online, as well. I thought that would be a fun idea for a book.

Interview by Benedict King

Five Books aims to keep its book recommendations and interviews up to date. If you are the interviewee and would like to update your choice of books (or even just what you say about them) please email us at

David Birch

David G.W. Birch is an author, advisor and commentator on digital financial services. He is Global Ambassador for Consult Hyperion (the secure electronic transactions consultancy that he helped to found) and Technology Fellow at the Centre for the Study of Financial Innovation (the London-based think tank). He is an internationally-recognised thought leader in digital identity and digital money; was named one of the global top 15 favourite sources of business information by Wired magazine and one of the top 10 most influential voices in banking by Financial Brand; created one of the top 25 “must read” financial IT blogs; was found by PR Daily to be one of the top 10 Twitter accounts followed by innovators (along with Bill Gates and Richard Branson), rated Europe’s most influential commentator on emerging payments by Total Payments and was recently awarded “Contributor of the Year” by the Emerging Payments Association.

Save for later

David Birch

David G.W. Birch is an author, advisor and commentator on digital financial services. He is Global Ambassador for Consult Hyperion (the secure electronic transactions consultancy that he helped to found) and Technology Fellow at the Centre for the Study of Financial Innovation (the London-based think tank). He is an internationally-recognised thought leader in digital identity and digital money; was named one of the global top 15 favourite sources of business information by Wired magazine and one of the top 10 most influential voices in banking by Financial Brand; created one of the top 25 “must read” financial IT blogs; was found by PR Daily to be one of the top 10 Twitter accounts followed by innovators (along with Bill Gates and Richard Branson), rated Europe’s most influential commentator on emerging payments by Total Payments and was recently awarded “Contributor of the Year” by the Emerging Payments Association.