1 00:00:04,400 --> 00:00:07,800 Speaker 1: Welcome to tech Stuff, a production from I Heart Radio. 2 00:00:11,920 --> 00:00:14,600 Speaker 1: Pay there and welcome to tech Stuff. I'm your host, 3 00:00:14,800 --> 00:00:17,960 Speaker 1: Jonathan Strickland. I'm an executive producer with iHeart Radio. And 4 00:00:18,000 --> 00:00:20,680 Speaker 1: how the tech are you? As you can probably tell, 5 00:00:21,200 --> 00:00:24,160 Speaker 1: I'm still very much under the weather right now, and 6 00:00:24,480 --> 00:00:27,520 Speaker 1: as such I'm not quite in the great condition to 7 00:00:27,600 --> 00:00:30,240 Speaker 1: record a full episode, So instead I thought I would 8 00:00:30,240 --> 00:00:33,640 Speaker 1: bring you this episode from last year for it's called 9 00:00:33,640 --> 00:00:36,280 Speaker 1: proof of steak versus Proof of Work. It's all about 10 00:00:36,320 --> 00:00:42,040 Speaker 1: cryptocurrency and blockchain and different ways to verify transactions and 11 00:00:42,080 --> 00:00:45,159 Speaker 1: to add blocks to the chain. And I thought it 12 00:00:45,240 --> 00:00:47,760 Speaker 1: was a good thing to cover because one of the 13 00:00:47,760 --> 00:00:52,040 Speaker 1: big stories for crypto is that you know, ethereum making 14 00:00:52,080 --> 00:00:55,600 Speaker 1: this transition from proof of work to proof of steak, 15 00:00:56,360 --> 00:00:58,680 Speaker 1: but also just the fact that crypto in general has 16 00:00:58,720 --> 00:01:02,800 Speaker 1: had a very bad a year. I mean, you know, economically, 17 00:01:02,880 --> 00:01:06,360 Speaker 1: everyone's having a pretty bad year, and crypto is no exception. 18 00:01:06,480 --> 00:01:11,520 Speaker 1: It has had massive drops in value already multiple times. 19 00:01:11,520 --> 00:01:14,840 Speaker 1: It's always in the tech headlines. So I thought it 20 00:01:14,840 --> 00:01:16,960 Speaker 1: would be good to go back over this talk about 21 00:01:17,000 --> 00:01:21,480 Speaker 1: the two different approaches and UH and how they work, 22 00:01:21,680 --> 00:01:24,600 Speaker 1: and the pros and cons of each, so I hope 23 00:01:24,640 --> 00:01:30,360 Speaker 1: you enjoy proof of steake versus proof of work. One 24 00:01:30,400 --> 00:01:32,360 Speaker 1: thing that I have covered in the past on this 25 00:01:32,360 --> 00:01:37,440 Speaker 1: show is cryptocurrency and blockchain, but I pretty much always 26 00:01:37,440 --> 00:01:42,200 Speaker 1: talk about blockchain in terms of proof of work. Cryptocurrencies 27 00:01:42,240 --> 00:01:45,640 Speaker 1: and proof of work block chains and there are other types. 28 00:01:46,120 --> 00:01:48,280 Speaker 1: So I thought we could go over some of this 29 00:01:48,440 --> 00:01:50,840 Speaker 1: and talk about what all of this means and what 30 00:01:50,960 --> 00:01:53,920 Speaker 1: the differences are. And to start off, we need to 31 00:01:53,960 --> 00:01:56,480 Speaker 1: talk about proof of work. Even though I've done it before, 32 00:01:56,920 --> 00:02:00,360 Speaker 1: We've got to establish that first. So when you've heard 33 00:02:00,400 --> 00:02:04,600 Speaker 1: me talk about how bitcoin mining, you know, is really 34 00:02:05,920 --> 00:02:11,240 Speaker 1: equivalent to a computer solving a really hard math problem, 35 00:02:11,440 --> 00:02:14,679 Speaker 1: or that your computer is essentially making the first accurate 36 00:02:14,800 --> 00:02:18,400 Speaker 1: guests for a particularly large unknown number, you know, I've 37 00:02:18,440 --> 00:02:22,000 Speaker 1: I've often kind of made that analogy. Proof of work 38 00:02:23,000 --> 00:02:27,880 Speaker 1: is related to that. However, the actual concept of proof 39 00:02:27,960 --> 00:02:32,360 Speaker 1: of work predates that of blockchain, or at least of 40 00:02:32,400 --> 00:02:38,880 Speaker 1: blockchain in the term of cryptocurrencies. Blockchain itself also predates cryptocurrency. 41 00:02:39,240 --> 00:02:42,480 Speaker 1: In fact, one could argue that the brilliance of bitcoin 42 00:02:42,680 --> 00:02:48,440 Speaker 1: was bringing these different ideas together into a new format. 43 00:02:48,800 --> 00:02:52,800 Speaker 1: So the proof of work concept was first described in 44 00:02:52,800 --> 00:02:58,080 Speaker 1: a paper that Cynthia Dwark and Mony Nyor wrote back 45 00:02:58,160 --> 00:03:01,360 Speaker 1: in the early nineties. They did not coin the phrase 46 00:03:01,440 --> 00:03:05,040 Speaker 1: proof of work, but what they described effectively is proof 47 00:03:05,080 --> 00:03:08,400 Speaker 1: of work. They were looking to solve a different problem 48 00:03:08,400 --> 00:03:11,720 Speaker 1: from cryptocurrencies, you know, how do we create a system 49 00:03:11,720 --> 00:03:16,440 Speaker 1: of which people can mine a digital currency and validate transactions. 50 00:03:16,960 --> 00:03:21,280 Speaker 1: They were looking at ways to discourage spam email. Their 51 00:03:21,320 --> 00:03:25,960 Speaker 1: paper is titled Pricing via Processing or Combating junk Mail. 52 00:03:26,440 --> 00:03:31,480 Speaker 1: So one of the reasons that spam even exists is 53 00:03:31,520 --> 00:03:34,360 Speaker 1: that it doesn't cost very much to send it out 54 00:03:34,760 --> 00:03:38,240 Speaker 1: at a massive scale. If you had to hire people 55 00:03:38,520 --> 00:03:42,560 Speaker 1: to manually type out spam messages or even just fill 56 00:03:42,640 --> 00:03:46,640 Speaker 1: in the address bar in the email, that would be 57 00:03:46,760 --> 00:03:50,400 Speaker 1: cost prohibitive because the return would be way too low. 58 00:03:51,160 --> 00:03:54,240 Speaker 1: It's actually kind of hard to cite statistics on this 59 00:03:54,360 --> 00:03:56,640 Speaker 1: because there are a lot of different metrics that are 60 00:03:56,720 --> 00:03:59,640 Speaker 1: used in a lot of different time periods we can 61 00:03:59,680 --> 00:04:03,880 Speaker 1: look at. But generally speaking, the response rate on spam, 62 00:04:03,920 --> 00:04:07,560 Speaker 1: that is the percentage of people who actually not only 63 00:04:07,640 --> 00:04:10,000 Speaker 1: open up a spam message, but they act on it 64 00:04:10,080 --> 00:04:14,640 Speaker 1: in some way. That response rate is abysmally low. According 65 00:04:14,720 --> 00:04:17,479 Speaker 1: to a study from the University of California, Berkeley, and 66 00:04:17,680 --> 00:04:20,159 Speaker 1: you see San Diego. Back in two thousand and eight, 67 00:04:20,400 --> 00:04:26,040 Speaker 1: only one in twelve point five million messages gets a response. 68 00:04:27,480 --> 00:04:31,760 Speaker 1: That's way low. Right now, I'm not sure if the 69 00:04:31,839 --> 00:04:34,720 Speaker 1: rate was much higher or if it was even lower 70 00:04:35,040 --> 00:04:38,520 Speaker 1: back in the early nineties when the researchers were working 71 00:04:38,680 --> 00:04:43,159 Speaker 1: on this concept to discourage spam. But when you've got 72 00:04:43,200 --> 00:04:46,080 Speaker 1: a success rate that is that small, the question arises, 73 00:04:46,440 --> 00:04:49,520 Speaker 1: how the heck can it be worthwhile? I mean, how 74 00:04:49,560 --> 00:04:53,120 Speaker 1: can it be worth the time and effort of operating 75 00:04:53,160 --> 00:04:56,159 Speaker 1: a business that sends out spam emails if you have 76 00:04:56,160 --> 00:04:59,799 Speaker 1: a success rate that is that low. Well, the secret 77 00:05:00,160 --> 00:05:04,120 Speaker 1: is to operate on an enormous scale. So, yeah, you're 78 00:05:04,160 --> 00:05:05,880 Speaker 1: only getting one hit out of twelve and a half 79 00:05:05,880 --> 00:05:09,760 Speaker 1: million people, but you're sending out emails to hundreds of 80 00:05:09,839 --> 00:05:12,520 Speaker 1: millions of people. You also have to have a very 81 00:05:12,560 --> 00:05:15,240 Speaker 1: low cost of operation. You know, it can't cost much 82 00:05:15,279 --> 00:05:18,440 Speaker 1: to actually do your business, and you have to have 83 00:05:18,600 --> 00:05:22,560 Speaker 1: a pretty enormous return. When you do have a success, 84 00:05:22,560 --> 00:05:27,200 Speaker 1: like when you get a hit, it's significant, and preferably 85 00:05:27,200 --> 00:05:30,440 Speaker 1: you have all of these at the same time. Keeping 86 00:05:30,480 --> 00:05:33,560 Speaker 1: costs low is a huge part of this with database 87 00:05:33,720 --> 00:05:39,159 Speaker 1: is full of email addresses, automated systems that use boilerplate copy, 88 00:05:39,560 --> 00:05:43,320 Speaker 1: and you know, an automated Robocolors style email program that 89 00:05:43,360 --> 00:05:46,320 Speaker 1: can plug addresses in and and attach it to this 90 00:05:46,400 --> 00:05:51,120 Speaker 1: boiler plate. You can really churn those suckers out. If 91 00:05:51,120 --> 00:05:54,080 Speaker 1: you get a bit over zealous, then you might make 92 00:05:54,279 --> 00:05:57,960 Speaker 1: authorities upset and they might come at you and want 93 00:05:58,040 --> 00:06:00,800 Speaker 1: you to answer some questions. That can be a problem. 94 00:06:00,800 --> 00:06:04,240 Speaker 1: We've seen that happen where spam operations got shut down 95 00:06:04,279 --> 00:06:07,320 Speaker 1: because you know, local politicians got fed up with it 96 00:06:07,400 --> 00:06:10,960 Speaker 1: and started looking into it. But you know, you can 97 00:06:11,160 --> 00:06:15,440 Speaker 1: make a profit working this way. You just again, you 98 00:06:15,520 --> 00:06:19,599 Speaker 1: have to be brutal with cost control in order to 99 00:06:19,640 --> 00:06:22,960 Speaker 1: make this work at scale. So the researchers wanted to 100 00:06:23,000 --> 00:06:25,880 Speaker 1: find ways to make the cost of operation go up. 101 00:06:26,440 --> 00:06:29,440 Speaker 1: Even if it only went up bild tiny little bit, 102 00:06:29,680 --> 00:06:32,120 Speaker 1: that could be enough to wipe out the return on 103 00:06:32,240 --> 00:06:37,520 Speaker 1: investment for spam operators and they would likely abandon the practice. 104 00:06:38,000 --> 00:06:40,279 Speaker 1: If there's no money to be made, then there's no 105 00:06:40,360 --> 00:06:43,880 Speaker 1: reason to send out spam. Right. If you could actually 106 00:06:43,920 --> 00:06:47,000 Speaker 1: make it expensive enough, then it would cost more money 107 00:06:47,040 --> 00:06:50,720 Speaker 1: to send out spam. Then you would recoup whenever you 108 00:06:50,839 --> 00:06:55,320 Speaker 1: got those rare successful responses, and that would definitely bring 109 00:06:55,400 --> 00:06:58,360 Speaker 1: the practice to an end. So let's say you're looking 110 00:06:58,400 --> 00:07:00,640 Speaker 1: at folks who are sending spam out and you're trying 111 00:07:00,640 --> 00:07:03,000 Speaker 1: to discourage them. You're trying to find a way so 112 00:07:03,040 --> 00:07:06,880 Speaker 1: that the spammers give up on what they're doing. Now, 113 00:07:06,880 --> 00:07:10,320 Speaker 1: if you could just put a price on sending an email, 114 00:07:11,240 --> 00:07:13,640 Speaker 1: that would probably do it right. There is a price 115 00:07:13,680 --> 00:07:19,800 Speaker 1: on sending email because operating a computational device has energy requirements, 116 00:07:20,040 --> 00:07:21,640 Speaker 1: and that means you have to pay an energy bill 117 00:07:21,680 --> 00:07:24,160 Speaker 1: at some point. But you want that price to be 118 00:07:24,200 --> 00:07:26,640 Speaker 1: even higher. You want to just attach it straight to 119 00:07:27,000 --> 00:07:31,720 Speaker 1: an email specifically, not just operating a computer. So let's 120 00:07:31,760 --> 00:07:34,720 Speaker 1: say that you decide that all emails will cost a 121 00:07:34,840 --> 00:07:38,440 Speaker 1: fraction of assent to spend to to send one. So 122 00:07:38,880 --> 00:07:41,480 Speaker 1: if you're gonna send an email, you're gonna get charged, 123 00:07:41,960 --> 00:07:45,600 Speaker 1: you know, a fraction of one penny for normal folks 124 00:07:45,640 --> 00:07:48,160 Speaker 1: just sending on emails. It would be such a small 125 00:07:48,240 --> 00:07:51,240 Speaker 1: charge that you probably wouldn't notice. I mean, you wouldn't 126 00:07:51,280 --> 00:07:54,520 Speaker 1: be happy about it, but it's not like it would 127 00:07:54,560 --> 00:07:56,880 Speaker 1: amount too much. If you're sending out maybe ten emails 128 00:07:56,880 --> 00:07:59,760 Speaker 1: a day. Maybe you're getting close to spending half of 129 00:08:00,040 --> 00:08:03,480 Speaker 1: any That would not be a big deal, right, But 130 00:08:03,560 --> 00:08:06,480 Speaker 1: for organizations they are trying to blast out hundreds of 131 00:08:06,520 --> 00:08:11,560 Speaker 1: millions of messages, it quickly becomes cost prohibitive. But this 132 00:08:11,720 --> 00:08:15,280 Speaker 1: approach comes with all sorts of problems because normal folks 133 00:08:15,440 --> 00:08:17,760 Speaker 1: wouldn't be thrilled at having to pay even a fraction 134 00:08:17,760 --> 00:08:20,360 Speaker 1: of a cent to send email. Like, even if you 135 00:08:20,440 --> 00:08:23,960 Speaker 1: framed it that way, people would object. They'd say, why 136 00:08:24,040 --> 00:08:28,840 Speaker 1: are you making it cost me anything to send something electronically? 137 00:08:28,840 --> 00:08:32,880 Speaker 1: There are no physical components to to be handled in this. 138 00:08:33,520 --> 00:08:35,960 Speaker 1: Plus you'd have to set up some sort of payment 139 00:08:36,000 --> 00:08:38,400 Speaker 1: system in the first place, And and whom are you 140 00:08:38,480 --> 00:08:42,920 Speaker 1: paying to whom does the money go? This This makes 141 00:08:42,960 --> 00:08:46,640 Speaker 1: it a difficult and thus unworkable solution. So the authors 142 00:08:46,679 --> 00:08:50,480 Speaker 1: of the paper suggested an alternative. Instead of charging money 143 00:08:50,559 --> 00:08:54,959 Speaker 1: outright to send an email, why not build into email 144 00:08:55,040 --> 00:08:59,840 Speaker 1: systems a processing requirement, as in a computer process or requirement. 145 00:09:00,200 --> 00:09:03,679 Speaker 1: Time someone wants to send an email, their computer must 146 00:09:03,800 --> 00:09:07,800 Speaker 1: first solve a mathematical problem. Uh. And in order to 147 00:09:07,800 --> 00:09:12,439 Speaker 1: solve a mathematical problem, the computer must expend resources. It's 148 00:09:12,440 --> 00:09:16,079 Speaker 1: got to send, spend some of its processing capability on 149 00:09:16,400 --> 00:09:19,960 Speaker 1: solving this problem and also some of its time. The 150 00:09:19,960 --> 00:09:24,559 Speaker 1: difficulty of the problem would require some amount of computational 151 00:09:24,559 --> 00:09:28,320 Speaker 1: output that's equivalent to a fraction of assent. In other words, 152 00:09:28,760 --> 00:09:33,560 Speaker 1: you technically you're still charging folks to use email, but 153 00:09:33,679 --> 00:09:38,480 Speaker 1: the cost is in effort and time, not directly in money, 154 00:09:38,960 --> 00:09:42,000 Speaker 1: and that is something that people would probably be a 155 00:09:42,000 --> 00:09:44,960 Speaker 1: little more receptive to. And again, for the average person, 156 00:09:45,080 --> 00:09:48,240 Speaker 1: they probably wouldn't even notice sending an email might take 157 00:09:48,280 --> 00:09:51,440 Speaker 1: a little longer than it did before, but not by 158 00:09:51,440 --> 00:09:53,840 Speaker 1: so much that they would make that big of a difference. 159 00:09:54,280 --> 00:09:56,520 Speaker 1: So their computer would have to solve some sort of 160 00:09:56,600 --> 00:10:00,320 Speaker 1: mathematical problem, and the proof of the solution would to be, 161 00:10:00,800 --> 00:10:04,480 Speaker 1: you know, signed into the email itself. The problem would 162 00:10:04,520 --> 00:10:07,600 Speaker 1: need to be difficult to solve but easy to verify. 163 00:10:07,760 --> 00:10:10,640 Speaker 1: So in other words, you you cannot send us email 164 00:10:11,280 --> 00:10:16,120 Speaker 1: until whatever system is handling it verifies that you did 165 00:10:16,360 --> 00:10:19,000 Speaker 1: solve the problem. It's kind of like you're not allowed 166 00:10:19,000 --> 00:10:21,320 Speaker 1: to go to bed without your parents checking to make 167 00:10:21,360 --> 00:10:24,600 Speaker 1: sure you did your homework first, same kind of idea. 168 00:10:25,000 --> 00:10:27,520 Speaker 1: So it needed to be the kind of problem where 169 00:10:27,520 --> 00:10:31,160 Speaker 1: you have to work out an answer, and that part 170 00:10:31,280 --> 00:10:34,240 Speaker 1: is hard, But once you have the answer, it's very 171 00:10:34,280 --> 00:10:37,160 Speaker 1: easy to plug that answer into the original problem and 172 00:10:37,240 --> 00:10:39,959 Speaker 1: see that it works. So you can think of something 173 00:10:40,000 --> 00:10:43,560 Speaker 1: like an algebraic equation and it has an unknown value 174 00:10:43,559 --> 00:10:46,120 Speaker 1: in it that you represent as a variable, the classic 175 00:10:46,160 --> 00:10:50,080 Speaker 1: being the letter X. Well, once you solve this equation, 176 00:10:50,559 --> 00:10:54,480 Speaker 1: and you solve for x, you can then plug that 177 00:10:54,760 --> 00:10:59,600 Speaker 1: solution that x value back into the original equation and 178 00:10:59,640 --> 00:11:02,720 Speaker 1: prove that it works well. Their approach was sort of 179 00:11:02,760 --> 00:11:07,080 Speaker 1: the same thing, only much more complicated than that. Moreover, 180 00:11:07,240 --> 00:11:10,640 Speaker 1: they pointed out that if after you implemented the solution, 181 00:11:10,840 --> 00:11:14,120 Speaker 1: you saw spammers trying to, you know, power through it 182 00:11:14,520 --> 00:11:17,280 Speaker 1: and just continue to spam despite the fact that you've 183 00:11:17,320 --> 00:11:22,440 Speaker 1: put this computational requirement in the way, well, you can 184 00:11:22,559 --> 00:11:25,560 Speaker 1: just adjust the difficulty of the problems that they have 185 00:11:25,679 --> 00:11:28,480 Speaker 1: to solve before they can send out more emails. You 186 00:11:28,520 --> 00:11:33,040 Speaker 1: make the problem tougher. Then it takes the computers more 187 00:11:33,120 --> 00:11:37,640 Speaker 1: resources to solve the problems. So the harder the problem gets, 188 00:11:38,000 --> 00:11:42,360 Speaker 1: the more quote unquote expensive it is to send an email. 189 00:11:43,000 --> 00:11:47,400 Speaker 1: And once you get to that tipping point, then spammers 190 00:11:47,400 --> 00:11:50,320 Speaker 1: will see that the amount of time and energy that 191 00:11:50,360 --> 00:11:52,520 Speaker 1: they're using in order to just send out the spam 192 00:11:52,520 --> 00:11:57,520 Speaker 1: emails is not offset by the amount they're making when 193 00:11:57,559 --> 00:12:01,480 Speaker 1: the spam finally starts hitting. Response is this was a 194 00:12:01,520 --> 00:12:06,319 Speaker 1: really interesting proposal. Now let's skip ahead to the two thousand's, 195 00:12:06,320 --> 00:12:08,560 Speaker 1: like two thousand seven, two thousand eight. It was in 196 00:12:08,600 --> 00:12:10,800 Speaker 1: two thousand eight that we first got a white paper 197 00:12:10,840 --> 00:12:14,200 Speaker 1: written by someone using or someone or some some people 198 00:12:14,440 --> 00:12:19,760 Speaker 1: potentially using the pseudonym Satoshi Nakamoto, and this was the 199 00:12:19,840 --> 00:12:24,600 Speaker 1: famous white paper describing Bitcoin. Now, in this piece, the 200 00:12:24,679 --> 00:12:29,280 Speaker 1: author or authors combined the proof of work concept with 201 00:12:29,360 --> 00:12:33,319 Speaker 1: another one that again predated bitcoin, and that was blockchain. 202 00:12:34,040 --> 00:12:38,679 Speaker 1: What blockchain does is establish a timeline of events of 203 00:12:38,720 --> 00:12:42,600 Speaker 1: some sort. So in the case of bitcoin, the events 204 00:12:42,679 --> 00:12:47,520 Speaker 1: are transactions, so their bitcoin transactions when bitcoin changes hands 205 00:12:47,559 --> 00:12:52,200 Speaker 1: from one entity to another. And let's think about timelines 206 00:12:52,360 --> 00:12:55,839 Speaker 1: for a second. In our experience, there is no way 207 00:12:56,160 --> 00:12:58,839 Speaker 1: to travel back in time. The only way to travel 208 00:12:58,880 --> 00:13:01,400 Speaker 1: through time is the way we all do it normally, 209 00:13:01,920 --> 00:13:06,120 Speaker 1: where time progresses forward for us. There's no turning back. 210 00:13:06,520 --> 00:13:09,520 Speaker 1: So that dumb thing you did when you were a kid, 211 00:13:10,080 --> 00:13:12,360 Speaker 1: you know you know which dumb thing I'm talking about. 212 00:13:12,480 --> 00:13:15,240 Speaker 1: It's that dumb thing where sometimes when you're just trying 213 00:13:15,240 --> 00:13:18,800 Speaker 1: to fall asleep, your brain digs up this dumb thing 214 00:13:18,880 --> 00:13:22,040 Speaker 1: and says, hey, remember when you did that dumb thing, 215 00:13:22,400 --> 00:13:25,800 Speaker 1: and do you remember how horrible you feel about it? Now? Well, 216 00:13:25,800 --> 00:13:28,120 Speaker 1: that that dumb thing you did, there's no way for 217 00:13:28,120 --> 00:13:30,520 Speaker 1: you to go back in time and to not do 218 00:13:30,600 --> 00:13:34,200 Speaker 1: that dumb thing. You can't erase it. It's in the timeline. 219 00:13:34,640 --> 00:13:38,120 Speaker 1: And really everything that's happened to you afterward in your 220 00:13:38,160 --> 00:13:41,800 Speaker 1: life has that dumb thing factored into it at least 221 00:13:41,840 --> 00:13:45,480 Speaker 1: on some level. Even if it's undetectable, it's there because 222 00:13:45,480 --> 00:13:50,720 Speaker 1: it happened you know that dumb, dumb thing. Well. Blockchain 223 00:13:50,840 --> 00:13:56,280 Speaker 1: is a computational process that establishes something similar to a timeline. 224 00:13:56,720 --> 00:14:00,080 Speaker 1: The idea is that with a blockchain, you have of 225 00:14:00,240 --> 00:14:05,000 Speaker 1: a timeline of processes, and this timeline is also unalterable. 226 00:14:05,080 --> 00:14:09,320 Speaker 1: Someone cannot go back earlier into the timeline, travel back 227 00:14:09,440 --> 00:14:13,280 Speaker 1: into the blockchain, and make a change, because if they did, 228 00:14:13,760 --> 00:14:16,240 Speaker 1: it would mean that all the later blocks in the 229 00:14:16,320 --> 00:14:19,440 Speaker 1: chain would also have to change, and folks would notice that. 230 00:14:19,960 --> 00:14:23,560 Speaker 1: Because the chain preserves the timeline, everything is built on 231 00:14:23,680 --> 00:14:28,480 Speaker 1: what has come before, So changing something from before would 232 00:14:28,600 --> 00:14:32,400 Speaker 1: change everything that comes afterward, and and the the jig 233 00:14:32,440 --> 00:14:36,280 Speaker 1: would be up. You would be found out immediately. So, 234 00:14:37,280 --> 00:14:40,720 Speaker 1: for example, if you spent bitcoin and then you thought, 235 00:14:40,880 --> 00:14:43,840 Speaker 1: I'm gonna get sneaky, and I'm gonna wait a while, 236 00:14:44,240 --> 00:14:45,760 Speaker 1: and after a while, I'm going to go into the 237 00:14:45,760 --> 00:14:49,360 Speaker 1: blockchain and alter that that record so that I didn't 238 00:14:49,600 --> 00:14:52,640 Speaker 1: spend that bitcoin, and then I magically get the bitcoin back. 239 00:14:52,680 --> 00:14:56,000 Speaker 1: It would be as if money were just magically appearing 240 00:14:56,000 --> 00:15:00,800 Speaker 1: inside your wallet. Well, because all future trans actions are 241 00:15:00,920 --> 00:15:04,720 Speaker 1: built upon past ones, going in and trying to alter 242 00:15:04,800 --> 00:15:08,120 Speaker 1: the blockchain would become visible all the way down and 243 00:15:08,200 --> 00:15:11,160 Speaker 1: you would immediately be found out. So that's how the 244 00:15:11,160 --> 00:15:16,360 Speaker 1: blockchain protects the order of processes that once you start 245 00:15:16,480 --> 00:15:23,440 Speaker 1: to validate a block of transactions, it is cemented effectively. Now, 246 00:15:23,440 --> 00:15:27,480 Speaker 1: occasionally the chain might fork, but at some point one 247 00:15:27,880 --> 00:15:31,600 Speaker 1: branch of this chain is going to be longer than 248 00:15:31,640 --> 00:15:34,440 Speaker 1: the others and it becomes the true chain. The other 249 00:15:34,560 --> 00:15:39,320 Speaker 1: branches become orphaned blocks. Uh. So over time you will 250 00:15:39,360 --> 00:15:42,840 Speaker 1: see things split off from the blockchain, but whichever one 251 00:15:42,920 --> 00:15:45,760 Speaker 1: gets built on the most within a given amount of 252 00:15:45,800 --> 00:15:52,760 Speaker 1: time becomes the true chain. Alright, So blockchains this digital 253 00:15:52,800 --> 00:15:56,840 Speaker 1: method of establishing a series of unalterable processes. Where does 254 00:15:56,920 --> 00:16:00,880 Speaker 1: proof of work come in? All right, So one thing 255 00:16:00,960 --> 00:16:05,440 Speaker 1: that's used a lot in computer science are hash functions. 256 00:16:05,880 --> 00:16:08,800 Speaker 1: These are a little tricky to talk about, all right, 257 00:16:08,880 --> 00:16:12,400 Speaker 1: So first let's talk about encryption. And I want to 258 00:16:12,440 --> 00:16:15,560 Speaker 1: point out right away at the very beginning, encryption is 259 00:16:15,600 --> 00:16:20,080 Speaker 1: not the same thing as a hash function. Encryption is 260 00:16:20,120 --> 00:16:23,560 Speaker 1: where you have some data and you perform a mathematical 261 00:16:23,640 --> 00:16:28,480 Speaker 1: process on that data, and you transform it into different data, 262 00:16:28,600 --> 00:16:32,000 Speaker 1: something that looks absolutely meaningless. You've jumbled it up. No 263 00:16:32,120 --> 00:16:34,360 Speaker 1: one can make head or tail of it just by 264 00:16:34,400 --> 00:16:38,080 Speaker 1: looking at it. But someone with the correct decryption key 265 00:16:38,280 --> 00:16:42,520 Speaker 1: can reverse that process and get at the original data 266 00:16:42,640 --> 00:16:46,920 Speaker 1: and read whatever it was you wrote. That is reversible. 267 00:16:47,280 --> 00:16:52,200 Speaker 1: That is encryption and decryption. Hashing is not reversible. You've 268 00:16:52,240 --> 00:16:54,880 Speaker 1: got some data, all right, let's say it's even the 269 00:16:54,880 --> 00:16:56,680 Speaker 1: same message. Is what we were just talking about with 270 00:16:56,760 --> 00:17:00,280 Speaker 1: encryption and decryption, and you have an operation that is 271 00:17:00,360 --> 00:17:03,560 Speaker 1: one way, which means you can perform this operation on 272 00:17:03,680 --> 00:17:06,560 Speaker 1: the data and you will get a result, But there's 273 00:17:06,600 --> 00:17:09,760 Speaker 1: no reverse process where you can take that result and 274 00:17:09,840 --> 00:17:13,639 Speaker 1: turn it back into the original data. Frequently, hash functions 275 00:17:13,680 --> 00:17:17,320 Speaker 1: have a set number of characters that they will generate 276 00:17:17,400 --> 00:17:20,760 Speaker 1: no matter what original value you plug in. So let's 277 00:17:20,760 --> 00:17:23,880 Speaker 1: say that you've got a hash function that will generate 278 00:17:23,920 --> 00:17:28,960 Speaker 1: an eighty character hash once you apply the function to 279 00:17:29,119 --> 00:17:33,600 Speaker 1: the incoming data. That means your result will have eighty characters. 280 00:17:33,920 --> 00:17:37,800 Speaker 1: Whether your incoming data is a one or if it's 281 00:17:37,800 --> 00:17:41,040 Speaker 1: a one billion or any other number, you end up 282 00:17:41,080 --> 00:17:45,080 Speaker 1: with an eighty character hash. Hashes can be collections of 283 00:17:45,200 --> 00:17:48,760 Speaker 1: letters and numbers, and there are lots of different hash functions, 284 00:17:49,160 --> 00:17:53,119 Speaker 1: which is what proof of work cryptocurrency kind of really 285 00:17:53,200 --> 00:17:56,399 Speaker 1: depends upon. And and here's where we get to the 286 00:17:56,520 --> 00:18:00,320 Speaker 1: key bit. The proof of work cryptocurrencies create a hash 287 00:18:00,560 --> 00:18:03,280 Speaker 1: that is based off the block of transactions that need 288 00:18:03,359 --> 00:18:06,280 Speaker 1: to be verified, as in the next block to join 289 00:18:06,400 --> 00:18:11,119 Speaker 1: the chain. But it doesn't just involve the hash of 290 00:18:11,160 --> 00:18:15,200 Speaker 1: that block or the hashing of that block. The hash 291 00:18:15,520 --> 00:18:21,040 Speaker 1: also incorporates the hash from the previous block of verified transactions, 292 00:18:21,040 --> 00:18:23,720 Speaker 1: the one that came right before. This is where we 293 00:18:23,800 --> 00:18:26,400 Speaker 1: have that link that ultimately goes all the way back 294 00:18:26,440 --> 00:18:31,119 Speaker 1: to the first block, right because block two's hash incorporates 295 00:18:31,119 --> 00:18:35,119 Speaker 1: the hash from block one. Block three's hash incorporates the 296 00:18:35,119 --> 00:18:38,639 Speaker 1: hash from block two, which, as we just mentioned, incorporates 297 00:18:38,640 --> 00:18:42,600 Speaker 1: the hash of block one. So this continues from block 298 00:18:42,720 --> 00:18:45,879 Speaker 1: number one all the way down to the last block 299 00:18:45,920 --> 00:18:49,680 Speaker 1: in the chain. All right, so the bitcoin system generates 300 00:18:49,720 --> 00:18:53,320 Speaker 1: this hash. You've got this value in front of you. 301 00:18:53,760 --> 00:18:57,840 Speaker 1: It's a hash value. You have no idea what information 302 00:18:57,880 --> 00:19:01,919 Speaker 1: went into this to create this hash. Computers connected, you know, 303 00:19:02,000 --> 00:19:05,400 Speaker 1: the nodes connected to the system are essentially all trying 304 00:19:05,400 --> 00:19:10,840 Speaker 1: to figure out how the system generated this specific hash. 305 00:19:11,119 --> 00:19:13,840 Speaker 1: And again, the process isn't reversible, so it's not like 306 00:19:13,880 --> 00:19:16,320 Speaker 1: you can take the hash value that the system presents 307 00:19:16,480 --> 00:19:20,960 Speaker 1: and then reverse engineer it. Instead, essentially you have to 308 00:19:21,080 --> 00:19:26,879 Speaker 1: guess what value would have created this particular hash using 309 00:19:26,880 --> 00:19:30,320 Speaker 1: the hash function of the algorithm. You're you're trying to 310 00:19:30,359 --> 00:19:34,679 Speaker 1: figure out what number was it that made this happen, Essentially, 311 00:19:35,200 --> 00:19:37,959 Speaker 1: And I'll give a really oversimplified kind of idea of 312 00:19:37,960 --> 00:19:40,399 Speaker 1: how this works just in case you're having some trouble 313 00:19:40,440 --> 00:19:43,960 Speaker 1: with it. So again this is an oversimplification. But let's 314 00:19:44,000 --> 00:19:48,280 Speaker 1: say I tell you the answer to this math problem 315 00:19:48,440 --> 00:19:52,880 Speaker 1: is six. What was the math problem? So all I've 316 00:19:52,920 --> 00:19:54,639 Speaker 1: done is given you the answer, and I'm asking you 317 00:19:54,720 --> 00:19:57,119 Speaker 1: what math problem did I do? That gave me the 318 00:19:57,119 --> 00:20:01,919 Speaker 1: answer six, And you could say four plus two, you 319 00:20:01,960 --> 00:20:06,480 Speaker 1: could say two times three, you could say sixteen minus ten, 320 00:20:06,720 --> 00:20:10,240 Speaker 1: and so on. And the point is there's an infinite 321 00:20:10,359 --> 00:20:13,760 Speaker 1: number of potential answers, right, Like, you could say all 322 00:20:13,800 --> 00:20:16,680 Speaker 1: sorts of different things that would be accurate in that 323 00:20:16,880 --> 00:20:20,000 Speaker 1: it would it would create a six, But it doesn't 324 00:20:20,040 --> 00:20:23,720 Speaker 1: necessarily mean that that was the math problem I did, right, 325 00:20:24,640 --> 00:20:28,880 Speaker 1: You're just guessing until someone hits the right math problem. Well, 326 00:20:28,880 --> 00:20:32,080 Speaker 1: in a way, that's what the computer nodes are doing 327 00:20:32,200 --> 00:20:38,600 Speaker 1: within a proof of work blockchain system like Bitcoin, and 328 00:20:38,680 --> 00:20:43,200 Speaker 1: the first computer to guess it correctly wins. Essentially, other 329 00:20:43,280 --> 00:20:47,000 Speaker 1: computers in the system can verify that the guests is 330 00:20:47,040 --> 00:20:51,040 Speaker 1: correct because once you have a guess, then you can 331 00:20:51,080 --> 00:20:55,200 Speaker 1: plug that into the hashing formula and find out if 332 00:20:55,240 --> 00:20:58,800 Speaker 1: in fact it generates the hash you were looking for. 333 00:20:59,400 --> 00:21:02,320 Speaker 1: Then if it does, you got it right, and the 334 00:21:02,359 --> 00:21:05,639 Speaker 1: winning computer system gets the reward of a certain amount 335 00:21:05,640 --> 00:21:09,959 Speaker 1: of cryptocurrency units for bitcoin. Right now, that amount is 336 00:21:10,119 --> 00:21:14,920 Speaker 1: six point to five bitcoins per block. Now, as I 337 00:21:15,000 --> 00:21:18,159 Speaker 1: record this episode, the value of bitcoin is almost fifty 338 00:21:18,240 --> 00:21:22,840 Speaker 1: seven thousand dollars so a six point to five reward 339 00:21:22,960 --> 00:21:26,000 Speaker 1: is equal to nearly three hundred fifty five thousand bucks, 340 00:21:26,440 --> 00:21:29,560 Speaker 1: and there are around one forty four blocks added to 341 00:21:29,600 --> 00:21:34,480 Speaker 1: the chain per day at around three thousand dollars per block. 342 00:21:34,880 --> 00:21:39,359 Speaker 1: So there is a huge financial incentive to run a 343 00:21:39,400 --> 00:21:43,560 Speaker 1: computer system or network of systems that is the first 344 00:21:43,600 --> 00:21:46,120 Speaker 1: to get to this right answer. Right. I mean, there's 345 00:21:46,160 --> 00:21:49,040 Speaker 1: just an enormous amount of money to be made if 346 00:21:49,080 --> 00:21:52,359 Speaker 1: you are number one, So there's a huge incentive to 347 00:21:52,400 --> 00:21:55,200 Speaker 1: be number one. This is why you'll hear about bitcoin 348 00:21:55,280 --> 00:21:59,880 Speaker 1: mining operations that have incredibly powerful machines just racing constantly 349 00:22:00,000 --> 00:22:03,120 Speaker 1: to get the right answer. These machines need a lot 350 00:22:03,160 --> 00:22:06,800 Speaker 1: of power, thus they need a lot of electricity. This 351 00:22:06,840 --> 00:22:09,479 Speaker 1: means a lot of power consumption for any sort of 352 00:22:09,480 --> 00:22:13,760 Speaker 1: proof of work cryptocurrency, with bitcoin obviously being the really 353 00:22:13,800 --> 00:22:16,520 Speaker 1: big one, and that number can go through the roof 354 00:22:16,720 --> 00:22:21,720 Speaker 1: as a currency's value increases, so bitcoin mining actually eats 355 00:22:21,760 --> 00:22:25,240 Speaker 1: up more electricity than some countries do. I've got a 356 00:22:25,240 --> 00:22:27,399 Speaker 1: lot more to say both about proof of work and 357 00:22:27,440 --> 00:22:38,240 Speaker 1: its alternatives, but first let's take a quick break. So 358 00:22:38,400 --> 00:22:42,560 Speaker 1: I left off talking about how bitcoin mining leads to 359 00:22:42,600 --> 00:22:47,919 Speaker 1: the sort of escalation um with people putting more and 360 00:22:47,960 --> 00:22:51,960 Speaker 1: more powerful systems at play to compete against one another 361 00:22:52,040 --> 00:22:55,600 Speaker 1: and try and mind each block in a blockchain in 362 00:22:55,680 --> 00:22:58,480 Speaker 1: order to get more and more bitcoin. This becomes a 363 00:22:58,560 --> 00:23:02,000 Speaker 1: kind of a vicious cycle, right because as long as 364 00:23:02,040 --> 00:23:05,080 Speaker 1: the amount of bitcoin you're getting back is greater than 365 00:23:05,119 --> 00:23:08,480 Speaker 1: the investment you've put forward to try and get the bitcoin, 366 00:23:09,240 --> 00:23:15,359 Speaker 1: it's profit. Right. If I'm spending you know, five dollars 367 00:23:15,480 --> 00:23:19,160 Speaker 1: on a computer system and power needs like I'm I'm 368 00:23:19,200 --> 00:23:23,040 Speaker 1: paying you know these rates to get electricity to power 369 00:23:23,080 --> 00:23:26,520 Speaker 1: all these computers. If I'm if I spend half a 370 00:23:26,560 --> 00:23:30,280 Speaker 1: million on that, well, really, I just I just need 371 00:23:30,320 --> 00:23:34,600 Speaker 1: to successfully mine two blocks a bitcoin to pay off 372 00:23:34,600 --> 00:23:39,560 Speaker 1: that investment. Right, then, as long as I'm hitting more 373 00:23:39,640 --> 00:23:44,320 Speaker 1: success in the future frequently enough, I can offset the 374 00:23:44,400 --> 00:23:49,120 Speaker 1: costs of operation and just keep making profit. So that's 375 00:23:49,119 --> 00:23:53,360 Speaker 1: why it's so um tempting to get into the bitcoin 376 00:23:53,440 --> 00:23:58,280 Speaker 1: mining is that? Yeah? At this point, being a serious 377 00:23:58,400 --> 00:24:01,240 Speaker 1: mining operation means you to put in a huge amount 378 00:24:01,280 --> 00:24:04,400 Speaker 1: of money because there are huge players out there already 379 00:24:04,440 --> 00:24:11,120 Speaker 1: that are running ridiculously powerful computer networks, sometimes co located 380 00:24:11,720 --> 00:24:15,840 Speaker 1: with power plants like you've got old coal based power 381 00:24:15,880 --> 00:24:17,840 Speaker 1: plants in different parts of the world where people have 382 00:24:18,000 --> 00:24:21,760 Speaker 1: built out bitcoin mining operations in the power plant itself 383 00:24:22,000 --> 00:24:26,479 Speaker 1: in order to have direct access to electricity at all 384 00:24:26,600 --> 00:24:29,040 Speaker 1: at a cost that's as low as they can possibly 385 00:24:29,040 --> 00:24:31,760 Speaker 1: get it. And again it's so that you can get 386 00:24:31,800 --> 00:24:35,239 Speaker 1: that that maximum amount of profit um and even then 387 00:24:35,240 --> 00:24:37,760 Speaker 1: it's not guaranteed because there's so many of these systems 388 00:24:37,800 --> 00:24:42,639 Speaker 1: all around the world. So this has obviously led to 389 00:24:42,800 --> 00:24:47,800 Speaker 1: some people to have some objections to bitcoin because it 390 00:24:47,880 --> 00:24:52,959 Speaker 1: has this kind of runaway UH consumption associated to it. 391 00:24:53,960 --> 00:24:57,080 Speaker 1: And it also means that you could argue that bitcoin 392 00:24:57,160 --> 00:25:01,119 Speaker 1: can be connected to things like carbon emissions and climate change, 393 00:25:01,160 --> 00:25:05,359 Speaker 1: because if the power that is, you know, allowing these 394 00:25:05,440 --> 00:25:09,080 Speaker 1: systems to operate, if it's coming from a power plant 395 00:25:09,119 --> 00:25:13,399 Speaker 1: that's using fossil fuels, then that power plant is having 396 00:25:13,400 --> 00:25:18,120 Speaker 1: to to generate enough electricity to send to these systems 397 00:25:18,200 --> 00:25:21,160 Speaker 1: and thus consuming more and more fossil fuels and generating 398 00:25:21,160 --> 00:25:25,440 Speaker 1: more carbon emissions. Now, there are some bitcoin defenders who 399 00:25:25,480 --> 00:25:28,800 Speaker 1: say that the vast majority of bitcoin are connected to 400 00:25:28,840 --> 00:25:32,520 Speaker 1: systems that are running on renewables. But even if you 401 00:25:32,560 --> 00:25:34,280 Speaker 1: look at it that way, you're saying, well, this is 402 00:25:34,280 --> 00:25:40,000 Speaker 1: a significant drain on our energy resources. There's an enormous 403 00:25:40,040 --> 00:25:44,119 Speaker 1: amount of energy that's having to go just towards bitcoin mining. 404 00:25:44,760 --> 00:25:47,720 Speaker 1: And even if you argue that's coming from renewable sources, 405 00:25:48,400 --> 00:25:52,480 Speaker 1: you could say, well, that that energy could be either 406 00:25:52,640 --> 00:25:55,760 Speaker 1: stored so that we can use it for other stuff 407 00:25:56,119 --> 00:25:58,840 Speaker 1: down the line when we aren't able to get and 408 00:25:58,960 --> 00:26:02,880 Speaker 1: those renewable sources as easily, for example, solar at night, 409 00:26:04,200 --> 00:26:06,720 Speaker 1: or that you can just direct that energy towards something 410 00:26:06,720 --> 00:26:10,240 Speaker 1: else besides bitcoin mining. Anyway, I also have to add 411 00:26:10,640 --> 00:26:14,159 Speaker 1: that the bitcoin approach has some built in adjustments that 412 00:26:14,359 --> 00:26:18,640 Speaker 1: are kind of ingenious. So the goal is to keep 413 00:26:18,640 --> 00:26:22,800 Speaker 1: this process more or less consistent with an ideal solution 414 00:26:22,840 --> 00:26:26,520 Speaker 1: time of ten minutes per block in the chain, so 415 00:26:26,920 --> 00:26:31,320 Speaker 1: a new block getting added to the chain approximately every 416 00:26:31,359 --> 00:26:35,200 Speaker 1: ten minutes, that's the goal. Well, obviously, if you add 417 00:26:35,359 --> 00:26:40,040 Speaker 1: more and more a computational power to the system, the 418 00:26:40,080 --> 00:26:42,879 Speaker 1: time it would be needed to to reach the solution 419 00:26:43,000 --> 00:26:46,399 Speaker 1: for any given block is gonna come down. Right for 420 00:26:46,520 --> 00:26:50,639 Speaker 1: a given difficulty of mathematical problem, if you're throwing more 421 00:26:50,680 --> 00:26:53,439 Speaker 1: and more computer power at it, you're gonna reduce the 422 00:26:53,480 --> 00:26:56,680 Speaker 1: amount of time it takes to get the solution. Well, 423 00:26:56,720 --> 00:27:00,400 Speaker 1: that means that the system will take an odd aumatic 424 00:27:00,520 --> 00:27:05,000 Speaker 1: kind of assessment of how long it takes, generally speaking, 425 00:27:05,040 --> 00:27:10,080 Speaker 1: for a block to get verified, and if it's below 426 00:27:10,160 --> 00:27:15,880 Speaker 1: ten minutes, it'll make those problems more difficult, thus increasing 427 00:27:15,920 --> 00:27:18,680 Speaker 1: the amount of time it takes to solve those problems. 428 00:27:18,720 --> 00:27:22,320 Speaker 1: So it's self correcting. In other words, it's saying, all right, 429 00:27:22,800 --> 00:27:25,520 Speaker 1: these blocks are starting to come out a little too frequently. 430 00:27:25,760 --> 00:27:28,080 Speaker 1: We need to slow it down. We'll make the problems 431 00:27:28,119 --> 00:27:30,960 Speaker 1: even harder. And now these computer systems will have to 432 00:27:31,000 --> 00:27:33,640 Speaker 1: work harder, it will take longer for them to get 433 00:27:33,640 --> 00:27:37,040 Speaker 1: the right answer. And again, as long as the return 434 00:27:37,080 --> 00:27:40,199 Speaker 1: on investment is good, that is, as long as the 435 00:27:40,200 --> 00:27:44,520 Speaker 1: bitcoin being mined is more than enough to pay for 436 00:27:44,560 --> 00:27:47,879 Speaker 1: the expense of operating a bunch of power hungry computers, 437 00:27:48,200 --> 00:27:50,480 Speaker 1: then you've got a positive return on investment, and you'll 438 00:27:50,520 --> 00:27:53,840 Speaker 1: have people investing even more in their systems. They'll be 439 00:27:53,840 --> 00:27:57,520 Speaker 1: making them more powerful, adding more computers to their networks. 440 00:27:58,840 --> 00:28:01,280 Speaker 1: But if it ever gets you know, more expensive to 441 00:28:01,440 --> 00:28:05,280 Speaker 1: operate to mine than you get from your cryptocurrency, Let's 442 00:28:05,280 --> 00:28:07,800 Speaker 1: say that you factor in like you figure out I'm 443 00:28:07,800 --> 00:28:10,920 Speaker 1: actually losing money in the long run, in this process, 444 00:28:10,960 --> 00:28:13,600 Speaker 1: because of how much I have to spend to keep 445 00:28:14,040 --> 00:28:16,919 Speaker 1: pace with everybody else and in order to pay my 446 00:28:17,000 --> 00:28:20,359 Speaker 1: power bill. If it gets too expensive, then more and 447 00:28:20,440 --> 00:28:24,480 Speaker 1: more people will drop out of the system, and the 448 00:28:24,600 --> 00:28:28,520 Speaker 1: total computational power connected to the system will also drop. 449 00:28:29,080 --> 00:28:32,160 Speaker 1: That can sometimes mean that it starts to take longer 450 00:28:32,520 --> 00:28:35,600 Speaker 1: to solve the problem than ten minutes. Well again, the 451 00:28:35,640 --> 00:28:38,560 Speaker 1: system says, all right, well, now it's taking you know, 452 00:28:38,680 --> 00:28:41,320 Speaker 1: fourteen minutes to solve a block instead of ten, I'm 453 00:28:41,360 --> 00:28:43,920 Speaker 1: going to make the problems a little easier. So it's 454 00:28:44,000 --> 00:28:49,080 Speaker 1: constantly tweaking itself, well, not constantly, it's regularly tweaking itself 455 00:28:49,520 --> 00:28:54,360 Speaker 1: to meet the abilities of the overall system in order 456 00:28:54,400 --> 00:28:59,960 Speaker 1: to keep that time to solve more or less consistent. 457 00:29:00,000 --> 00:29:02,800 Speaker 1: It However, one of the downsides of this is that 458 00:29:03,920 --> 00:29:07,400 Speaker 1: it that the system totally doesn't care how much computational 459 00:29:07,440 --> 00:29:12,400 Speaker 1: power is being used. Right. It doesn't care if if 460 00:29:12,560 --> 00:29:16,080 Speaker 1: coal power plants all over the world are firing up 461 00:29:16,120 --> 00:29:22,080 Speaker 1: more than ever just in order to fuel bitcoin mining operations. Uh, 462 00:29:22,160 --> 00:29:24,840 Speaker 1: the the algorithm is just concerned with trying to keep 463 00:29:24,920 --> 00:29:29,760 Speaker 1: that time to solve pretty consistent. So that is another potential, 464 00:29:29,920 --> 00:29:34,160 Speaker 1: you know, downfall of proof of work systems. But let's 465 00:29:34,200 --> 00:29:37,720 Speaker 1: talk about the probably you know, some of the best 466 00:29:37,720 --> 00:29:40,360 Speaker 1: known cryptocurrencies that use proof of work, and of course 467 00:29:40,480 --> 00:29:43,320 Speaker 1: the top of that list is Bitcoin. I would argue 468 00:29:43,320 --> 00:29:47,000 Speaker 1: Bitcoin really was responsible for putting cryptocurrency on the map. 469 00:29:47,080 --> 00:29:49,680 Speaker 1: Not only was it famous in that paper, but it 470 00:29:49,720 --> 00:29:52,600 Speaker 1: remains like the best known of all the cryptocurrencies that 471 00:29:52,680 --> 00:29:56,880 Speaker 1: have come out since Bitcoin debuted. But there's also Ethereum 472 00:29:56,880 --> 00:30:00,560 Speaker 1: one point oh, that's a proof of work cryptocurrency. We'll 473 00:30:00,600 --> 00:30:04,479 Speaker 1: talk about Ethereum two point oh in uh just a 474 00:30:04,480 --> 00:30:08,280 Speaker 1: short while, and also doge coin does coin is another 475 00:30:08,320 --> 00:30:10,800 Speaker 1: proof of work cryptocurrency, and there are plenty of other 476 00:30:11,080 --> 00:30:15,280 Speaker 1: famous ones bitcoins. The heavy hitter Ethereum has really emerged 477 00:30:15,320 --> 00:30:19,400 Speaker 1: as a popular cryptocurrency, and a lot of other technologies 478 00:30:19,440 --> 00:30:22,200 Speaker 1: like n f t s actually rely on Ethereum's blockchain, 479 00:30:22,280 --> 00:30:27,360 Speaker 1: so Ethereum's blockchain allows for other innovations to exist on 480 00:30:27,440 --> 00:30:31,480 Speaker 1: top of it. In addition to Ethereum, cryptocurrency, which is 481 00:30:31,520 --> 00:30:35,000 Speaker 1: called ether does coins started off as a joke, and 482 00:30:35,480 --> 00:30:37,920 Speaker 1: despite a few attempts to turn it into a legit currency, 483 00:30:38,000 --> 00:30:40,360 Speaker 1: is still mostly a joke that a lot of people 484 00:30:40,400 --> 00:30:43,000 Speaker 1: poured a lot of money into I'm not saying people 485 00:30:43,000 --> 00:30:46,520 Speaker 1: didn't make money off dog coin. I'm saying that a 486 00:30:46,520 --> 00:30:49,840 Speaker 1: lot of people made money off doge coin by convincing 487 00:30:49,840 --> 00:30:53,840 Speaker 1: other people to get into doge coin, thus potentially artificially 488 00:30:53,920 --> 00:30:56,640 Speaker 1: driving up the value of the cryptocurrency. That's another thing 489 00:30:56,640 --> 00:30:59,640 Speaker 1: I should really address very quickly. A lot of this 490 00:31:00,000 --> 00:31:03,480 Speaker 1: off we'll talk about talks about the value of cryptocurrency. 491 00:31:04,720 --> 00:31:08,360 Speaker 1: Cryptocurrency doesn't necessarily have an innate value to it because 492 00:31:08,400 --> 00:31:13,000 Speaker 1: it's not tied to like a centralized financial institution. Its 493 00:31:13,080 --> 00:31:17,160 Speaker 1: value is dictated by the market, like the system itself. 494 00:31:17,680 --> 00:31:22,280 Speaker 1: It's it's kind of self supportive that way. So we 495 00:31:22,440 --> 00:31:26,160 Speaker 1: see a lot of these cryptocurrencies have pretty volatile values. 496 00:31:26,240 --> 00:31:30,680 Speaker 1: They go up and down dramatically sometimes sometimes why they 497 00:31:30,800 --> 00:31:33,120 Speaker 1: order of tens of thousands of dollars. In the case 498 00:31:33,120 --> 00:31:36,240 Speaker 1: of bitcoin, you know, we saw it nearly at sixty 499 00:31:36,560 --> 00:31:39,959 Speaker 1: dollars per bitcoin, then down to around twenty thousand dollars. 500 00:31:40,160 --> 00:31:43,600 Speaker 1: Now it's back up to almost sixty thousand. Again, that's 501 00:31:44,040 --> 00:31:49,320 Speaker 1: all within the span of a year. It's crazy anyway. Um, Yeah, 502 00:31:49,360 --> 00:31:53,600 Speaker 1: it's that that's a separate entity that doesn't necessarily have 503 00:31:53,640 --> 00:31:56,840 Speaker 1: anything to do with the tech. So now we're gonna 504 00:31:56,840 --> 00:32:01,200 Speaker 1: talk about proof of steak, and in order to understand that, 505 00:32:01,240 --> 00:32:03,120 Speaker 1: we have to talk about what proof of steak and 506 00:32:03,200 --> 00:32:06,480 Speaker 1: proof of work both need to do. So again, we've 507 00:32:06,480 --> 00:32:08,760 Speaker 1: got our blockchain. We have to have a way to 508 00:32:09,000 --> 00:32:12,960 Speaker 1: verify transactions. We need some sort of system in place 509 00:32:13,040 --> 00:32:18,640 Speaker 1: that says person X sent person, why some cryptocurrency equaling 510 00:32:19,200 --> 00:32:23,440 Speaker 1: z amount. Right, You've gotta have some record of this. Otherwise, 511 00:32:23,520 --> 00:32:26,360 Speaker 1: because it's all digital, people could just try and keep 512 00:32:26,400 --> 00:32:29,040 Speaker 1: spending the same digital unit of currency more than once, 513 00:32:29,600 --> 00:32:32,120 Speaker 1: or they might you know, quote unquote give themselves a 514 00:32:32,160 --> 00:32:35,320 Speaker 1: billion dollars by copying a digital unit. So you have 515 00:32:35,400 --> 00:32:39,360 Speaker 1: to have some method to keep order in this system, 516 00:32:39,480 --> 00:32:42,160 Speaker 1: or else the system just doesn't work. So there has 517 00:32:42,160 --> 00:32:46,040 Speaker 1: to be a process by which you verify and publish 518 00:32:46,240 --> 00:32:50,960 Speaker 1: these transactions. Uh. In the case of cryptocurrencies and block chains, 519 00:32:51,040 --> 00:32:54,320 Speaker 1: that's in a centralized ledger, not a central a decentralized 520 00:32:54,360 --> 00:33:00,480 Speaker 1: ledger actually, because every node has access to seeing the ledger. Um. 521 00:33:00,560 --> 00:33:03,280 Speaker 1: You also need to have some means of circulating new 522 00:33:03,400 --> 00:33:06,520 Speaker 1: units of currency into the system. You have to have 523 00:33:06,600 --> 00:33:10,240 Speaker 1: some way of mining in other words, So let's talk 524 00:33:10,280 --> 00:33:13,400 Speaker 1: about bitcoin again. For a second, Bitcoin launched with a 525 00:33:13,480 --> 00:33:16,920 Speaker 1: cap on how many bitcoin there will ever be. Ever, 526 00:33:17,360 --> 00:33:22,120 Speaker 1: that cap is twenty one million bitcoin, and Nakamoto did 527 00:33:22,200 --> 00:33:26,120 Speaker 1: not release all twenty one million units of bitcoin into 528 00:33:26,160 --> 00:33:31,520 Speaker 1: circulation at once. Instead, bitcoin stands as a reward for 529 00:33:31,720 --> 00:33:36,040 Speaker 1: verifying bitcoin transactions. It's an incentive for people to dedicate 530 00:33:36,120 --> 00:33:41,920 Speaker 1: computational power to provide proof of work and verify transactions. 531 00:33:41,920 --> 00:33:45,200 Speaker 1: So it's a very delicate ecosystem designed to perpetuate the 532 00:33:45,280 --> 00:33:49,959 Speaker 1: usefulness of bitcoin. So every time a computer solves a block, 533 00:33:50,840 --> 00:33:53,840 Speaker 1: it gets a bitcoin reward, but the amount of that 534 00:33:53,920 --> 00:33:58,160 Speaker 1: reward decreases by half every four years or so. So 535 00:33:58,360 --> 00:34:01,160 Speaker 1: back in two thousand nine, in the early days of bitcoin, 536 00:34:01,680 --> 00:34:07,000 Speaker 1: the reward to minor block was fifty bitcoin. Well, by 537 00:34:07,080 --> 00:34:10,200 Speaker 1: two thousand twelve that came down to twenty five bitcoin. 538 00:34:10,520 --> 00:34:13,040 Speaker 1: By two thousand sixteen we got down to twelve and 539 00:34:13,080 --> 00:34:17,560 Speaker 1: a half bitcoin. Now we're at six point to five bitcoin. 540 00:34:17,880 --> 00:34:21,160 Speaker 1: In twenty four it will drop again to three point 541 00:34:21,280 --> 00:34:25,640 Speaker 1: one to five bitcoin, and so on. Also, the total 542 00:34:26,000 --> 00:34:30,360 Speaker 1: number of unmined bitcoin has dropped right like, over time, 543 00:34:30,360 --> 00:34:34,400 Speaker 1: we have mined more and more of the total bitcoin today, 544 00:34:34,440 --> 00:34:37,080 Speaker 1: we're looking at around two million bitcoin that have yet 545 00:34:37,080 --> 00:34:41,640 Speaker 1: to be mined, So that means that almost nineteen million 546 00:34:41,680 --> 00:34:45,279 Speaker 1: bitcoin are already out in circulation, some of which are 547 00:34:45,320 --> 00:34:47,920 Speaker 1: just lost forever because they got stored in you know, 548 00:34:47,920 --> 00:34:53,439 Speaker 1: like a hard drive that got inaccessible. So not all 549 00:34:53,600 --> 00:34:58,360 Speaker 1: that those nearly nineteen million bitcoin are still valid these days. 550 00:34:58,520 --> 00:35:01,520 Speaker 1: They I mean they exist, is they still have value, 551 00:35:01,800 --> 00:35:03,799 Speaker 1: just no one can get to them. Well, you might 552 00:35:03,840 --> 00:35:07,759 Speaker 1: wonder what happens when all the bitcoins that can be 553 00:35:07,880 --> 00:35:12,840 Speaker 1: mined have been mined. Now, due to the way bitcoin 554 00:35:12,960 --> 00:35:16,239 Speaker 1: does rounding, it actually means we're not going to see 555 00:35:16,280 --> 00:35:19,560 Speaker 1: all twenty one million bitcoins inter circulation. There will be 556 00:35:19,840 --> 00:35:23,040 Speaker 1: a small amount, a very very small amount that just 557 00:35:23,120 --> 00:35:27,799 Speaker 1: remains unmined because the math just doesn't work out. There 558 00:35:27,840 --> 00:35:30,120 Speaker 1: are a lot of unknown variables about this that we 559 00:35:30,200 --> 00:35:32,799 Speaker 1: have to take into account, and so it means that 560 00:35:33,000 --> 00:35:37,400 Speaker 1: ultimately nobody really knows. But one thing that we, you know, 561 00:35:37,840 --> 00:35:39,480 Speaker 1: have to think about, is that we don't know what 562 00:35:39,560 --> 00:35:41,440 Speaker 1: the value of bitcoin is going to be by the 563 00:35:41,440 --> 00:35:44,520 Speaker 1: time we get to the point where the final bitcoins 564 00:35:44,560 --> 00:35:48,400 Speaker 1: are going to be mined, because the number awarded drops 565 00:35:48,440 --> 00:35:53,000 Speaker 1: by every four years, we see the total unmined number 566 00:35:53,040 --> 00:35:57,640 Speaker 1: of bitcoin dropping less during each four year period. So 567 00:35:57,680 --> 00:36:00,880 Speaker 1: early on we saw that the total number dropped quickly 568 00:36:01,000 --> 00:36:04,600 Speaker 1: because folks were getting fifty bitcoin per block UDT four 569 00:36:04,640 --> 00:36:08,879 Speaker 1: blocks per day, it's going down pretty fast. These days, 570 00:36:08,920 --> 00:36:11,920 Speaker 1: the number drops more slowly because it's six point to 571 00:36:12,200 --> 00:36:15,640 Speaker 1: five bitcoins per block now. It will be even slower 572 00:36:15,880 --> 00:36:19,600 Speaker 1: after four and so on. So the schedule means that 573 00:36:19,760 --> 00:36:24,600 Speaker 1: while we've mined around nine of all bitcoins already, we 574 00:36:24,680 --> 00:36:30,120 Speaker 1: won't have hit the bottom until that's the year where 575 00:36:30,120 --> 00:36:35,080 Speaker 1: we will essentially have all the bitcoins out. So unless 576 00:36:35,080 --> 00:36:39,279 Speaker 1: the value for bitcoin really goes bonkers, and it might, 577 00:36:39,880 --> 00:36:42,440 Speaker 1: then we should see more folks drop off of bitcoin 578 00:36:42,520 --> 00:36:45,640 Speaker 1: mining in several years, because again the returns will be lower, 579 00:36:46,200 --> 00:36:49,600 Speaker 1: like if if it's you know, if it holds steady, 580 00:36:49,640 --> 00:36:52,879 Speaker 1: if the value holds steady, but you're getting fewer bitcoins 581 00:36:53,200 --> 00:36:57,000 Speaker 1: than eventually you start to hit that that negative return 582 00:36:57,040 --> 00:37:00,760 Speaker 1: on investment where you're losing money to go so hard 583 00:37:00,920 --> 00:37:03,399 Speaker 1: trying to get a bitcoin, and if it costs more 584 00:37:03,440 --> 00:37:06,160 Speaker 1: to operate your computer, then you're getting back in bitcoins 585 00:37:06,200 --> 00:37:09,719 Speaker 1: thence and that loss you're gonna stop. And once all 586 00:37:09,760 --> 00:37:13,000 Speaker 1: the bitcoin or in circulation, there are no more coins 587 00:37:13,040 --> 00:37:16,840 Speaker 1: to mine, so verifying a block of transactions could generate 588 00:37:16,880 --> 00:37:21,040 Speaker 1: payouts in the form of transaction fees, and that means 589 00:37:21,080 --> 00:37:23,840 Speaker 1: there will still be at least an incentive for nodes 590 00:37:23,920 --> 00:37:28,720 Speaker 1: to participate in the bitcoin system, but the transaction fees 591 00:37:28,840 --> 00:37:32,440 Speaker 1: might be really modest compared to what we're seeing in mining, 592 00:37:33,160 --> 00:37:35,560 Speaker 1: And honestly, no one's really sure how this is all 593 00:37:35,560 --> 00:37:37,480 Speaker 1: going to shake out in the long run. But the 594 00:37:37,520 --> 00:37:39,680 Speaker 1: reason I even talk about that is because proof of 595 00:37:39,760 --> 00:37:43,319 Speaker 1: steake has to solve the same issues proof of work does. 596 00:37:43,520 --> 00:37:47,839 Speaker 1: In order for the blockchain to be useful, there has 597 00:37:47,880 --> 00:37:50,239 Speaker 1: to be a way to verify transactions. There needs to 598 00:37:50,239 --> 00:37:53,480 Speaker 1: be a way to release more cryptocurrency into circulation. You 599 00:37:53,560 --> 00:37:57,280 Speaker 1: have to reward people for participating in order to encourage 600 00:37:57,320 --> 00:38:00,879 Speaker 1: them to participate in the first place, and unless you're 601 00:38:00,880 --> 00:38:04,040 Speaker 1: just dumping everything out at once, there does have to 602 00:38:04,040 --> 00:38:07,600 Speaker 1: be a method of, you know, metering out a certain 603 00:38:07,640 --> 00:38:12,720 Speaker 1: amount of cryptocurrency every given amount of time. So proof 604 00:38:12,760 --> 00:38:15,799 Speaker 1: of steak the phrase gives you a bit of a 605 00:38:15,880 --> 00:38:19,680 Speaker 1: hint about what's going on. The people, or rather, you know, 606 00:38:19,719 --> 00:38:23,800 Speaker 1: the nodes, the computer systems that are participating within this 607 00:38:24,080 --> 00:38:29,040 Speaker 1: cryptocurrency blockchain. Uh, the ones that are responsible for verifying 608 00:38:29,040 --> 00:38:32,640 Speaker 1: a block of transactions have to post a stake of 609 00:38:32,719 --> 00:38:36,920 Speaker 1: cryptocurrency that they possess within that system, Something of that 610 00:38:37,000 --> 00:38:42,040 Speaker 1: native cryptocurrency has to go into a pool of steaks, 611 00:38:42,120 --> 00:38:45,480 Speaker 1: so they have to contribute some minimum amount in order 612 00:38:45,560 --> 00:38:49,400 Speaker 1: to be part of the verification process. Now, in proof 613 00:38:49,400 --> 00:38:53,600 Speaker 1: of work approaches, we talk about systems being miners, right, 614 00:38:53,719 --> 00:38:57,400 Speaker 1: they are mining cryptocurrency. In proof of steak systems, we 615 00:38:57,440 --> 00:39:01,080 Speaker 1: talk about validators. These are people who have systems that 616 00:39:01,320 --> 00:39:04,799 Speaker 1: validate or verify a transaction, and then the other stakeholders 617 00:39:05,320 --> 00:39:09,520 Speaker 1: validate that verified block so that joins the chain. In 618 00:39:09,560 --> 00:39:14,400 Speaker 1: other words, they're checking the work of the primary validator. 619 00:39:14,560 --> 00:39:19,640 Speaker 1: They're saying, is this a valid block in the blockchain? 620 00:39:20,320 --> 00:39:22,800 Speaker 1: All right, I'm gonna need to take a quick breath 621 00:39:23,160 --> 00:39:35,160 Speaker 1: and then we'll come back with more about proof of steak. Okay, 622 00:39:35,960 --> 00:39:39,160 Speaker 1: so we've got this proof of steak approach where in 623 00:39:39,239 --> 00:39:42,360 Speaker 1: order to participate, you have to put up a steak 624 00:39:43,120 --> 00:39:48,400 Speaker 1: of the native cryptocurrency and that will allow you to 625 00:39:48,440 --> 00:39:52,360 Speaker 1: be a validator. Uh. The systems reward people who have 626 00:39:52,480 --> 00:39:58,239 Speaker 1: established uh that sufficient amount of cryptocurrency. And let's use 627 00:39:58,280 --> 00:40:01,080 Speaker 1: an example, because this is getting too vague, will use 628 00:40:01,120 --> 00:40:04,759 Speaker 1: Ethereum two point oh. So you remember I said ethereum 629 00:40:04,800 --> 00:40:07,680 Speaker 1: one point oh is proof of work. Well, for a 630 00:40:07,680 --> 00:40:11,080 Speaker 1: few years now, Ethereum has been laying the groundwork to 631 00:40:11,160 --> 00:40:14,480 Speaker 1: switch over to a proof of steak system, and that's 632 00:40:14,520 --> 00:40:17,799 Speaker 1: going to be Ethereum two point oh and essentially one 633 00:40:17,840 --> 00:40:21,680 Speaker 1: point oh is going to get merged into two point oh. Now, 634 00:40:21,680 --> 00:40:25,760 Speaker 1: in order to be a validator in ethereum two's ecosystem, 635 00:40:25,880 --> 00:40:29,360 Speaker 1: you have to put up a stake of at least 636 00:40:29,400 --> 00:40:34,880 Speaker 1: thirty two ether. Ether is the unit of currency within Ethereum. 637 00:40:34,920 --> 00:40:38,200 Speaker 1: Now at the moment, one unit of ether, so one 638 00:40:38,239 --> 00:40:42,640 Speaker 1: ether is equivalent to nearly three thousand, six hundred bucks, 639 00:40:43,120 --> 00:40:46,680 Speaker 1: and you have to have at least thirty two of them, 640 00:40:46,680 --> 00:40:50,080 Speaker 1: which is the equivalent of around a hundred fifteen thousand 641 00:40:50,400 --> 00:40:54,240 Speaker 1: dollars to be a validator for ethereum two point oh. 642 00:40:54,440 --> 00:40:57,960 Speaker 1: So you probably already see something that's a bit of 643 00:40:58,000 --> 00:41:00,239 Speaker 1: a barrier in here, but we'll get back to that 644 00:41:00,800 --> 00:41:03,360 Speaker 1: all right. So to be part of proof of steak, 645 00:41:03,760 --> 00:41:06,759 Speaker 1: you have to stake whatever that minimum amount is, you know, 646 00:41:06,800 --> 00:41:10,120 Speaker 1: like the thirty two ether. The system then selects a 647 00:41:10,160 --> 00:41:14,280 Speaker 1: winning validator from the pool of people who have placed 648 00:41:14,320 --> 00:41:18,839 Speaker 1: a steak into this cryptocurrency pool, and the system will 649 00:41:18,880 --> 00:41:22,799 Speaker 1: typically choose a winner based on two criteria. How much 650 00:41:22,840 --> 00:41:27,719 Speaker 1: cryptocurrency have they staked. So remember thirty two is the minimum, 651 00:41:27,760 --> 00:41:30,560 Speaker 1: it's not the maximum, so if you put in way more, 652 00:41:31,080 --> 00:41:34,600 Speaker 1: you are increasing your chances of being chosen as the winner. 653 00:41:35,120 --> 00:41:40,560 Speaker 1: Two uh to verify or validate a block of transactions. 654 00:41:41,400 --> 00:41:45,319 Speaker 1: The other criteria is that how long the steak has 655 00:41:45,320 --> 00:41:49,160 Speaker 1: actually been in the pool, So the system rewards people 656 00:41:49,200 --> 00:41:52,200 Speaker 1: who have been part of the system longest and who 657 00:41:52,239 --> 00:41:55,759 Speaker 1: have the largest steaks in the system. So the more 658 00:41:55,800 --> 00:41:57,879 Speaker 1: you stake and the longer you do it, the more 659 00:41:57,960 --> 00:42:00,920 Speaker 1: likely you're going to get chosen as the winner. When 660 00:42:00,960 --> 00:42:03,000 Speaker 1: you are chosen as the winner, then your computer goes 661 00:42:03,000 --> 00:42:06,400 Speaker 1: through the process of validating the transactions and upon your 662 00:42:06,440 --> 00:42:09,319 Speaker 1: system saying all right, I figured it out. I've got 663 00:42:09,360 --> 00:42:12,840 Speaker 1: the solution. Then the other validators that have put a 664 00:42:12,880 --> 00:42:18,759 Speaker 1: stake into this cryptocurrency pool will test your solution during 665 00:42:18,760 --> 00:42:23,080 Speaker 1: the atestation phase, and once enough validators have verified that 666 00:42:23,120 --> 00:42:27,120 Speaker 1: your solution is correct, that block joins the blockchain. All 667 00:42:27,120 --> 00:42:31,320 Speaker 1: participating validators then get paid out a reward in cryptocurrency. 668 00:42:31,560 --> 00:42:35,080 Speaker 1: So in the ethereum case, they would get some ethereum, 669 00:42:35,120 --> 00:42:38,640 Speaker 1: and the amount given to each validator would be you know, 670 00:42:38,760 --> 00:42:44,000 Speaker 1: proportional in some regard to the size of the steak 671 00:42:44,680 --> 00:42:46,680 Speaker 1: that they put in. So if you put in a 672 00:42:46,680 --> 00:42:49,560 Speaker 1: really big steak, you'll get a bigger percentage of the 673 00:42:49,640 --> 00:42:52,120 Speaker 1: reward each time. Now, you don't have to be a 674 00:42:52,120 --> 00:42:55,120 Speaker 1: winner to get a reward, you just have to participate 675 00:42:55,239 --> 00:42:57,480 Speaker 1: in the process. You have to be an active node 676 00:42:57,960 --> 00:43:01,640 Speaker 1: in the ethereum system in this as however, this does 677 00:43:01,719 --> 00:43:04,279 Speaker 1: mean that in order to be a participant you first 678 00:43:04,280 --> 00:43:07,160 Speaker 1: have to meet that minimum criteria. And this is a 679 00:43:07,360 --> 00:43:11,239 Speaker 1: really steep cost, and it's so much though that it's 680 00:43:11,280 --> 00:43:15,000 Speaker 1: effectively a barrier. I mean, it's a system that disproportionately 681 00:43:15,120 --> 00:43:20,399 Speaker 1: rewards the people who already have a substantial ownership in 682 00:43:20,440 --> 00:43:22,799 Speaker 1: that system. Or if you want to think of it 683 00:43:22,840 --> 00:43:26,759 Speaker 1: in another way, the rich get richer, and they get 684 00:43:26,880 --> 00:43:30,560 Speaker 1: richer because they're already rich. If you're not a hundred 685 00:43:30,640 --> 00:43:34,080 Speaker 1: gees deep in ether, you're out of luck. You don't 686 00:43:34,160 --> 00:43:37,880 Speaker 1: have enough to post a thirty two ether steak and 687 00:43:37,920 --> 00:43:40,239 Speaker 1: become a validator. It becomes a bit of a catch 688 00:43:40,280 --> 00:43:43,359 Speaker 1: twenty two because you can't afford to join the validators 689 00:43:43,440 --> 00:43:46,080 Speaker 1: without making more ether, and you're not going to make 690 00:43:46,080 --> 00:43:49,960 Speaker 1: more ether without being a validator and getting those rewards. Now, 691 00:43:50,040 --> 00:43:53,239 Speaker 1: you could always purchase more ether and thus build up 692 00:43:53,280 --> 00:43:57,720 Speaker 1: your ether over time, or you could join a steak pool. 693 00:43:58,040 --> 00:44:01,759 Speaker 1: This is something that is sometimes called delegating. This is 694 00:44:01,800 --> 00:44:04,200 Speaker 1: where you join a group of folks who are all 695 00:44:04,239 --> 00:44:08,759 Speaker 1: pooling smaller amounts of cryptocurrency that collectively meet the requirements 696 00:44:08,880 --> 00:44:13,200 Speaker 1: of a full steak in the validation process. So essentially 697 00:44:13,200 --> 00:44:18,799 Speaker 1: there's a leader who's who's node is acting as the 698 00:44:18,840 --> 00:44:22,680 Speaker 1: focal point for all this. Everyone else pours their smaller 699 00:44:22,760 --> 00:44:29,280 Speaker 1: cryptocurrency investments into a pool the again collectively gets staked 700 00:44:29,480 --> 00:44:33,600 Speaker 1: for this one node. The node ends up receiving rewards 701 00:44:33,719 --> 00:44:37,520 Speaker 1: based upon the size and of that steak, and then 702 00:44:37,840 --> 00:44:42,320 Speaker 1: divvies it up amongst the people who invested in that pool. Essentially, 703 00:44:42,360 --> 00:44:45,640 Speaker 1: it's the same thing as the general proof of steak approach, 704 00:44:45,880 --> 00:44:50,719 Speaker 1: but on a smaller level. Now, that does tend to 705 00:44:50,760 --> 00:44:53,160 Speaker 1: be one of the big criticisms for proof of steak, 706 00:44:53,239 --> 00:44:55,120 Speaker 1: that it's something that prevents a lot of people from 707 00:44:55,200 --> 00:44:58,480 Speaker 1: meaningful participation in the system, and it's rewarding people who 708 00:44:58,520 --> 00:45:03,880 Speaker 1: are already financially well off because that's how the system works. 709 00:45:04,200 --> 00:45:07,520 Speaker 1: While cryptocurrencies are decentralized and that they don't rely on 710 00:45:07,560 --> 00:45:12,200 Speaker 1: a single financial authority, they can somewhat functionally become centralized, 711 00:45:12,520 --> 00:45:15,239 Speaker 1: kind of like by a caball that has large enough 712 00:45:15,280 --> 00:45:17,560 Speaker 1: steak in the stuff and everybody else is just kind 713 00:45:17,560 --> 00:45:21,200 Speaker 1: of on the periphery. Uh. It's also possible to have 714 00:45:21,320 --> 00:45:25,479 Speaker 1: your steak reduced in these systems. So let's say that 715 00:45:26,440 --> 00:45:30,399 Speaker 1: you were picked as a winner to verify a block 716 00:45:30,440 --> 00:45:33,520 Speaker 1: of transactions and you end up validating a bad block 717 00:45:33,560 --> 00:45:37,640 Speaker 1: of transactions, and then others during the aid to station 718 00:45:37,719 --> 00:45:41,680 Speaker 1: phase they test your solution and they realize this, there's 719 00:45:41,680 --> 00:45:45,080 Speaker 1: something wrong here. Well, you can get dinged for that, 720 00:45:45,200 --> 00:45:48,000 Speaker 1: and you can see the system actually take away part 721 00:45:48,080 --> 00:45:50,239 Speaker 1: of your steak that you had put up into the 722 00:45:50,320 --> 00:45:54,360 Speaker 1: cryptocurrency pool. You might even fall below the amount needed 723 00:45:54,400 --> 00:45:56,680 Speaker 1: to be a validator and you would have to add 724 00:45:56,680 --> 00:46:00,840 Speaker 1: in extra cryptocurrency to bring you back up to the minimum, 725 00:46:00,880 --> 00:46:03,759 Speaker 1: So you could get really hurt that way. Or let's 726 00:46:03,760 --> 00:46:06,960 Speaker 1: say your validation node hasn't met the minimum requirement for 727 00:46:07,040 --> 00:46:09,960 Speaker 1: active hours on the system. Now, remember these validators are 728 00:46:10,040 --> 00:46:14,080 Speaker 1: necessary to make sure that transactions actually get verified or 729 00:46:14,080 --> 00:46:17,359 Speaker 1: else the whole system just doesn't work as a financial system. 730 00:46:17,400 --> 00:46:20,680 Speaker 1: So if someone's not pulling their weight, then they might 731 00:46:20,719 --> 00:46:24,640 Speaker 1: also see their steak get dinged as a result. Now 732 00:46:24,680 --> 00:46:27,960 Speaker 1: that being said, proof of steak does have some pretty 733 00:46:27,960 --> 00:46:30,600 Speaker 1: big advantages as well. One of those is that proof 734 00:46:30,640 --> 00:46:35,000 Speaker 1: of steak approach, generally speaking, has a lower resource requirement 735 00:46:35,239 --> 00:46:38,840 Speaker 1: than proof of work, or at least lower resource requirements 736 00:46:38,840 --> 00:46:41,799 Speaker 1: than proof of work systems that are as active as 737 00:46:41,800 --> 00:46:45,880 Speaker 1: say bitcoins. When a proof of work cryptocurrencies value increases, 738 00:46:46,400 --> 00:46:51,000 Speaker 1: as I said earlier, it incentivizes people to mind the cryptocurrency, 739 00:46:51,239 --> 00:46:54,640 Speaker 1: so the overall computational power in that system goes up, 740 00:46:54,719 --> 00:46:58,719 Speaker 1: as do the resource requirements to run those systems. But 741 00:46:58,800 --> 00:47:02,160 Speaker 1: proof of stake doesn't rely on computer systems racing against 742 00:47:02,160 --> 00:47:04,160 Speaker 1: each other to come up with the right answers, so 743 00:47:04,560 --> 00:47:09,000 Speaker 1: you don't see this cycle of escalation, and thus you 744 00:47:09,040 --> 00:47:13,560 Speaker 1: don't see this need for increased amounts of processing power 745 00:47:13,640 --> 00:47:16,759 Speaker 1: being thrown at the system. Now, does this mean that 746 00:47:16,800 --> 00:47:19,320 Speaker 1: a proof of stake system will always be less resource 747 00:47:19,440 --> 00:47:22,440 Speaker 1: hungry than a proof of work, not exactly, because it 748 00:47:22,480 --> 00:47:25,680 Speaker 1: actually depends, Like if you have a proof of work cryptocurrency, 749 00:47:25,880 --> 00:47:29,680 Speaker 1: but the cryptocurrency is practically worthless, like it's fractions of 750 00:47:29,680 --> 00:47:33,520 Speaker 1: a penny per unit, chances are there won't actually be 751 00:47:33,560 --> 00:47:37,760 Speaker 1: that many people who are bothering to mine that cryptocurrency 752 00:47:37,880 --> 00:47:40,799 Speaker 1: because it means they've spend more on the electricity they 753 00:47:40,800 --> 00:47:45,200 Speaker 1: were using than they were making as a minor. So 754 00:47:45,440 --> 00:47:48,680 Speaker 1: that leads to fewer people participating and the resource demand 755 00:47:48,840 --> 00:47:52,680 Speaker 1: for that particular system remains relatively low. If you have 756 00:47:52,719 --> 00:47:55,799 Speaker 1: a really healthy proof of stake system, you might have 757 00:47:55,920 --> 00:47:59,280 Speaker 1: lots of validators who are actively participating in that system, 758 00:47:59,280 --> 00:48:02,880 Speaker 1: and so the resource demand could be greater. So really, 759 00:48:03,000 --> 00:48:06,160 Speaker 1: like I said, it just depends upon the situation. But 760 00:48:06,200 --> 00:48:08,720 Speaker 1: it's pretty safe to say that if you had two 761 00:48:09,040 --> 00:48:12,719 Speaker 1: more or less equal systems, like the cryptocurrency was more 762 00:48:12,840 --> 00:48:15,759 Speaker 1: or less the same value, and one of them was 763 00:48:15,840 --> 00:48:18,080 Speaker 1: running on a proof of work system and the other 764 00:48:18,080 --> 00:48:20,200 Speaker 1: one was running on a proof of steak system, the 765 00:48:20,200 --> 00:48:24,200 Speaker 1: proof of steak one would likely require less processing power 766 00:48:24,560 --> 00:48:28,960 Speaker 1: and fewer resources to run. So proof of steak is 767 00:48:29,080 --> 00:48:33,520 Speaker 1: arguably the best known alternative to proof of work cryptocurrency systems, 768 00:48:34,120 --> 00:48:38,200 Speaker 1: But there are others. For example, there's proof of burn, 769 00:48:39,040 --> 00:48:41,239 Speaker 1: and it sounds like I'm making that up, but I'm 770 00:48:41,280 --> 00:48:45,799 Speaker 1: not so. Proof of burn was proposed as a way 771 00:48:45,800 --> 00:48:49,160 Speaker 1: of achieving the same thing as proof of work, but 772 00:48:49,320 --> 00:48:54,040 Speaker 1: without the escalating increase of resources and energy requirements. But 773 00:48:54,320 --> 00:48:58,560 Speaker 1: this one makes my head hurt, and it makes me 774 00:48:58,600 --> 00:49:04,040 Speaker 1: realize that I'm never truly going to understand cryptocurrency, blockchain, 775 00:49:04,200 --> 00:49:07,600 Speaker 1: or for that matter, finance. All right, So, in a 776 00:49:07,640 --> 00:49:11,560 Speaker 1: proof of burned system, participants who wish to have the 777 00:49:11,560 --> 00:49:16,200 Speaker 1: opportunity to verify the next block. In other words, they 778 00:49:16,280 --> 00:49:19,240 Speaker 1: want to be the one to mine the next block 779 00:49:19,360 --> 00:49:23,080 Speaker 1: and get the reward for it, they must first burn 780 00:49:23,600 --> 00:49:28,680 Speaker 1: virtual currency. That virtual currency might be the native cryptocurrency 781 00:49:28,719 --> 00:49:31,960 Speaker 1: of the system itself, or it might be some other 782 00:49:32,280 --> 00:49:36,520 Speaker 1: virtual currency, depending on the system. Some systems allow for either. 783 00:49:37,600 --> 00:49:40,399 Speaker 1: So what does burning actually mean? I mean, these are 784 00:49:40,400 --> 00:49:45,160 Speaker 1: all bits of digital information. What is there to burn? Well, 785 00:49:45,200 --> 00:49:49,040 Speaker 1: in this case, burning means sending virtual currency to an 786 00:49:49,040 --> 00:49:53,759 Speaker 1: address that is verified to be an unspindable account. In 787 00:49:53,760 --> 00:49:57,719 Speaker 1: other words, it can accept currency, but currency is never 788 00:49:57,760 --> 00:50:01,520 Speaker 1: gonna leave it. It will never a release that currency again. 789 00:50:01,840 --> 00:50:04,279 Speaker 1: So it's kind of like walking up to a bottomless 790 00:50:04,320 --> 00:50:07,839 Speaker 1: pit and just chucking some cash into that bottomless pit, 791 00:50:08,280 --> 00:50:11,520 Speaker 1: and in return for doing that, the system says, all right, 792 00:50:12,360 --> 00:50:15,200 Speaker 1: you will be considered for the job of writing the 793 00:50:15,239 --> 00:50:18,480 Speaker 1: next block on the block chain and thus getting a reward. 794 00:50:18,880 --> 00:50:22,360 Speaker 1: The more money you chuck into the bottomless pit, the 795 00:50:22,480 --> 00:50:26,440 Speaker 1: greater the chance that the system is going to choose you. 796 00:50:26,440 --> 00:50:28,440 Speaker 1: You could you know, system is saying, hey, look how 797 00:50:28,480 --> 00:50:31,880 Speaker 1: dedicated this person is. They're dumping their entire life savings 798 00:50:31,880 --> 00:50:35,719 Speaker 1: into a bottomless pit. Let's pick them now. Obviously, you 799 00:50:35,760 --> 00:50:38,080 Speaker 1: would never want to spend more money than you would 800 00:50:38,080 --> 00:50:41,319 Speaker 1: potentially earn back by writing more blocks to the chain. 801 00:50:42,440 --> 00:50:44,520 Speaker 1: But you could be playing the long game. You could 802 00:50:44,600 --> 00:50:48,520 Speaker 1: be making a big investment and thus burning a lot 803 00:50:48,560 --> 00:50:52,720 Speaker 1: of virtual currency early on, hoping that this will eventually 804 00:50:52,800 --> 00:50:56,280 Speaker 1: pay out over the long run, assuming that the currency 805 00:50:56,280 --> 00:50:59,040 Speaker 1: continues to hold its value or increase its value, and 806 00:50:59,040 --> 00:51:02,719 Speaker 1: that you you get picked multiple times to build the 807 00:51:02,760 --> 00:51:05,520 Speaker 1: next block in the blockchain. But when I read up 808 00:51:05,560 --> 00:51:08,720 Speaker 1: on how the proof of burn concept creates a system 809 00:51:08,760 --> 00:51:12,400 Speaker 1: that's more agile, that just confuses me. I had a 810 00:51:12,400 --> 00:51:17,240 Speaker 1: wall that represents the limit of my understanding, and trust me, guys, 811 00:51:18,160 --> 00:51:22,640 Speaker 1: despite having read multiple articles, I have not found a 812 00:51:22,760 --> 00:51:26,520 Speaker 1: crack in that wall of ignorance. Yet my ignorance has 813 00:51:26,560 --> 00:51:29,879 Speaker 1: more than met the challenge of my research. I've got 814 00:51:29,880 --> 00:51:32,920 Speaker 1: a couple more alternatives to proof of work and proof 815 00:51:32,920 --> 00:51:35,239 Speaker 1: of steak to talk about. Before I get to those, 816 00:51:35,560 --> 00:51:46,680 Speaker 1: let's take one last break. All right, we've talked about 817 00:51:46,719 --> 00:51:49,120 Speaker 1: proof of work, proof of steak, and proof of burn, 818 00:51:49,400 --> 00:51:52,959 Speaker 1: but there's also proof of capacity. Now. In this system, 819 00:51:52,960 --> 00:51:55,760 Speaker 1: participants vi to be the ones to mind the next 820 00:51:55,760 --> 00:51:59,880 Speaker 1: block by providing hard drive space to the system. So 821 00:52:00,040 --> 00:52:03,040 Speaker 1: the more hard drive space you provide, the better the 822 00:52:03,120 --> 00:52:05,600 Speaker 1: chances are that you're going to be the one picked 823 00:52:05,920 --> 00:52:08,440 Speaker 1: to mind the next block and thus get the reward. 824 00:52:09,280 --> 00:52:13,719 Speaker 1: The system stores data in bunches called plots, which get 825 00:52:13,880 --> 00:52:18,000 Speaker 1: deposited on the hard drive space that participants are volunteering 826 00:52:18,360 --> 00:52:22,080 Speaker 1: to the system. So the more plots that you have 827 00:52:22,200 --> 00:52:25,120 Speaker 1: on your hard drive, the better the chances you'll get 828 00:52:25,160 --> 00:52:29,080 Speaker 1: selected to mind the next block. So again, providing more 829 00:52:29,080 --> 00:52:33,240 Speaker 1: hard drive space gives you more opportunity to house plots. 830 00:52:33,800 --> 00:52:35,880 Speaker 1: The more plots you have, the better chance you have 831 00:52:36,000 --> 00:52:39,640 Speaker 1: to get the next round of rewards. But this approach 832 00:52:39,920 --> 00:52:43,080 Speaker 1: kind of does with hard drive space what bitcoin used 833 00:52:43,080 --> 00:52:46,000 Speaker 1: to do with graphics cards. You know, back in the day, 834 00:52:47,000 --> 00:52:51,920 Speaker 1: graphics cards were seen as being absolutely instrumental to a 835 00:52:51,960 --> 00:52:56,160 Speaker 1: successful bitcoin mining operation, and it made it really hard 836 00:52:56,280 --> 00:52:58,759 Speaker 1: to get hold of graphics cards as they came out 837 00:52:58,800 --> 00:53:01,400 Speaker 1: because bitcoin miners are buying them up and driving the 838 00:53:01,400 --> 00:53:05,759 Speaker 1: prices way way way up. These days, graphics cards don't 839 00:53:05,800 --> 00:53:09,839 Speaker 1: measure up to the requirements of bitcoin miners really, at 840 00:53:09,920 --> 00:53:14,359 Speaker 1: least not serious bitcoin miners. They've moved on to other systems. Uh, 841 00:53:14,560 --> 00:53:17,080 Speaker 1: graphics cards can still be hard to get sometimes though, 842 00:53:17,239 --> 00:53:19,600 Speaker 1: and occasionally you do have some bitcoin miners who are 843 00:53:19,640 --> 00:53:22,680 Speaker 1: still depending on them. They just have very little chance 844 00:53:22,760 --> 00:53:26,400 Speaker 1: of winning in a proof of work system. All right, 845 00:53:26,480 --> 00:53:31,359 Speaker 1: then we've got proof of elapsed time. This one comes 846 00:53:31,360 --> 00:53:36,200 Speaker 1: courtesy of Intel, as the company known for making processors 847 00:53:36,200 --> 00:53:41,000 Speaker 1: and such that Intel like Intel inside Intel, Well, they 848 00:53:41,160 --> 00:53:45,520 Speaker 1: created this algorithm which uses kind of a lottery based system, 849 00:53:45,560 --> 00:53:49,920 Speaker 1: so all participating nodes within this blockchain system have an 850 00:53:49,960 --> 00:53:54,799 Speaker 1: equal chance of winning. So the more nodes that participate, 851 00:53:54,880 --> 00:53:59,000 Speaker 1: the lower your odds are that you will win. Right Like, 852 00:53:59,280 --> 00:54:01,319 Speaker 1: It's like one of those sweepstakes where they say what 853 00:54:01,360 --> 00:54:03,160 Speaker 1: are the odds of winning, Well, the odds of winning 854 00:54:03,160 --> 00:54:06,200 Speaker 1: depend upon how many entries we get. If we get 855 00:54:06,200 --> 00:54:10,360 Speaker 1: two entries, your odds of winning are but if we 856 00:54:10,440 --> 00:54:13,520 Speaker 1: get a billion entries, it's going to be a different story. 857 00:54:13,840 --> 00:54:17,480 Speaker 1: Kind of similar. So the algorithm in this case creates 858 00:54:17,520 --> 00:54:22,000 Speaker 1: a random amount of time for each node in the system. 859 00:54:22,040 --> 00:54:25,759 Speaker 1: So each node is assigned a random amount of time 860 00:54:25,800 --> 00:54:30,439 Speaker 1: to quote unquote go to sleep. Essentially, it's saying this 861 00:54:30,480 --> 00:54:33,760 Speaker 1: is how long you have to wait before you indicate 862 00:54:33,800 --> 00:54:37,560 Speaker 1: that you're ready to validate a block of transactions. And 863 00:54:37,680 --> 00:54:40,960 Speaker 1: like I said, it's randomly generated for every single node, 864 00:54:41,600 --> 00:54:44,640 Speaker 1: So one node might get the equivalent of you have 865 00:54:44,719 --> 00:54:47,600 Speaker 1: to wait five minutes, and another node might be told 866 00:54:47,840 --> 00:54:49,799 Speaker 1: you have to wait ten minutes, and the next node 867 00:54:49,880 --> 00:54:52,719 Speaker 1: might be told you need to wait two minutes, and 868 00:54:52,760 --> 00:54:56,200 Speaker 1: then all the nodes go to sleep, and then the 869 00:54:56,239 --> 00:54:59,959 Speaker 1: first node that wakes up, So essentially the first node 870 00:55:00,000 --> 00:55:02,440 Speaker 1: that gets the node that gets the shortest amount of 871 00:55:02,440 --> 00:55:07,320 Speaker 1: time to wait winds. But this is again randomly generated, 872 00:55:07,360 --> 00:55:09,879 Speaker 1: so it is like a lottery. It's essentially the same 873 00:55:09,920 --> 00:55:14,279 Speaker 1: thing as being given a random number. And then you 874 00:55:14,440 --> 00:55:17,719 Speaker 1: have a drawing from a bunch of random numbers and 875 00:55:17,760 --> 00:55:21,560 Speaker 1: if yours matches, then you win. Our processors go into 876 00:55:21,560 --> 00:55:25,600 Speaker 1: sleep mode, so that means that they're not actually actively 877 00:55:25,760 --> 00:55:32,200 Speaker 1: processing on behalf of this system, and that means that 878 00:55:32,239 --> 00:55:35,520 Speaker 1: they're actually consuming slightly less power than a proof of 879 00:55:35,560 --> 00:55:39,600 Speaker 1: work system. That was the whole reason behind the creation 880 00:55:39,640 --> 00:55:43,439 Speaker 1: of proof of elapsed time algorithms. It's that it does 881 00:55:43,480 --> 00:55:46,359 Speaker 1: something similar to proof of work, but you don't actually 882 00:55:46,400 --> 00:55:51,520 Speaker 1: have all these processors dedicating all of their their resources 883 00:55:51,880 --> 00:55:56,040 Speaker 1: towards solving difficult math problems. So it does have a 884 00:55:56,160 --> 00:56:01,239 Speaker 1: lower energy requirement than proof of work systems. And um, yeah, 885 00:56:01,320 --> 00:56:04,279 Speaker 1: I'm just giving you an overview of all these concepts. 886 00:56:04,320 --> 00:56:07,919 Speaker 1: Like I'm not diving into super deep detail. Even as 887 00:56:07,960 --> 00:56:09,879 Speaker 1: long as this episode is, and I get it, it's 888 00:56:09,920 --> 00:56:14,720 Speaker 1: a long one. This is still scratching just the barest 889 00:56:14,800 --> 00:56:18,480 Speaker 1: of surfaces as far as these algorithms and UH and 890 00:56:18,520 --> 00:56:23,800 Speaker 1: financial systems go. And again, like once I started diving 891 00:56:23,840 --> 00:56:27,799 Speaker 1: down a little bit further, I get well beyond my understanding, 892 00:56:27,880 --> 00:56:31,479 Speaker 1: including how different approaches handle stuff like if a bad 893 00:56:31,520 --> 00:56:33,840 Speaker 1: actor is determined to try and leverage the system for 894 00:56:33,880 --> 00:56:37,279 Speaker 1: their own financial gain. So, for example, on that with 895 00:56:37,360 --> 00:56:40,520 Speaker 1: proof of work, you can have something called at attack. 896 00:56:41,640 --> 00:56:45,280 Speaker 1: This is when you get a group of cryptocurrency investors 897 00:56:45,320 --> 00:56:49,239 Speaker 1: who represent more than fifty of all hash mining capability. 898 00:56:49,560 --> 00:56:52,000 Speaker 1: You can think of it as more than of all 899 00:56:52,040 --> 00:56:57,160 Speaker 1: computational power dedicated to mining. If you were to get 900 00:56:57,840 --> 00:57:02,759 Speaker 1: or more of the my aiming capability in bitcoin to coordinate, 901 00:57:03,680 --> 00:57:07,560 Speaker 1: you could potentially manipulate the system. You could potentially create 902 00:57:08,320 --> 00:57:13,920 Speaker 1: verifications of transactions that break that that last block. You 903 00:57:13,920 --> 00:57:17,440 Speaker 1: couldn't go back in time and change stuff that's still immutable, 904 00:57:18,240 --> 00:57:21,680 Speaker 1: but for a current block of transactions, you could erase 905 00:57:21,840 --> 00:57:25,160 Speaker 1: a transaction that you did so that you would once 906 00:57:25,160 --> 00:57:28,360 Speaker 1: again have the bitcoin that you've already spent. You could 907 00:57:28,440 --> 00:57:33,520 Speaker 1: also monopolize the mining of the blocks, like you could 908 00:57:33,560 --> 00:57:38,560 Speaker 1: prevent anyone who's outside of that from successfully mining a 909 00:57:38,560 --> 00:57:42,560 Speaker 1: block and thus end up getting all of the reward 910 00:57:42,600 --> 00:57:48,120 Speaker 1: bitcoin for your group. This is a threat that has happened, 911 00:57:48,120 --> 00:57:51,280 Speaker 1: like we've actually seen these play out in some smaller 912 00:57:51,360 --> 00:57:55,360 Speaker 1: cryptocurrency markets. Uh, once it gets to a certain size, 913 00:57:55,480 --> 00:57:58,160 Speaker 1: it's very hard to coordinate on that kind of level. 914 00:57:58,440 --> 00:58:01,240 Speaker 1: There's just there are too many players that too too 915 00:58:01,800 --> 00:58:03,840 Speaker 1: involved in their own self interest to be able to 916 00:58:03,880 --> 00:58:06,760 Speaker 1: do that, but it has happened before with some of 917 00:58:06,840 --> 00:58:11,320 Speaker 1: the smaller cryptocurrency markets, you know. It's It's also something 918 00:58:11,360 --> 00:58:13,400 Speaker 1: that's even harder to do if you've got a proof 919 00:58:13,480 --> 00:58:17,520 Speaker 1: of steak model, because in order to have that kind 920 00:58:17,520 --> 00:58:19,800 Speaker 1: of level of influence with proof of steak, you have 921 00:58:19,880 --> 00:58:22,640 Speaker 1: to put forward an even larger steak. Same with like 922 00:58:22,960 --> 00:58:26,840 Speaker 1: the proof of burn model, right, it means that your 923 00:58:26,880 --> 00:58:32,560 Speaker 1: initial expense in order to have that leverage is so 924 00:58:32,640 --> 00:58:36,440 Speaker 1: high that it's not worth the payout. So there are 925 00:58:36,480 --> 00:58:39,880 Speaker 1: different ways to go about trying to stop bad actors 926 00:58:39,920 --> 00:58:45,600 Speaker 1: from tipping the system. But again, once you get beyond 927 00:58:45,960 --> 00:58:49,400 Speaker 1: these early explanations, it starts to get to a level 928 00:58:49,480 --> 00:58:53,680 Speaker 1: where I'm like scratching my head and left wondering what's 929 00:58:53,680 --> 00:58:56,800 Speaker 1: for dinner because it's the only thought I can even 930 00:58:57,160 --> 00:59:00,680 Speaker 1: manage to deal with at that point. I hope you 931 00:59:00,800 --> 00:59:03,560 Speaker 1: found this interesting and that you learned a bit about 932 00:59:03,600 --> 00:59:07,120 Speaker 1: proof of stake, the big alternative to proof of work. 933 00:59:08,160 --> 00:59:11,800 Speaker 1: We will have to see how these various philosophies play 934 00:59:11,840 --> 00:59:14,440 Speaker 1: out over time and whether or not they are successful. 935 00:59:14,640 --> 00:59:19,200 Speaker 1: It's still early days. Honestly, I'm still really curious what 936 00:59:19,320 --> 00:59:21,760 Speaker 1: happens in the long term with bitcoin, like we might 937 00:59:21,840 --> 00:59:24,680 Speaker 1: see the value of bitcoin continue to go up. There 938 00:59:24,680 --> 00:59:27,880 Speaker 1: are those who argue that it might be you know, 939 00:59:28,280 --> 00:59:34,160 Speaker 1: two dollars per bitcoin before too long. Um, maybe that 940 00:59:34,200 --> 00:59:39,120 Speaker 1: will happen. It would be scary to see in many ways, 941 00:59:39,600 --> 00:59:43,640 Speaker 1: because again, that volatility is something that worries me in 942 00:59:43,680 --> 00:59:46,440 Speaker 1: the long run. Also, I should point out that a 943 00:59:46,480 --> 00:59:50,600 Speaker 1: lot of people who are real evangelists for cryptocurrency, I 944 00:59:50,680 --> 00:59:53,680 Speaker 1: get the sense, and maybe this isn't even conscious, but 945 00:59:53,760 --> 00:59:56,880 Speaker 1: I get the sense that part of their enthusiasm, or 946 00:59:56,880 --> 01:00:00,320 Speaker 1: a great deal of their enthusiasm, is that if they 947 01:00:00,360 --> 01:00:07,000 Speaker 1: get more people on board with cryptocurrency, cryptocurrency values generally 948 01:00:07,080 --> 01:00:11,320 Speaker 1: start to increase. There there becomes this sort of speculation 949 01:00:11,920 --> 01:00:14,600 Speaker 1: where more people start to invest and that drives the 950 01:00:14,680 --> 01:00:18,640 Speaker 1: value of the cryptocurrency up. So if you already have 951 01:00:18,680 --> 01:00:22,400 Speaker 1: a steak in cryptocurrency, it looks like there's kind of 952 01:00:22,440 --> 01:00:26,840 Speaker 1: an incentive to get more people on board, and that 953 01:00:27,120 --> 01:00:33,120 Speaker 1: feeds into this sort of evangelical approach to talking about cryptocurrency, 954 01:00:33,160 --> 01:00:38,200 Speaker 1: and that strikes me as a bit ikey, because when 955 01:00:38,240 --> 01:00:40,240 Speaker 1: I look at the proof of steak approach, for example, 956 01:00:40,760 --> 01:00:44,440 Speaker 1: I know I am never going to have a sufficient 957 01:00:44,520 --> 01:00:48,840 Speaker 1: number of cryptocurrency units in whatever system to be able 958 01:00:48,880 --> 01:00:52,480 Speaker 1: to participate in proof of steak. But what I might 959 01:00:52,520 --> 01:00:55,280 Speaker 1: be doing is by getting involved in one of these, 960 01:00:55,360 --> 01:00:57,800 Speaker 1: I might help drive the value of the currency up, 961 01:00:57,840 --> 01:01:01,320 Speaker 1: and so someone who already has a signal nificant investment 962 01:01:02,080 --> 01:01:05,840 Speaker 1: sees that investment increase. I'm essentially helping someone else get 963 01:01:05,880 --> 01:01:11,160 Speaker 1: even more wealthy. And while I don't mind helping other people, um, 964 01:01:11,400 --> 01:01:14,000 Speaker 1: I'd rather help the people who aren't wealthy at all 965 01:01:14,440 --> 01:01:18,720 Speaker 1: rather than help people who are wealthy get wealthier. I 966 01:01:19,120 --> 01:01:22,800 Speaker 1: would just like to direct that that sort of humanitarian 967 01:01:22,880 --> 01:01:26,600 Speaker 1: impulse towards folks where it would make a bigger difference 968 01:01:26,640 --> 01:01:30,960 Speaker 1: in their lives. But that's just me, and that was 969 01:01:31,040 --> 01:01:33,200 Speaker 1: proof of state versus proof of work. If you're curious, 970 01:01:33,200 --> 01:01:37,040 Speaker 1: that episode originally published October eleventh, two thousand twenty one, 971 01:01:37,560 --> 01:01:41,040 Speaker 1: so just last year. If you have suggestions for topics 972 01:01:41,120 --> 01:01:43,760 Speaker 1: actually cover in future episodes of Text Stuff, you just 973 01:01:43,800 --> 01:01:45,560 Speaker 1: want to reach out, you can do that in a 974 01:01:45,560 --> 01:01:47,720 Speaker 1: couple different ways. One way is to go to the 975 01:01:47,760 --> 01:01:51,000 Speaker 1: I Heart radio app, which is free to download and use, 976 01:01:51,120 --> 01:01:53,680 Speaker 1: and you navigate over to the tech Stuff page there's 977 01:01:53,720 --> 01:01:56,480 Speaker 1: little microphone icon that you can click on and leave 978 01:01:56,520 --> 01:01:59,440 Speaker 1: a voice message up to thirty seconds in length. That's 979 01:01:59,440 --> 01:02:01,680 Speaker 1: one way you can reach out to me. Another is 980 01:02:01,720 --> 01:02:04,360 Speaker 1: you can leave me a message on Twitter. The handle 981 01:02:04,480 --> 01:02:07,520 Speaker 1: is text stuff H s W and I'll talk to 982 01:02:07,560 --> 01:02:16,800 Speaker 1: you again really soon Y. Text Stuff is an I 983 01:02:16,920 --> 01:02:20,400 Speaker 1: heart Radio production. For more podcasts from I Heart Radio, 984 01:02:20,760 --> 01:02:23,920 Speaker 1: visit the i heart Radio app, Apple Podcasts, or wherever 985 01:02:24,000 --> 01:02:25,520 Speaker 1: you listen to your favorite shows.