WEBVTT - What are Bitcoins? 0:00:00.280 --> 0:00:02.840 Brought to you by the reinvented two thousand twelve camera. 0:00:03.160 --> 0:00:08.880 It's ready. Are you get in touch with technology? With 0:00:09.000 --> 0:00:17.960 tech Stuff from how stuff works dot com. Hello again, everyone, 0:00:18.000 --> 0:00:20.360 welcome to tech stuff. My name is Chris Polette and 0:00:20.400 --> 0:00:22.440 I am an editor of how stuff works dot Com. 0:00:22.440 --> 0:00:27.440 Sitting across from me as always, his senior writer, Jonathan Strickland, pennies, nickels, damps, 0:00:27.560 --> 0:00:34.000 quarters dollar bills, hundred dollar bills. Uh, that's a really 0:00:34.000 --> 0:00:36.680 obscure song. If you guys, If you guys recognize that, 0:00:36.760 --> 0:00:39.239 let me know. And my roommate from college does not 0:00:39.400 --> 0:00:42.240 count because he's the one who introduced me to it. Yeah, this, 0:00:42.240 --> 0:00:45.560 this podcast is not going to be about the Benjamin's No, 0:00:45.720 --> 0:00:50.320 but it's about currency. It's about a digital currency called bitcoin. Yes, 0:00:50.400 --> 0:00:52.360 So all the all of all of you who have 0:00:52.479 --> 0:00:56.279 been asking us about bitcome bitcoin? Is it? Yes? So 0:00:56.760 --> 0:00:59.520 we have an article on the site about how currency works, 0:00:59.520 --> 0:01:02.160 which is useful to to kind of get a background 0:01:02.200 --> 0:01:04.720 on this. Keep in mind, your currency is sort of 0:01:04.959 --> 0:01:09.080 based upon just a mutual agreement among everybody that a 0:01:09.160 --> 0:01:13.760 representation of wealth actually is worth something. Yes, because you know, 0:01:13.840 --> 0:01:17.600 we we all recognize that there are certain products out 0:01:17.640 --> 0:01:22.240 there that we either need or want, and we recognize 0:01:22.240 --> 0:01:24.920 there are also services that we need or want, and 0:01:24.959 --> 0:01:28.120 there's stuff that we can provide, and that by providing 0:01:28.160 --> 0:01:30.400 some things, we can get other things and that way 0:01:30.440 --> 0:01:34.520 we all can live. Well. Currency is just a method 0:01:34.520 --> 0:01:37.160 of exchange so that you can get those services or 0:01:37.560 --> 0:01:40.000 products without having to do a direct exchange, because that 0:01:40.040 --> 0:01:44.880 gets messy. The Barner system is not really easy to navigate. Yes, 0:01:44.920 --> 0:01:47.360 I can't think of a thing that I could really do. 0:01:47.760 --> 0:01:49.960 Uh well, maybe a couple of small things I could 0:01:50.000 --> 0:01:53.280 do to convince a computer manufacturer to give me a 0:01:53.280 --> 0:02:00.080 new computers an Xbox. Yeah, um, so it's it's it 0:02:00.120 --> 0:02:02.920 can be very useful thing. Although um at one time, 0:02:02.960 --> 0:02:07.000 for example, the the United States UM currency system was 0:02:07.040 --> 0:02:09.880 based on the gold standard. You could take a dollar 0:02:09.919 --> 0:02:15.000 bill uh two the the exchange and get a dollar's 0:02:15.040 --> 0:02:17.960 worth of gold, um and you would need a microscope 0:02:18.120 --> 0:02:21.120 to see it. But um, that was the way it 0:02:21.320 --> 0:02:23.280 used to work, and that is not the way it 0:02:23.400 --> 0:02:28.040 works anymore. UM. That has been changed for several decades. 0:02:28.080 --> 0:02:29.720 So now at this point, of course, you could have 0:02:29.760 --> 0:02:32.919 always argued that the value of gold was arbitrary anyway, 0:02:33.240 --> 0:02:36.400 so really it was a piece of paper representing value 0:02:36.480 --> 0:02:41.839 of a mineral that represented value. Yes, So in other words, 0:02:41.880 --> 0:02:44.720 of ruining the magic, Jonathan, I'm just saying that eventually 0:02:44.720 --> 0:02:46.600 you get to the point where currency is based upon 0:02:46.639 --> 0:02:49.239 a shared delusion among everybody, and that if we all 0:02:49.280 --> 0:02:51.440 sat there and said, hey, wait a minute, it would 0:02:51.440 --> 0:02:54.200 all fall apart. Yeah, that's that's kind of the thing. 0:02:54.240 --> 0:02:58.640 It's it's a medium of exchange. And uh, for the 0:02:58.680 --> 0:03:02.800 most part, um, we you know, the people of Earth 0:03:02.840 --> 0:03:07.920 are are doing business with money that is backed by 0:03:07.960 --> 0:03:11.880 a government of some type, or in some cases, you know, 0:03:11.960 --> 0:03:14.480 a coalition of governments, like for example, the Euro, the 0:03:14.480 --> 0:03:17.560 Euro exactly. So yeah, yeah, usually you've got some sort 0:03:17.720 --> 0:03:22.960 of of state backed currency. Yeah. And um uh, you know, 0:03:23.400 --> 0:03:26.040 back in the old, old old days, currency of course 0:03:26.160 --> 0:03:29.640 was made out of precious metals, which again were precious 0:03:29.680 --> 0:03:31.920 because they were pretty and they were hard to get 0:03:32.680 --> 0:03:37.400 those those scarcity and and uh and pretty are two 0:03:37.480 --> 0:03:41.240 of the things that really fell into the old currency system. Yeah. 0:03:41.320 --> 0:03:43.760 And of course at one time salt was a medium 0:03:43.960 --> 0:03:47.480 of exchange. Sure, that's where we get salary exactly, That's 0:03:47.480 --> 0:03:49.360 what I get my salary in. I don't know about 0:03:49.400 --> 0:03:54.720 you big exactly salt like delicious explains that that big 0:03:54.760 --> 0:03:59.200 salt crystal at your desk not just a great barbecue joint. Um. 0:03:59.280 --> 0:04:04.720 So oh yeah. So currency is all based upon various 0:04:04.720 --> 0:04:10.320 people agreeing that whatever the medium of exchanges actually has value. Right, 0:04:10.520 --> 0:04:13.119 So that's going to lead us in Just a side note, 0:04:13.160 --> 0:04:16.480 have you ever heard of Joshua Abraham Norton? That name 0:04:16.560 --> 0:04:18.640 does sound familiar, but I don't. I can't play. Also 0:04:18.680 --> 0:04:24.000 known as Imperial Majesty Emperor Norton the first He's an eccentric. 0:04:24.920 --> 0:04:28.039 That's one way of saying it. Uh crazy is another way. 0:04:28.360 --> 0:04:32.039 He essentially declared himself an emperor of the United States 0:04:32.480 --> 0:04:35.920 while living in San Francisco. Okay, that's why it sounds. Yeah. 0:04:35.920 --> 0:04:38.000 He one of the things he did, he was he 0:04:38.080 --> 0:04:40.960 was kind of this eccentric, celebrated guy living in the 0:04:41.160 --> 0:04:43.960 nineteenth century San Francisco. One of the things he did 0:04:44.040 --> 0:04:47.880 was he printed his own money. He printed his own money, 0:04:48.000 --> 0:04:51.520 and uh, local merchants would some of them would accept it. 0:04:51.720 --> 0:04:53.599 They would accept his local thing. You know, they thought 0:04:53.600 --> 0:04:55.839 he was an interesting character, and they would accept his 0:04:55.880 --> 0:04:58.720 money and and sell him goods with his money, which 0:04:58.720 --> 0:05:01.520 meant that his currency, at least on a micro level, 0:05:01.720 --> 0:05:06.039 was valid because two parties, at least two parties agreed 0:05:06.400 --> 0:05:11.599 that that particular method of currency had value. That just 0:05:11.640 --> 0:05:16.080 shows you how tenuous the concept of currency really is. Now, 0:05:16.160 --> 0:05:18.839 let's move on to bitcoin. I just had to give 0:05:19.080 --> 0:05:22.000 Emperor Norton a shout out. I figured you, the next 0:05:22.200 --> 0:05:25.360 uh person of interest in this discussion would probably be 0:05:25.400 --> 0:05:29.840 Satoshi Nakamoto. Yes, who is the inventor of bitcoin. Now, 0:05:29.920 --> 0:05:33.080 bitcoin is a digital currency. It's not the only digital 0:05:33.080 --> 0:05:35.120 currency out there. There are a lot of digital currencies 0:05:35.120 --> 0:05:40.920 that are connected to various games or virtual worlds, and um, 0:05:40.960 --> 0:05:43.600 I mean you could even argue things like, uh, like 0:05:43.839 --> 0:05:47.479 Xbox points on the Xbox Life marketplace are kind of 0:05:47.480 --> 0:05:52.200 a digital currency. Um, Facebook credits, Facebook credits. Yeah, there 0:05:52.200 --> 0:05:55.280 are other versions out there, although as Lendon dollars was 0:05:55.320 --> 0:05:56.840 the one I was mainly thinking of, that's of course 0:05:56.839 --> 0:06:00.880 Second Life Lendon dollars. Yeah. So there are other digital 0:06:00.920 --> 0:06:03.120 currencies out there, but most of these tend to be 0:06:04.120 --> 0:06:08.359 very um uh contained, right, there's only there's only a tiny, 0:06:08.440 --> 0:06:13.560 little niche marketplace where you can you can spend this currency, 0:06:13.839 --> 0:06:16.960 and otherwise it has really not much value. Usually can't 0:06:17.040 --> 0:06:22.000 resell the the digital currency to get real quote unquote 0:06:22.040 --> 0:06:26.760 real money back. Yeah, I mean you can um. For example, 0:06:26.800 --> 0:06:31.840 with UH, if you have ten euros, you can uh, 0:06:31.880 --> 0:06:34.120 you know, have a service that your friend gives you say, 0:06:34.160 --> 0:06:37.279 you know, hey, yeah, I'll help you. I'll help you 0:06:37.320 --> 0:06:40.480 move your stuff from your old apartment to your new apartment. 0:06:40.480 --> 0:06:42.680 If you give me money for beer, okay, well here's 0:06:42.760 --> 0:06:46.560 you know, here's ten euros and for that person, then 0:06:46.960 --> 0:06:49.800 he can take that, you know, that ten year o 0:06:49.960 --> 0:06:52.840 note and go spend it at a store or get 0:06:52.960 --> 0:06:55.359 really good get really good beer because you're apparently in 0:06:55.400 --> 0:06:58.360 Europe and uh, the beer there's so much better than 0:06:58.360 --> 0:07:02.400 in America. Oh, people can write to Jonathan. Come on, 0:07:02.480 --> 0:07:06.760 everyone knows that why by European beers. I guess it's okay, UM, 0:07:06.800 --> 0:07:08.640 but yeah, I mean you can. You can use that 0:07:08.960 --> 0:07:10.800 in many places, or you could take it to a 0:07:10.840 --> 0:07:14.960 bank and exchange it for Japanese yen or in a 0:07:14.960 --> 0:07:19.720 American dollars or wherever. But if you buy um, uh, 0:07:20.000 --> 0:07:22.480 go to the department store and buy one of those 0:07:22.480 --> 0:07:27.960 Facebook credit cards cards with Facebook credits UM, and you 0:07:28.720 --> 0:07:30.960 enter that in your Facebook account. You can't get that 0:07:31.040 --> 0:07:34.280 back and go exchange it for Japanese yen. Once it's 0:07:34.320 --> 0:07:38.880 in Facebook, it's in that world, and that's all it is, exactly. Yeah. 0:07:38.920 --> 0:07:42.080 And um also there tends another element that tends to 0:07:42.080 --> 0:07:44.160 happen with a lot of these currency exchanges. There's a 0:07:44.200 --> 0:07:48.400 transaction fee. There may be transaction several transaction fees, depending 0:07:48.440 --> 0:07:51.360 upon the nature of the transaction. If you're purchasing something, 0:07:51.360 --> 0:07:53.520 there may be a transaction fee charged by the financial 0:07:53.600 --> 0:07:56.440 institution that is overseeing the transaction, assuming that you're not 0:07:56.560 --> 0:07:59.760 using cash. Right, let's take cash all the elements, all 0:07:59.840 --> 0:08:02.600 the out of this, because digital currency kind of falls 0:08:02.680 --> 0:08:08.440 between cash and credit. It's it's it's in this world 0:08:08.440 --> 0:08:14.720 that's sort of a vague defined world right in the middle. Um, 0:08:14.760 --> 0:08:17.280 So cash is there are a lot of different benefits 0:08:17.280 --> 0:08:21.520 to cash. Cash means that, depending on the nature of 0:08:21.520 --> 0:08:25.960 the transaction, you may be not paying taxes on something, right, right, 0:08:26.040 --> 0:08:27.440 I mean that's why a lot of people like to 0:08:27.440 --> 0:08:31.480 do cash transactions. It means that there's no, uh, there's 0:08:31.480 --> 0:08:35.160 not necessarily a paper trail. It allows you to make 0:08:35.200 --> 0:08:39.480 a transaction between two individuals without a third party intervening. Um. 0:08:39.520 --> 0:08:41.960 When you're using credit, then that it's different because there's 0:08:41.960 --> 0:08:44.120 now a trail there and there may be you know, 0:08:44.200 --> 0:08:47.079 you may have to have taxes come into play so 0:08:47.120 --> 0:08:50.199 that you cannot break the law. Plus, you know, with 0:08:50.360 --> 0:08:53.800 a point of sale terminals, there's no risk of skimming 0:08:54.040 --> 0:08:56.719 your credit card or debit card number if you are 0:08:56.800 --> 0:09:01.480 paying with cash, so the risk of un and also 0:09:01.520 --> 0:09:04.960 it's more anonymous. So two people meet with cash, you don't, 0:09:05.160 --> 0:09:08.720 you know, cash is an agreed upon currency. It's it's 0:09:08.720 --> 0:09:11.240 that's fine, You've you've purchased whatever it was you're purchasing, 0:09:11.240 --> 0:09:15.720 whether it's a service or a good, and it is not. Uh. Again, 0:09:15.760 --> 0:09:19.480 there's no trail leading to that transaction. Now with credits 0:09:19.600 --> 0:09:23.280 much more UH, it's much different. The anonymity factor has 0:09:23.320 --> 0:09:26.240 taken out of it. Digital coins are kind of Bitcoin 0:09:26.360 --> 0:09:28.480 is kind of in between it. There's all there's some 0:09:28.520 --> 0:09:33.000 anonymity built in UM and there's uh an ability to 0:09:33.200 --> 0:09:37.040 do a person to person transactions so that there's not 0:09:37.120 --> 0:09:40.040 a third party involved in this. So again you can 0:09:40.080 --> 0:09:44.880 purchase stuff essentially tax free, depending on the vendor that 0:09:44.960 --> 0:09:47.120 you're going to or the person you know, whomever it 0:09:47.200 --> 0:09:50.160 is that has agreed to sell you the service or product. 0:09:50.800 --> 0:09:55.640 Um and it also, unfortunately, bitcoin has also been used 0:09:55.640 --> 0:10:00.280 and this is kind of one of the more sensationalized 0:10:00.280 --> 0:10:05.199 elements of bitcoin. It's been used in illegal uh transactions 0:10:05.760 --> 0:10:09.160 for example, um uh purchasing drugs. That's been in the 0:10:09.160 --> 0:10:12.760 news recently where people have started to adopt the bitcoin 0:10:12.840 --> 0:10:17.880 currency in order to purchase illegal substances. And the reason 0:10:17.960 --> 0:10:21.040 for it is because there's no it's not going through 0:10:21.080 --> 0:10:25.559 any official channels. You can even purchase stuff across country 0:10:25.600 --> 0:10:28.280 lines because again, it's a digital currency, it's not a 0:10:28.280 --> 0:10:32.040 physical currency. So if let's say your supplier is in 0:10:32.160 --> 0:10:35.120 another country, you can purchase something through bitcoins on an 0:10:35.120 --> 0:10:39.760 agreed upon amount and then uh that person gets the bitcoins, 0:10:39.800 --> 0:10:43.360 they can then transfer those bitcoins either into it you know, 0:10:43.400 --> 0:10:45.440 they can either use those bitcoins by something else that 0:10:45.520 --> 0:10:48.400 they want, or they can try to sell the bitcoins 0:10:48.440 --> 0:10:51.320 to someone else where can agreed upon amount of money, 0:10:51.720 --> 0:10:54.600 which is kind of interesting. I mean, the the finding 0:10:54.640 --> 0:10:57.840 out how much bitcoins are trading for, as in in 0:10:57.920 --> 0:11:02.000 relation to established currency these is uh kind of an 0:11:02.000 --> 0:11:04.320 interesting situation. That's the part that I have the hardest 0:11:05.320 --> 0:11:10.000 uh time understanding, Like how do we determine how much 0:11:10.040 --> 0:11:13.360 a bitcoin is worth to us in our in dollars 0:11:13.400 --> 0:11:18.760 for example, or euros. Right. Well, Um, from what I've read, 0:11:18.960 --> 0:11:21.880 the value of bitcoin right now is subject to a 0:11:21.880 --> 0:11:26.480 lot of speculation. UM. As in speculators, Yeah, as in 0:11:26.600 --> 0:11:29.720 people who are investing in bitcoin because they believe that 0:11:29.760 --> 0:11:33.520 this is something that's going to really take off and 0:11:33.520 --> 0:11:35.600 and be successful, and therefore they can make a lot 0:11:35.600 --> 0:11:38.160 of money if they get in on the ground floor. Yeah, 0:11:38.240 --> 0:11:40.160 sort of like sort of like the stock market is 0:11:40.200 --> 0:11:42.720 in a lot of cases like UM, you'll see that 0:11:42.760 --> 0:11:48.040 with initial public offerings of stock, UM, people will uh 0:11:48.080 --> 0:11:51.160 an I p O will take off immediately, especially for 0:11:51.200 --> 0:11:52.959 a lot of the tech companies. If you watch that, 0:11:53.480 --> 0:11:56.719 UM people say, oh, well you know X y Z Industries, 0:11:56.760 --> 0:12:00.120 they make that cool software. Everybody's gonna want that. So 0:12:00.440 --> 0:12:02.400 I think the stock is going to go up. I'm 0:12:02.400 --> 0:12:04.400 gonna buy as soon as it comes out, because it 0:12:04.440 --> 0:12:07.760 will never be lower, it will only go up. Um. 0:12:07.840 --> 0:12:11.319 And so that's sort of what we're talking about now. UM. 0:12:11.360 --> 0:12:16.240 The weird thing about bitcoin is that it's made by you, 0:12:16.960 --> 0:12:20.160 or could be made by you. Yeah, it's um. You 0:12:20.200 --> 0:12:23.680 actually have to mine bitcoins, but mining in this sense, 0:12:23.960 --> 0:12:28.400 it's it's kind of interesting. What what what bitcoin does 0:12:28.760 --> 0:12:34.040 is it kind of emulates what an actual mining operation 0:12:34.160 --> 0:12:36.120 would be like, in the sense that let's say that 0:12:36.280 --> 0:12:40.360 you are prospector for gold back in the old gold rush, 0:12:40.440 --> 0:12:43.880 and you find a vein of gold and you start 0:12:44.080 --> 0:12:46.360 you start mining that gold for all it's worth. Well, 0:12:46.360 --> 0:12:49.520 of course, the more you mind, the less gold there is, right, 0:12:49.720 --> 0:12:51.439 And then you eventually get to a point where you're 0:12:51.440 --> 0:12:53.520 having to put forth a lot of effort to get 0:12:53.559 --> 0:12:56.400 a little amount of gold because you've already mined the 0:12:56.440 --> 0:12:59.400 most of the gold out. And then you start to 0:12:59.400 --> 0:13:01.600 have to make to say, jians of is the effort 0:13:01.600 --> 0:13:04.760 I'm putting forward worth the amount of gold that I'm 0:13:04.760 --> 0:13:09.680 getting back? Well, the the bitcoin system emulates that, and 0:13:09.720 --> 0:13:13.200 it's such an interesting process. So essentially what's going on 0:13:13.360 --> 0:13:16.720 is that it's a peer to peer network. Now that 0:13:16.760 --> 0:13:20.360 means that in order to be a part of mining bitcoins, 0:13:20.559 --> 0:13:24.400 you join this this network of other users, and your 0:13:24.520 --> 0:13:27.640 computer ends up making connections with other computers trying to 0:13:27.720 --> 0:13:31.680 solve a hash problem. The hash problem is when you 0:13:31.720 --> 0:13:35.480 take uh at least two figures and you make another 0:13:35.520 --> 0:13:39.520 figure from them, and then you have to UH, you 0:13:39.559 --> 0:13:43.800 have to to solve some problem related to that new figure. 0:13:44.320 --> 0:13:48.200 And in this case, UM, the way bitcoins works is 0:13:48.200 --> 0:13:52.640 that there are fifty bitcoins released at at specific intervals, 0:13:53.559 --> 0:13:57.840 and if your computer solves the hash of that particular 0:13:57.920 --> 0:14:01.760 for that particular group, you get the fifty coins. Okay, Now, 0:14:02.160 --> 0:14:04.800 early early on in this, remember it was launched in 0:14:04.800 --> 0:14:07.760 two thousand nine, early on in this it was relatively 0:14:07.880 --> 0:14:10.360 easy to solve the hash. And by solving the hash, 0:14:10.400 --> 0:14:12.920 this is the same sort of process that a lot 0:14:13.000 --> 0:14:17.000 of UH networked computer like grid computing systems use, where 0:14:17.080 --> 0:14:20.440 you connect in our our folding proteins or something along 0:14:20.480 --> 0:14:24.080 those lines, or or back in the old set program, 0:14:24.120 --> 0:14:26.400 you would UM, I hate to say the old SETI program, 0:14:26.440 --> 0:14:28.880 but would have no more funding for it, but you 0:14:28.880 --> 0:14:35.160 would have your computer analyze radio signals for any potential 0:14:35.280 --> 0:14:39.440 actual like UM intended radio signal as opposed to just 0:14:39.960 --> 0:14:43.800 random noise. UM. Your computer would work on this problem 0:14:43.840 --> 0:14:46.480 and then send results back to a master system which 0:14:46.480 --> 0:14:50.240 would corelate all that and then analyze it. Well, that's 0:14:50.280 --> 0:14:51.880 sort of the same thing that's going on with bitcoin, 0:14:51.920 --> 0:14:54.680 except instead of trying to solve a an actual problem 0:14:54.720 --> 0:14:57.680 problem what you're doing is you're trying to mind these coins, 0:14:58.160 --> 0:14:59.880 and in the early days you didn't have to have 0:15:00.080 --> 0:15:01.960 much processing power to do it. But as more and 0:15:02.000 --> 0:15:06.440 more processors joined the network, more and more nodes in 0:15:06.440 --> 0:15:10.160 this peer to peer network joined, than the problem would 0:15:10.240 --> 0:15:15.720 get progressively more complicated, to the point now where um, actually, 0:15:15.880 --> 0:15:18.240 if you go to the bitcoin website and you read 0:15:18.280 --> 0:15:22.400 about mining, it says that most bitcoin users don't mind 0:15:22.480 --> 0:15:25.840 at all because it's very competitive, and you've got people 0:15:25.840 --> 0:15:32.680 who are building machines computers designed specifically to be bitcoin miners, 0:15:33.320 --> 0:15:36.640 and they're using they're using powerful processors including uh and 0:15:36.760 --> 0:15:41.160 not not CPUs, they're using graphics cards processors yeah, GPUs, 0:15:41.600 --> 0:15:44.600 because they're faster to solve the kind of time type 0:15:44.600 --> 0:15:47.920 of problems that are that Bitcoin depends upon for mining. 0:15:48.520 --> 0:15:53.640 So the odds of you solving the problem of or 0:15:53.680 --> 0:15:56.320 your computer, I should really say, your processor solving the 0:15:56.360 --> 0:16:01.880 problem of that particular batch offty bitcoins is very low, 0:16:02.560 --> 0:16:05.880 and it gets lower every time someone joins on with 0:16:05.920 --> 0:16:09.280 an even more powerful machine. And again this is where 0:16:09.320 --> 0:16:12.560 we get into that that analogy of mining for gold. 0:16:12.640 --> 0:16:17.200 Eventually you're talking about spending so much money building and 0:16:17.280 --> 0:16:21.760 maintaining a machine, including things like paying for electricity that 0:16:22.360 --> 0:16:25.080 it doesn't make sense to keep going it. You know, 0:16:25.240 --> 0:16:29.040 you're spending more money than you would earn through mining bitcoins. 0:16:29.960 --> 0:16:33.360 So it's a kind of interesting situation. And also the 0:16:33.360 --> 0:16:38.960 the the bitcoins themselves will decrease over time. There's a 0:16:39.040 --> 0:16:44.600 finite number. I think it's twenty one million bitcoins are allowed. Ever, yeah, 0:16:44.640 --> 0:16:48.840 that's a that's a basic law of UM of the markets. 0:16:48.880 --> 0:16:52.880 I mean, some people, um, you know, when when you 0:16:52.880 --> 0:16:55.920 don't really understand how this works, will say, well, I 0:16:56.000 --> 0:17:00.720 heard that the you know work short twenty million dollars 0:17:00.800 --> 0:17:03.720 or whatever currency. It's like, why don't they just print more? Well, 0:17:03.920 --> 0:17:06.360 if you if you make too many of a currency, 0:17:06.480 --> 0:17:11.000 or you you have too many UM certificates of stock 0:17:11.080 --> 0:17:13.800 for your company, at some point it begins to devalue 0:17:14.520 --> 0:17:19.479 the institution that is represented you know, represented by that. So, um, 0:17:19.680 --> 0:17:22.160 the more money you print, the less the money is worth. 0:17:22.160 --> 0:17:27.040 The more stock certificates you release to two shareholders, the 0:17:27.119 --> 0:17:30.200 last the company is worth. So it's it's essentially the 0:17:31.520 --> 0:17:35.760 key takeaway there is currency and wealth are two different things. Yes, 0:17:36.359 --> 0:17:38.399 just because you have more currency does not mean you 0:17:38.480 --> 0:17:43.560 have more wealth because the wealth is dependent upon the 0:17:43.600 --> 0:17:47.719 perceived value of that currency, and the more currency there is, 0:17:46.760 --> 0:17:51.400 the less value people will perceive in it, right, which 0:17:51.440 --> 0:17:53.720 is you know, that's why you you can see historic 0:17:53.960 --> 0:17:58.720 issue problems with with massive depressions breaking out across the 0:17:58.760 --> 0:18:02.479 globe in various air is because the currency would get 0:18:02.480 --> 0:18:06.240 flooded and then you would have, uh, you know, you 0:18:06.280 --> 0:18:09.240 would have a brief moment where everyone appears to be wealthy, 0:18:09.280 --> 0:18:12.720 and then costs would adjust to the amount of currency 0:18:12.760 --> 0:18:15.240 that was in the market, and then the currency would 0:18:15.240 --> 0:18:19.600 be practically worthless. Um. Actually that maybe what happened to 0:18:19.920 --> 0:18:25.600 Spain after the the discovery of the New World and 0:18:25.680 --> 0:18:29.919 the expansion into into really exploiting the New World and 0:18:29.960 --> 0:18:34.879 pulling the the the wealth back over to Europe. People ask, well, 0:18:34.920 --> 0:18:37.679 what happened to all that gold that Spain was mining 0:18:37.720 --> 0:18:41.200 and shipping back to uh, Spain, you know, front the 0:18:41.240 --> 0:18:43.960 New World? What happened to it? Well, a lot of 0:18:44.000 --> 0:18:46.359 what happened to it was it some of it sunk, 0:18:46.560 --> 0:18:48.040 some of it was stolen, but a lot of it 0:18:48.080 --> 0:18:50.280 made its its way back to Spain. And people said, well, 0:18:50.320 --> 0:18:54.720 then Spain later on suffered some really some real economic hardship. Well, 0:18:54.760 --> 0:18:57.280 you get all this influx of gold in there, and 0:18:57.280 --> 0:19:01.320 it devalues the gold. You know, suddenly, yes, you've got 0:19:01.320 --> 0:19:04.200 all this precious material, but it's no longer as precious 0:19:04.200 --> 0:19:06.960 because there's more of it that there's that scarcity problem. 0:19:07.280 --> 0:19:10.920 So by capping bitcoins at twenty one million, there's already 0:19:12.240 --> 0:19:15.800 a finite limit. You're not gonna make any more after that. Um, 0:19:15.920 --> 0:19:21.280 And as more blocks are are solved, the the problems 0:19:21.320 --> 0:19:24.800 are contained in blocks. As more of these problems are solved, 0:19:25.240 --> 0:19:27.720 uh than fewer coins will be released over time. So 0:19:27.880 --> 0:19:31.640 remember I said that they be released in fifty coin batches. Well, 0:19:31.680 --> 0:19:34.520 after a certain number of blocks are solved, that gets 0:19:34.520 --> 0:19:38.439 reduced to twenty five coins, and then after that so 0:19:38.480 --> 0:19:40.920 it's half the amount, right, the same sort of thing. 0:19:41.000 --> 0:19:44.800 After each time it gets closer to the UH than 0:19:45.920 --> 0:19:49.560 the end, it's going to have again and half again 0:19:49.640 --> 0:19:54.960 and half again. Now it's not infinitely divisible. Bitcoins can 0:19:55.040 --> 0:19:58.480 be divisible down to UH to an eight to eight digits. 0:19:59.119 --> 0:20:03.119 It's like a like eight bits you could think of, um, 0:20:03.160 --> 0:20:07.160 So UH, it's not going to continue ad infinitum. There 0:20:07.160 --> 0:20:09.639 will come a point where the last bitcoins will essentially 0:20:09.680 --> 0:20:14.520 be released. Um, so you know you're not gonna end 0:20:14.560 --> 0:20:18.040 up with like a bitcoin like point zero zero zero 0:20:18.119 --> 0:20:21.040 zero zero zero zero zero zero zero zero zero zero 0:20:21.119 --> 0:20:24.280 one bitcoins and then it gets divided again by another tenth. 0:20:25.000 --> 0:20:29.679 That's not gonna happen. Um. The it's to me, it's 0:20:29.720 --> 0:20:33.840 an interesting concept. I still, I still, frankly I grapple 0:20:33.920 --> 0:20:35.640 with us a bit, but it's probably from a more 0:20:35.680 --> 0:20:40.040 philosophical standpoint than technical. I understand technically, Um, well, there 0:20:40.119 --> 0:20:43.640 is quite a bit of technology uh involved in it 0:20:43.680 --> 0:20:49.000 to make it more sturdy, if you will, um, because 0:20:49.160 --> 0:20:54.040 while there is some anonymity involved, there is a signature 0:20:54.640 --> 0:20:58.119 that goes along with a bitcoin transaction. There's a public 0:20:58.160 --> 0:21:01.199 key and a private key encryption uh that's involved in this, 0:21:01.720 --> 0:21:06.520 and every single transaction is recorded yes um, and becomes 0:21:06.560 --> 0:21:09.320 part of a history of transactions that then is a 0:21:09.359 --> 0:21:13.160 part of every future transaction. Yeah. So it's not so 0:21:13.240 --> 0:21:17.760 much to track people's purchases and what they buy, so 0:21:18.200 --> 0:21:21.720 you know, you uh, there there are many companies that 0:21:21.720 --> 0:21:25.359 that take bitcoin, although most of them are I didn't 0:21:25.400 --> 0:21:28.480 see anybody who wasn't an independent company and taking bitcoin. 0:21:28.600 --> 0:21:33.080 I didn't read uh, every a list of every company. Yeah, 0:21:33.119 --> 0:21:34.800 and a lot of them have bit in the name, 0:21:34.840 --> 0:21:38.200 which suggests that their business was built around this currency 0:21:38.240 --> 0:21:40.000 in the first place. But I've see I saw that 0:21:40.040 --> 0:21:43.520 some web hosting providers use it. So let's say, uh, 0:21:43.560 --> 0:21:46.480 you know, you pay for a month's worth of web 0:21:46.520 --> 0:21:52.440 hosting with bitcoin. Um, people aren't going to go Jonathan 0:21:52.520 --> 0:21:55.840 just bought web hosting with you know. Basically what they 0:21:55.880 --> 0:21:59.040 want to do is verify the authenticity of it and 0:21:59.080 --> 0:22:01.560 make sure that no one is counterfeiting, right because if 0:22:01.560 --> 0:22:04.600 it's a if it's a digital if it's a digital currency, 0:22:04.680 --> 0:22:08.480 then what stops you from say any as you want 0:22:08.680 --> 0:22:12.200 or sending or trying to spend the same bitcoin twice? 0:22:12.800 --> 0:22:14.360 I mean, that's that's one of the big issues. That's 0:22:14.359 --> 0:22:17.560 why it has to be um uh, why it has 0:22:17.560 --> 0:22:20.520 to be recorded, so every single transaction has the history 0:22:20.520 --> 0:22:23.120 of all transactions as part of it. Now that that 0:22:23.880 --> 0:22:27.359 data gets kind of compressed and hashed, so it's not 0:22:27.920 --> 0:22:31.480 getting you know, it's not growing exponentially with every single purchase. 0:22:31.920 --> 0:22:36.640 But the the idea here is that, uh, it will 0:22:36.720 --> 0:22:40.520 prevent people from trying to spend the same currency multiple 0:22:40.520 --> 0:22:42.959 times just because it's in digital format, and that's an 0:22:42.960 --> 0:22:46.160 important element. I mean, it's um. There are other problems 0:22:46.160 --> 0:22:49.160 that have popped up around bitcoin. For example, a lot 0:22:49.200 --> 0:22:52.560 of vendors now will no longer um or a lot 0:22:52.600 --> 0:22:56.080 of a lot of bitcoin traders will now no longer 0:22:56.200 --> 0:23:01.240 make payments to PayPal accounts in return for bitcoins because 0:23:01.920 --> 0:23:05.879 UM or well no longer no longer accept PayPal accounts 0:23:05.880 --> 0:23:07.680 and return for bitcoins. So let's say I'm a bitcoin 0:23:07.720 --> 0:23:10.160 trader and I've got all these bitcoins and someone comes 0:23:10.160 --> 0:23:13.879 to me and they say, I want to purchase some bitcoins. Uh, 0:23:14.119 --> 0:23:17.560 I want twenty bitcoins, and I wanted at the trading 0:23:17.640 --> 0:23:20.320 rate that is going right now, which is the thirteen 0:23:20.359 --> 0:23:24.600 dollars American or whatever. Um, let's make this transaction happen 0:23:24.600 --> 0:23:27.120 and I'll pay you through PayPal. Well, the problem that's 0:23:27.160 --> 0:23:30.600 been coming up is that these these vendors will sell 0:23:30.640 --> 0:23:33.960 the bitcoins and will the transaction will complete, and then 0:23:34.400 --> 0:23:39.480 some unscrupulous people would then contact PayPal and complain stating 0:23:39.520 --> 0:23:43.160 that they made a purchase but didn't receive anything in return. 0:23:43.240 --> 0:23:45.840 And bitcoin, you know, it's this digital stuff. It's just bits, 0:23:45.920 --> 0:23:49.919 it's information, it's it's not a physical thing. And paypals 0:23:50.000 --> 0:23:52.880 response maybe to stop the payment on that, and then 0:23:52.920 --> 0:23:55.639 the person may may close out their PayPal account and 0:23:55.720 --> 0:23:58.960 essentially what they've done is stolen some bitcoins. So a 0:23:59.000 --> 0:24:03.520 lot of the traders, the big traders for bitcoins, won't 0:24:03.520 --> 0:24:07.439 accept PayPal payments anymore, all right, because it's just you know, 0:24:07.520 --> 0:24:11.280 it's it's too risky. So again we're you getting into 0:24:11.359 --> 0:24:14.800