Speaker 1: Brought to you by the reinvented two thousand twelve camera.
Speaker 1: It's ready. Are you get in touch with technology? With
Speaker 1: tech Stuff from how stuff works dot com. Hello again, everyone,
Speaker 1: welcome to tech stuff. My name is Chris Polette and
Speaker 1: I am an editor of how stuff works dot Com.
Speaker 1: Sitting across from me as always, his senior writer, Jonathan Strickland, pennies, nickels, damps,
Speaker 1: quarters dollar bills, hundred dollar bills. Uh, that's a really
Speaker 1: obscure song. If you guys, If you guys recognize that,
Speaker 1: let me know. And my roommate from college does not
Speaker 1: count because he's the one who introduced me to it. Yeah, this,
Speaker 1: this podcast is not going to be about the Benjamin's No,
Speaker 1: but it's about currency. It's about a digital currency called bitcoin. Yes,
Speaker 1: So all the all of all of you who have
Speaker 1: been asking us about bitcome bitcoin? Is it? Yes? So
Speaker 1: we have an article on the site about how currency works,
Speaker 1: which is useful to to kind of get a background
Speaker 1: on this. Keep in mind, your currency is sort of
Speaker 1: based upon just a mutual agreement among everybody that a
Speaker 1: representation of wealth actually is worth something. Yes, because you know,
Speaker 1: we we all recognize that there are certain products out
Speaker 1: there that we either need or want, and we recognize
Speaker 1: there are also services that we need or want, and
Speaker 1: there's stuff that we can provide, and that by providing
Speaker 1: some things, we can get other things and that way
Speaker 1: we all can live. Well. Currency is just a method
Speaker 1: of exchange so that you can get those services or
Speaker 1: products without having to do a direct exchange, because that
Speaker 1: gets messy. The Barner system is not really easy to navigate. Yes,
Speaker 1: I can't think of a thing that I could really do.
Speaker 1: Uh well, maybe a couple of small things I could
Speaker 1: do to convince a computer manufacturer to give me a
Speaker 1: new computers an Xbox. Yeah, um, so it's it's it
Speaker 1: can be very useful thing. Although um at one time,
Speaker 1: for example, the the United States UM currency system was
Speaker 1: based on the gold standard. You could take a dollar
Speaker 1: bill uh two the the exchange and get a dollar's
Speaker 1: worth of gold, um and you would need a microscope
Speaker 1: to see it. But um, that was the way it
Speaker 1: used to work, and that is not the way it
Speaker 1: works anymore. UM. That has been changed for several decades.
Speaker 1: So now at this point, of course, you could have
Speaker 1: always argued that the value of gold was arbitrary anyway,
Speaker 1: so really it was a piece of paper representing value
Speaker 1: of a mineral that represented value. Yes, So in other words,
Speaker 1: of ruining the magic, Jonathan, I'm just saying that eventually
Speaker 1: you get to the point where currency is based upon
Speaker 1: a shared delusion among everybody, and that if we all
Speaker 1: sat there and said, hey, wait a minute, it would
Speaker 1: all fall apart. Yeah, that's that's kind of the thing.
Speaker 1: It's it's a medium of exchange. And uh, for the
Speaker 1: most part, um, we you know, the people of Earth
Speaker 1: are are doing business with money that is backed by
Speaker 1: a government of some type, or in some cases, you know,
Speaker 1: a coalition of governments, like for example, the Euro, the
Speaker 1: Euro exactly. So yeah, yeah, usually you've got some sort
Speaker 1: of of state backed currency. Yeah. And um uh, you know,
Speaker 1: back in the old, old old days, currency of course
Speaker 1: was made out of precious metals, which again were precious
Speaker 1: because they were pretty and they were hard to get
Speaker 1: those those scarcity and and uh and pretty are two
Speaker 1: of the things that really fell into the old currency system. Yeah.
Speaker 1: And of course at one time salt was a medium
Speaker 1: of exchange. Sure, that's where we get salary exactly, That's
Speaker 1: what I get my salary in. I don't know about
Speaker 1: you big exactly salt like delicious explains that that big
Speaker 1: salt crystal at your desk not just a great barbecue joint. Um.
Speaker 1: So oh yeah. So currency is all based upon various
Speaker 1: people agreeing that whatever the medium of exchanges actually has value. Right,
Speaker 1: So that's going to lead us in Just a side note,
Speaker 1: have you ever heard of Joshua Abraham Norton? That name
Speaker 1: does sound familiar, but I don't. I can't play. Also
Speaker 1: known as Imperial Majesty Emperor Norton the first He's an eccentric.
Speaker 1: That's one way of saying it. Uh crazy is another way.
Speaker 1: He essentially declared himself an emperor of the United States
Speaker 1: while living in San Francisco. Okay, that's why it sounds. Yeah.
Speaker 1: He one of the things he did, he was he
Speaker 1: was kind of this eccentric, celebrated guy living in the
Speaker 1: nineteenth century San Francisco. One of the things he did
Speaker 1: was he printed his own money. He printed his own money,
Speaker 1: and uh, local merchants would some of them would accept it.
Speaker 1: They would accept his local thing. You know, they thought
Speaker 1: he was an interesting character, and they would accept his
Speaker 1: money and and sell him goods with his money, which
Speaker 1: meant that his currency, at least on a micro level,
Speaker 1: was valid because two parties, at least two parties agreed
Speaker 1: that that particular method of currency had value. That just
Speaker 1: shows you how tenuous the concept of currency really is. Now,
Speaker 1: let's move on to bitcoin. I just had to give
Speaker 1: Emperor Norton a shout out. I figured you, the next
Speaker 1: uh person of interest in this discussion would probably be
Speaker 1: Satoshi Nakamoto. Yes, who is the inventor of bitcoin. Now,
Speaker 1: bitcoin is a digital currency. It's not the only digital
Speaker 1: currency out there. There are a lot of digital currencies
Speaker 1: that are connected to various games or virtual worlds, and um,
Speaker 1: I mean you could even argue things like, uh, like
Speaker 1: Xbox points on the Xbox Life marketplace are kind of
Speaker 1: a digital currency. Um, Facebook credits, Facebook credits. Yeah, there
Speaker 1: are other versions out there, although as Lendon dollars was
Speaker 1: the one I was mainly thinking of, that's of course
Speaker 1: Second Life Lendon dollars. Yeah. So there are other digital
Speaker 1: currencies out there, but most of these tend to be
Speaker 1: very um uh contained, right, there's only there's only a tiny,
Speaker 1: little niche marketplace where you can you can spend this currency,
Speaker 1: and otherwise it has really not much value. Usually can't
Speaker 1: resell the the digital currency to get real quote unquote
Speaker 1: real money back. Yeah, I mean you can um. For example,
Speaker 1: with UH, if you have ten euros, you can uh,
Speaker 1: you know, have a service that your friend gives you say,
Speaker 1: you know, hey, yeah, I'll help you. I'll help you
Speaker 1: move your stuff from your old apartment to your new apartment.
Speaker 1: If you give me money for beer, okay, well here's
Speaker 1: you know, here's ten euros and for that person, then
Speaker 1: he can take that, you know, that ten year o
Speaker 1: note and go spend it at a store or get
Speaker 1: really good get really good beer because you're apparently in
Speaker 1: Europe and uh, the beer there's so much better than
Speaker 1: in America. Oh, people can write to Jonathan. Come on,
Speaker 1: everyone knows that why by European beers. I guess it's okay, UM,
Speaker 1: but yeah, I mean you can. You can use that
Speaker 1: in many places, or you could take it to a
Speaker 1: bank and exchange it for Japanese yen or in a
Speaker 1: American dollars or wherever. But if you buy um, uh,
Speaker 1: go to the department store and buy one of those
Speaker 1: Facebook credit cards cards with Facebook credits UM, and you
Speaker 1: enter that in your Facebook account. You can't get that
Speaker 1: back and go exchange it for Japanese yen. Once it's
Speaker 1: in Facebook, it's in that world, and that's all it is, exactly. Yeah.
Speaker 1: And um also there tends another element that tends to
Speaker 1: happen with a lot of these currency exchanges. There's a
Speaker 1: transaction fee. There may be transaction several transaction fees, depending
Speaker 1: upon the nature of the transaction. If you're purchasing something,
Speaker 1: there may be a transaction fee charged by the financial
Speaker 1: institution that is overseeing the transaction, assuming that you're not
Speaker 1: using cash. Right, let's take cash all the elements, all
Speaker 1: the out of this, because digital currency kind of falls
Speaker 1: between cash and credit. It's it's it's in this world
Speaker 1: that's sort of a vague defined world right in the middle. Um,
Speaker 1: So cash is there are a lot of different benefits
Speaker 1: to cash. Cash means that, depending on the nature of
Speaker 1: the transaction, you may be not paying taxes on something, right, right,
Speaker 1: I mean that's why a lot of people like to
Speaker 1: do cash transactions. It means that there's no, uh, there's
Speaker 1: not necessarily a paper trail. It allows you to make
Speaker 1: a transaction between two individuals without a third party intervening. Um.
Speaker 1: When you're using credit, then that it's different because there's
Speaker 1: now a trail there and there may be you know,
Speaker 1: you may have to have taxes come into play so
Speaker 1: that you cannot break the law. Plus, you know, with
Speaker 1: a point of sale terminals, there's no risk of skimming
Speaker 1: your credit card or debit card number if you are
Speaker 1: paying with cash, so the risk of un and also
Speaker 1: it's more anonymous. So two people meet with cash, you don't,
Speaker 1: you know, cash is an agreed upon currency. It's it's
Speaker 1: that's fine, You've you've purchased whatever it was you're purchasing,
Speaker 1: whether it's a service or a good, and it is not. Uh. Again,
Speaker 1: there's no trail leading to that transaction. Now with credits
Speaker 1: much more UH, it's much different. The anonymity factor has
Speaker 1: taken out of it. Digital coins are kind of Bitcoin
Speaker 1: is kind of in between it. There's all there's some
Speaker 1: anonymity built in UM and there's uh an ability to
Speaker 1: do a person to person transactions so that there's not
Speaker 1: a third party involved in this. So again you can
Speaker 1: purchase stuff essentially tax free, depending on the vendor that
Speaker 1: you're going to or the person you know, whomever it
Speaker 1: is that has agreed to sell you the service or product.
Speaker 1: Um and it also, unfortunately, bitcoin has also been used
Speaker 1: and this is kind of one of the more sensationalized
Speaker 1: elements of bitcoin. It's been used in illegal uh transactions
Speaker 1: for example, um uh purchasing drugs. That's been in the
Speaker 1: news recently where people have started to adopt the bitcoin
Speaker 1: currency in order to purchase illegal substances. And the reason
Speaker 1: for it is because there's no it's not going through
Speaker 1: any official channels. You can even purchase stuff across country
Speaker 1: lines because again, it's a digital currency, it's not a
Speaker 1: physical currency. So if let's say your supplier is in
Speaker 1: another country, you can purchase something through bitcoins on an
Speaker 1: agreed upon amount and then uh that person gets the bitcoins,
Speaker 1: they can then transfer those bitcoins either into it you know,
Speaker 1: they can either use those bitcoins by something else that
Speaker 1: they want, or they can try to sell the bitcoins
Speaker 1: to someone else where can agreed upon amount of money,
Speaker 1: which is kind of interesting. I mean, the the finding
Speaker 1: out how much bitcoins are trading for, as in in
Speaker 1: relation to established currency these is uh kind of an
Speaker 1: interesting situation. That's the part that I have the hardest
Speaker 1: uh time understanding, Like how do we determine how much
Speaker 1: a bitcoin is worth to us in our in dollars
Speaker 1: for example, or euros. Right. Well, Um, from what I've read,
Speaker 1: the value of bitcoin right now is subject to a
Speaker 1: lot of speculation. UM. As in speculators, Yeah, as in
Speaker 1: people who are investing in bitcoin because they believe that
Speaker 1: this is something that's going to really take off and
Speaker 1: and be successful, and therefore they can make a lot
Speaker 1: of money if they get in on the ground floor. Yeah,
Speaker 1: sort of like sort of like the stock market is
Speaker 1: in a lot of cases like UM, you'll see that
Speaker 1: with initial public offerings of stock, UM, people will uh
Speaker 1: an I p O will take off immediately, especially for
Speaker 1: a lot of the tech companies. If you watch that,
Speaker 1: UM people say, oh, well you know X y Z Industries,
Speaker 1: they make that cool software. Everybody's gonna want that. So
Speaker 1: I think the stock is going to go up. I'm
Speaker 1: gonna buy as soon as it comes out, because it
Speaker 1: will never be lower, it will only go up. Um.
Speaker 1: And so that's sort of what we're talking about now. UM.
Speaker 1: The weird thing about bitcoin is that it's made by you,
Speaker 1: or could be made by you. Yeah, it's um. You
Speaker 1: actually have to mine bitcoins, but mining in this sense,
Speaker 1: it's it's kind of interesting. What what what bitcoin does
Speaker 1: is it kind of emulates what an actual mining operation
Speaker 1: would be like, in the sense that let's say that
Speaker 1: you are prospector for gold back in the old gold rush,
Speaker 1: and you find a vein of gold and you start
Speaker 1: you start mining that gold for all it's worth. Well,
Speaker 1: of course, the more you mind, the less gold there is, right,
Speaker 1: And then you eventually get to a point where you're
Speaker 1: having to put forth a lot of effort to get
Speaker 1: a little amount of gold because you've already mined the
Speaker 1: most of the gold out. And then you start to
Speaker 1: have to make to say, jians of is the effort
Speaker 1: I'm putting forward worth the amount of gold that I'm
Speaker 1: getting back? Well, the the bitcoin system emulates that, and
Speaker 1: it's such an interesting process. So essentially what's going on
Speaker 1: is that it's a peer to peer network. Now that
Speaker 1: means that in order to be a part of mining bitcoins,
Speaker 1: you join this this network of other users, and your
Speaker 1: computer ends up making connections with other computers trying to
Speaker 1: solve a hash problem. The hash problem is when you
Speaker 1: take uh at least two figures and you make another
Speaker 1: figure from them, and then you have to UH, you
Speaker 1: have to to solve some problem related to that new figure.
Speaker 1: And in this case, UM, the way bitcoins works is
Speaker 1: that there are fifty bitcoins released at at specific intervals,
Speaker 1: and if your computer solves the hash of that particular
Speaker 1: for that particular group, you get the fifty coins. Okay, Now,
Speaker 1: early early on in this, remember it was launched in
Speaker 1: two thousand nine, early on in this it was relatively
Speaker 1: easy to solve the hash. And by solving the hash,
Speaker 1: this is the same sort of process that a lot
Speaker 1: of UH networked computer like grid computing systems use, where
Speaker 1: you connect in our our folding proteins or something along
Speaker 1: those lines, or or back in the old set program,
Speaker 1: you would UM, I hate to say the old SETI program,
Speaker 1: but would have no more funding for it, but you
Speaker 1: would have your computer analyze radio signals for any potential
Speaker 1: actual like UM intended radio signal as opposed to just
Speaker 1: random noise. UM. Your computer would work on this problem
Speaker 1: and then send results back to a master system which
Speaker 1: would corelate all that and then analyze it. Well, that's
Speaker 1: sort of the same thing that's going on with bitcoin,
Speaker 1: except instead of trying to solve a an actual problem
Speaker 1: problem what you're doing is you're trying to mind these coins,
Speaker 1: and in the early days you didn't have to have
Speaker 1: much processing power to do it. But as more and
Speaker 1: more processors joined the network, more and more nodes in
Speaker 1: this peer to peer network joined, than the problem would
Speaker 1: get progressively more complicated, to the point now where um, actually,
Speaker 1: if you go to the bitcoin website and you read
Speaker 1: about mining, it says that most bitcoin users don't mind
Speaker 1: at all because it's very competitive, and you've got people
Speaker 1: who are building machines computers designed specifically to be bitcoin miners,
Speaker 1: and they're using they're using powerful processors including uh and
Speaker 1: not not CPUs, they're using graphics cards processors yeah, GPUs,
Speaker 1: because they're faster to solve the kind of time type
Speaker 1: of problems that are that Bitcoin depends upon for mining.
Speaker 1: So the odds of you solving the problem of or
Speaker 1: your computer, I should really say, your processor solving the
Speaker 1: problem of that particular batch offty bitcoins is very low,
Speaker 1: and it gets lower every time someone joins on with
Speaker 1: an even more powerful machine. And again this is where
Speaker 1: we get into that that analogy of mining for gold.
Speaker 1: Eventually you're talking about spending so much money building and
Speaker 1: maintaining a machine, including things like paying for electricity that
Speaker 1: it doesn't make sense to keep going it. You know,
Speaker 1: you're spending more money than you would earn through mining bitcoins.
Speaker 1: So it's a kind of interesting situation. And also the
Speaker 1: the the bitcoins themselves will decrease over time. There's a
Speaker 1: finite number. I think it's twenty one million bitcoins are allowed. Ever, yeah,
Speaker 1: that's a that's a basic law of UM of the markets.
Speaker 1: I mean, some people, um, you know, when when you
Speaker 1: don't really understand how this works, will say, well, I
Speaker 1: heard that the you know work short twenty million dollars
Speaker 1: or whatever currency. It's like, why don't they just print more? Well,
Speaker 1: if you if you make too many of a currency,
Speaker 1: or you you have too many UM certificates of stock
Speaker 1: for your company, at some point it begins to devalue
Speaker 1: the institution that is represented you know, represented by that. So, um,
Speaker 1: the more money you print, the less the money is worth.
Speaker 1: The more stock certificates you release to two shareholders, the
Speaker 1: last the company is worth. So it's it's essentially the
Speaker 1: key takeaway there is currency and wealth are two different things. Yes,
Speaker 1: just because you have more currency does not mean you
Speaker 1: have more wealth because the wealth is dependent upon the
Speaker 1: perceived value of that currency, and the more currency there is,
Speaker 1: the less value people will perceive in it, right, which
Speaker 1: is you know, that's why you you can see historic
Speaker 1: issue problems with with massive depressions breaking out across the
Speaker 1: globe in various air is because the currency would get
Speaker 1: flooded and then you would have, uh, you know, you
Speaker 1: would have a brief moment where everyone appears to be wealthy,
Speaker 1: and then costs would adjust to the amount of currency
Speaker 1: that was in the market, and then the currency would
Speaker 1: be practically worthless. Um. Actually that maybe what happened to
Speaker 1: Spain after the the discovery of the New World and
Speaker 1: the expansion into into really exploiting the New World and
Speaker 1: pulling the the the wealth back over to Europe. People ask, well,
Speaker 1: what happened to all that gold that Spain was mining
Speaker 1: and shipping back to uh, Spain, you know, front the
Speaker 1: New World? What happened to it? Well, a lot of
Speaker 1: what happened to it was it some of it sunk,
Speaker 1: some of it was stolen, but a lot of it
Speaker 1: made its its way back to Spain. And people said, well,
Speaker 1: then Spain later on suffered some really some real economic hardship. Well,
Speaker 1: you get all this influx of gold in there, and
Speaker 1: it devalues the gold. You know, suddenly, yes, you've got
Speaker 1: all this precious material, but it's no longer as precious
Speaker 1: because there's more of it that there's that scarcity problem.
Speaker 1: So by capping bitcoins at twenty one million, there's already
Speaker 1: a finite limit. You're not gonna make any more after that. Um,
Speaker 1: And as more blocks are are solved, the the problems
Speaker 1: are contained in blocks. As more of these problems are solved,
Speaker 1: uh than fewer coins will be released over time. So
Speaker 1: remember I said that they be released in fifty coin batches. Well,
Speaker 1: after a certain number of blocks are solved, that gets
Speaker 1: reduced to twenty five coins, and then after that so
Speaker 1: it's half the amount, right, the same sort of thing.
Speaker 1: After each time it gets closer to the UH than
Speaker 1: the end, it's going to have again and half again
Speaker 1: and half again. Now it's not infinitely divisible. Bitcoins can
Speaker 1: be divisible down to UH to an eight to eight digits.
Speaker 1: It's like a like eight bits you could think of, um,
Speaker 1: So UH, it's not going to continue ad infinitum. There
Speaker 1: will come a point where the last bitcoins will essentially
Speaker 1: be released. Um, so you know you're not gonna end
Speaker 1: up with like a bitcoin like point zero zero zero
Speaker 1: zero zero zero zero zero zero zero zero zero zero
Speaker 1: one bitcoins and then it gets divided again by another tenth.
Speaker 1: That's not gonna happen. Um. The it's to me, it's
Speaker 1: an interesting concept. I still, I still, frankly I grapple
Speaker 1: with us a bit, but it's probably from a more
Speaker 1: philosophical standpoint than technical. I understand technically, Um, well, there
Speaker 1: is quite a bit of technology uh involved in it
Speaker 1: to make it more sturdy, if you will, um, because
Speaker 1: while there is some anonymity involved, there is a signature
Speaker 1: that goes along with a bitcoin transaction. There's a public
Speaker 1: key and a private key encryption uh that's involved in this,
Speaker 1: and every single transaction is recorded yes um, and becomes
Speaker 1: part of a history of transactions that then is a
Speaker 1: part of every future transaction. Yeah. So it's not so
Speaker 1: much to track people's purchases and what they buy, so
Speaker 1: you know, you uh, there there are many companies that
Speaker 1: that take bitcoin, although most of them are I didn't
Speaker 1: see anybody who wasn't an independent company and taking bitcoin.
Speaker 1: I didn't read uh, every a list of every company. Yeah,
Speaker 1: and a lot of them have bit in the name,
Speaker 1: which suggests that their business was built around this currency
Speaker 1: in the first place. But I've see I saw that
Speaker 1: some web hosting providers use it. So let's say, uh,
Speaker 1: you know, you pay for a month's worth of web
Speaker 1: hosting with bitcoin. Um, people aren't going to go Jonathan
Speaker 1: just bought web hosting with you know. Basically what they
Speaker 1: want to do is verify the authenticity of it and
Speaker 1: make sure that no one is counterfeiting, right because if
Speaker 1: it's a if it's a digital if it's a digital currency,
Speaker 1: then what stops you from say any as you want
Speaker 1: or sending or trying to spend the same bitcoin twice?
Speaker 1: I mean, that's that's one of the big issues. That's
Speaker 1: why it has to be um uh, why it has
Speaker 1: to be recorded, so every single transaction has the history
Speaker 1: of all transactions as part of it. Now that that
Speaker 1: data gets kind of compressed and hashed, so it's not
Speaker 1: getting you know, it's not growing exponentially with every single purchase.
Speaker 1: But the the idea here is that, uh, it will
Speaker 1: prevent people from trying to spend the same currency multiple
Speaker 1: times just because it's in digital format, and that's an
Speaker 1: important element. I mean, it's um. There are other problems
Speaker 1: that have popped up around bitcoin. For example, a lot
Speaker 1: of vendors now will no longer um or a lot
Speaker 1: of a lot of bitcoin traders will now no longer
Speaker 1: make payments to PayPal accounts in return for bitcoins because
Speaker 1: UM or well no longer no longer accept PayPal accounts
Speaker 1: and return for bitcoins. So let's say I'm a bitcoin
Speaker 1: trader and I've got all these bitcoins and someone comes
Speaker 1: to me and they say, I want to purchase some bitcoins. Uh,
Speaker 1: I want twenty bitcoins, and I wanted at the trading
Speaker 1: rate that is going right now, which is the thirteen
Speaker 1: dollars American or whatever. Um, let's make this transaction happen
Speaker 1: and I'll pay you through PayPal. Well, the problem that's
Speaker 1: been coming up is that these these vendors will sell
Speaker 1: the bitcoins and will the transaction will complete, and then
Speaker 1: some unscrupulous people would then contact PayPal and complain stating
Speaker 1: that they made a purchase but didn't receive anything in return.
Speaker 1: And bitcoin, you know, it's this digital stuff. It's just bits,
Speaker 1: it's information, it's it's not a physical thing. And paypals
Speaker 1: response maybe to stop the payment on that, and then
Speaker 1: the person may may close out their PayPal account and
Speaker 1: essentially what they've done is stolen some bitcoins. So a
Speaker 1: lot of the traders, the big traders for bitcoins, won't
Speaker 1: accept PayPal payments anymore, all right, because it's just you know,
Speaker 1: it's it's too risky. So again we're you getting into
Speaker 1: that level between the anonymity and freedom of cash and
Speaker 1: the um, the the the trappings that are all around
Speaker 1: using credit. Because of course, if you're using credit and
Speaker 1: not only are you being tracked, but you're also spending
Speaker 1: extra money just to purchase whatever it is you want.
Speaker 1: You read an article UM by John Evans a tech
Speaker 1: Crunch about bitcoin um and according to what he said,
Speaker 1: the the Electronic Frontier Foundation is now accepting donations using
Speaker 1: bitcoin UM and apparently they are. That organization is UM
Speaker 1: about basically freedom expression and UM, you know, protecting your
Speaker 1: personal rights online. And uh, from what I've read, the
Speaker 1: organization likes the idea of bitcoin because there isn't a
Speaker 1: government behind it UM. So you know, you're you're if
Speaker 1: you you can't have your assets frozen by a government
Speaker 1: because bitcoin isn't part of a government, um, which is
Speaker 1: an interesting thought. UM. On the other hand, if it's
Speaker 1: you know, there there's a flip side everything, and if
Speaker 1: it's being used to fund to legal activities or you know,
Speaker 1: a war machine, maybe that's not such a good thing.
Speaker 1: I don't know. It all depends on you know, ethics
Speaker 1: and legality are two different things. So let's say that
Speaker 1: you live in a country that is has a repressive
Speaker 1: government and there are specific things that are not allowed
Speaker 1: to be UM sold through normal means, which means that
Speaker 1: you know, you don't have to go to some sort
Speaker 1: of black market to buy something that in another country
Speaker 1: you could purchase legitimately with no problem. Right, then the
Speaker 1: bitcoin transaction may give an avenue for that person to
Speaker 1: purchase such a thing without it ever being seen by
Speaker 1: that government. And so you're talking about clandestine buying at
Speaker 1: that point, and you're kind of undermining a financial system.
Speaker 1: So some people who adopt bitcoin are doing it specifically
Speaker 1: because they see it as sort of the subversive way
Speaker 1: to undermine the status quo that uh that they feel
Speaker 1: is either corrupt or or inefficient or whatever, you know,
Speaker 1: whatever reason they have in their minds that says, I
Speaker 1: don't want to be a part of this system anymore.
Speaker 1: I think the system is broken. I want to use
Speaker 1: this other system that's not dependent upon a state. Um,
Speaker 1: you've got a lot of people interested in bitcoin for that.
Speaker 1: So you've got your your speculators who just who are
Speaker 1: looking at bitcoin is a way to make money. Some
Speaker 1: actually literally in this case, Um, although I guess I
Speaker 1: shouldn't say literally. The money is there, they're not making it,
Speaker 1: they're just uncovering it. Right. But then, um, you've got
Speaker 1: the people who are using it because they want access
Speaker 1: to things that they normally could not get through quote
Speaker 1: and quote legitimate means. And then you've got the people
Speaker 1: who just don't have any faith or trust in any institution,
Speaker 1: and so they want to avoid using those institutions as
Speaker 1: much as possible. Now, again, the whole value of bitcoin
Speaker 1: exists only so far as people agree that it exists.
Speaker 1: You know, why does bitcoin have a value because people
Speaker 1: agree that it has a value. If if vendors were
Speaker 1: not accepting bitcoins in return for goods and services, then
Speaker 1: that currency would be worthless. So there's nothing intrinsic about
Speaker 1: bitcoin that makes it a desirable, valuable thing except that
Speaker 1: we agree that it does, which blows my mind. But
Speaker 1: then so does currency. Currency blows my mind. I mean,
Speaker 1: any any time you get away from once you start
Speaker 1: moving away from the the demon demonstrable this has value
Speaker 1: to me because blah blah blah um. Then my brain
Speaker 1: starts to hurt. And also I start looking at my
Speaker 1: four oh one k and I think, I hope I've
Speaker 1: got enough chickens to get that Xbox sixty because you
Speaker 1: know what, BioShock is coming out soon, and I want
Speaker 1: to play that game. Ah well, you know it's it's
Speaker 1: just safe to say that the Xbox three sixty is
Speaker 1: a lot less messy than those chickens will be. You'll
Speaker 1: be happier, is made. The moral of the story is,
Speaker 1: don't count your bitcoins before their mind. All right, Well,
Speaker 1: do you have anything else to add about this after
Speaker 1: that joke? Okay? Well, this is a really fascinating subject,
Speaker 1: and there's there's plenty on the net, uh that you
Speaker 1: can read. You can read up on for a bitcoin,
Speaker 1: including things such as the actual mechanics of what goes
Speaker 1: into making it work, the the nature of the hash
Speaker 1: problem that computers have to try and solve in order
Speaker 1: to mind bitcoins, the type of rigs that people build
Speaker 1: to mind bitcoins, the various vendors out there, the whole
Speaker 1: political philosophy behind people who have adopted bitcoin. All of
Speaker 1: that stuff is out there on the web. It's a
Speaker 1: huge topic of discussion, and if you're interested interested, I
Speaker 1: do recommend checking out some more um information on that.
Speaker 1: And of course, like I said at the beginning of
Speaker 1: the show, we have how currency works at how stuff
Speaker 1: works dot com if you just want to get a
Speaker 1: good grounding of the basis of currency period, because I
Speaker 1: mean that you kind of need that in order to
Speaker 1: go beyond and started understanding that the working is a bitcoin. UM.
Speaker 1: If you guys have any other big topics you would
Speaker 1: like us to tackle, let us know. You can send
Speaker 1: us a message on Facebook or Twitter. Are handled. There
Speaker 1: is text stuff h s W or you can send
Speaker 1: us nan now and that addresses tech stuff at how
Speaker 1: stuff Works dot com and Chris and I will talk
Speaker 1: to you again really soon. Breaking news everyone, So um,
Speaker 1: we recorded this podcast if you weeks ago at the time,
Speaker 1: and I'm recording this update, and some stuff has happened
Speaker 1: with bitcoin that we really need to address. First of all,
Speaker 1: there was a hacking attempt a successful one against a
Speaker 1: currency exchange company that handled bitcoin operations called mount Cox,
Speaker 1: g o X and UH. It was not an attack
Speaker 1: directly against bitcoin, Bitcoin itself and the peer to peer network,
Speaker 1: and all of that remained secure, but through getting the
Speaker 1: the account information through this currency exchange company, the hackers
Speaker 1: were able to essentially, um well, steal about a hundred
Speaker 1: thousand bitcoins and then immediately start to sell them off,
Speaker 1: which caused the value of bitcoins to plummet. It was
Speaker 1: trading at around seventeen dollars a coin and dropped down
Speaker 1: to essentially nothing. Since then, the the value has stabilized.
Speaker 1: The company, the mount Cox has managed to h to
Speaker 1: freeze all the accounts, and at the recording of this
Speaker 1: up date, is trying to roll out the accounts again
Speaker 1: to users, requiring them to create a new strong password
Speaker 1: UM and is essentially refunding everyone the money that they
Speaker 1: would have lost UM but and also in that process.
Speaker 1: Shortly after the the attack, another big event happened. The
Speaker 1: Electronic Frontier Foundation the e f F, which had been
Speaker 1: accepting donations in bitcoin format, decided to drop that they
Speaker 1: are no longer accepting bitcoin donations. Now the reasons for
Speaker 1: doing so are not directly tied to the hacking attack,
Speaker 1: although the timing is very coincidental. Um. They're more tied
Speaker 1: to things like concerns about the legality of bitcoin in
Speaker 1: the sense that a lot of people are using or
Speaker 1: maybe I shouldn't say a lot of people. Some people
Speaker 1: are using bitcoins two create illegal transactions, whether that's to
Speaker 1: purchase illegal goods or services, or to try and circumvent
Speaker 1: taxation laws or other laws. That's beside the point. The
Speaker 1: point is that the e f F did not want
Speaker 1: it to look like they were endorsing a currency that
Speaker 1: might have questionable legality, and so they have backed away
Speaker 1: from that. Now, the e f F is all about
Speaker 1: protecting freedoms on the Internet, so they champion causes like
Speaker 1: net neutrality and privacy. So for them to back away
Speaker 1: from this currency, it's kind of a big deal, at
Speaker 1: least within the the Internet elite circles. Will this actually
Speaker 1: spell the end of bitcoin? I don't think so. I
Speaker 1: think that bitcoin has enough support from other parties where
Speaker 1: it's going to keep going. It might actually slow down
Speaker 1: adoption of bitcoin, so you may not see more vendors
Speaker 1: and and other providers popping on to accept bitcoins quickly.
Speaker 1: It might take a while, but it's important to remember
Speaker 1: again that this was not a direct attack against the
Speaker 1: service itself. It was an attack against one of the
Speaker 1: preliminary vendors um although it does once again illustrate the
Speaker 1: importance of computer security and how houlnerable things on the
Speaker 1: Internet can be to hackers. And as we all know,
Speaker 1: there are plenty of hackers out there from all different
Speaker 1: walks of life, including professional hackers to just script kiddies
Speaker 1: who are running some stuff that they found online. Anything
Speaker 1: that's gonna be online is gonna be prone to to attack.
Speaker 1: Whether or not it can stand up to those attacks
Speaker 1: as another matter entirely. So bottom line, do your research.
Speaker 1: Make sure that whatever it is you are investing in,
Speaker 1: whether it's bitcoin or some other property, has good security.
Speaker 1: And even in this case, when it wasn't bitcoin itself
Speaker 1: that was the problem, your investment might take a hit
Speaker 1: for a while, but if if we're all careful and
Speaker 1: we're all smart, then hopefully we rebound from that pretty quickly.
Speaker 1: So that's the update on the news, and by the
Speaker 1: time this goes live, there maybe even more developments. But
Speaker 1: I just thought we should address that, since otherwise the
Speaker 1: podcast would sound horribly out of date. This is Jonathan
Speaker 1: sy me Off. Be sure to check out our new
Speaker 1: video podcasts, Stuff from the Future. Join How Staff Work
Speaker 1: Staff as we explore the most promising and perplexing possibilities
Speaker 1: of tomorrow. The How Stuff Works iPhone app has a rise.
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