WEBVTT - Rerun: Proof of Stake vs Proof of Work 0:00:04.400 --> 0:00:07.800 Welcome to tech Stuff, a production from I Heart Radio. 0:00:11.920 --> 0:00:14.600 Pay there and welcome to tech Stuff. I'm your host, 0:00:14.800 --> 0:00:17.960 Jonathan Strickland. I'm an executive producer with iHeart Radio. And 0:00:18.000 --> 0:00:20.680 how the tech are you? As you can probably tell, 0:00:21.200 --> 0:00:24.160 I'm still very much under the weather right now, and 0:00:24.480 --> 0:00:27.520 as such I'm not quite in the great condition to 0:00:27.600 --> 0:00:30.240 record a full episode, So instead I thought I would 0:00:30.240 --> 0:00:33.640 bring you this episode from last year for it's called 0:00:33.640 --> 0:00:36.280 proof of steak versus Proof of Work. It's all about 0:00:36.320 --> 0:00:42.040 cryptocurrency and blockchain and different ways to verify transactions and 0:00:42.080 --> 0:00:45.159 to add blocks to the chain. And I thought it 0:00:45.240 --> 0:00:47.760 was a good thing to cover because one of the 0:00:47.760 --> 0:00:52.040 big stories for crypto is that you know, ethereum making 0:00:52.080 --> 0:00:55.600 this transition from proof of work to proof of steak, 0:00:56.360 --> 0:00:58.680 but also just the fact that crypto in general has 0:00:58.720 --> 0:01:02.800 had a very bad a year. I mean, you know, economically, 0:01:02.880 --> 0:01:06.360 everyone's having a pretty bad year, and crypto is no exception. 0:01:06.480 --> 0:01:11.520 It has had massive drops in value already multiple times. 0:01:11.520 --> 0:01:14.840 It's always in the tech headlines. So I thought it 0:01:14.840 --> 0:01:16.960 would be good to go back over this talk about 0:01:17.000 --> 0:01:21.480 the two different approaches and UH and how they work, 0:01:21.680 --> 0:01:24.600 and the pros and cons of each, so I hope 0:01:24.640 --> 0:01:30.360 you enjoy proof of steake versus proof of work. One 0:01:30.400 --> 0:01:32.360 thing that I have covered in the past on this 0:01:32.360 --> 0:01:37.440 show is cryptocurrency and blockchain, but I pretty much always 0:01:37.440 --> 0:01:42.200 talk about blockchain in terms of proof of work. Cryptocurrencies 0:01:42.240 --> 0:01:45.640 and proof of work block chains and there are other types. 0:01:46.120 --> 0:01:48.280 So I thought we could go over some of this 0:01:48.440 --> 0:01:50.840 and talk about what all of this means and what 0:01:50.960 --> 0:01:53.920 the differences are. And to start off, we need to 0:01:53.960 --> 0:01:56.480 talk about proof of work. Even though I've done it before, 0:01:56.920 --> 0:02:00.360 We've got to establish that first. So when you've heard 0:02:00.400 --> 0:02:04.600 me talk about how bitcoin mining, you know, is really 0:02:05.920 --> 0:02:11.240 equivalent to a computer solving a really hard math problem, 0:02:11.440 --> 0:02:14.679 or that your computer is essentially making the first accurate 0:02:14.800 --> 0:02:18.400 guests for a particularly large unknown number, you know, I've 0:02:18.440 --> 0:02:22.000 I've often kind of made that analogy. Proof of work 0:02:23.000 --> 0:02:27.880 is related to that. However, the actual concept of proof 0:02:27.960 --> 0:02:32.360 of work predates that of blockchain, or at least of 0:02:32.400 --> 0:02:38.880 blockchain in the term of cryptocurrencies. Blockchain itself also predates cryptocurrency. 0:02:39.240 --> 0:02:42.480 In fact, one could argue that the brilliance of bitcoin 0:02:42.680 --> 0:02:48.440 was bringing these different ideas together into a new format. 0:02:48.800 --> 0:02:52.800 So the proof of work concept was first described in 0:02:52.800 --> 0:02:58.080 a paper that Cynthia Dwark and Mony Nyor wrote back 0:02:58.160 --> 0:03:01.360 in the early nineties. They did not coin the phrase 0:03:01.440 --> 0:03:05.040 proof of work, but what they described effectively is proof 0:03:05.080 --> 0:03:08.400 of work. They were looking to solve a different problem 0:03:08.400 --> 0:03:11.720 from cryptocurrencies, you know, how do we create a system 0:03:11.720 --> 0:03:16.440 of which people can mine a digital currency and validate transactions. 0:03:16.960 --> 0:03:21.280 They were looking at ways to discourage spam email. Their 0:03:21.320 --> 0:03:25.960 paper is titled Pricing via Processing or Combating junk Mail. 0:03:26.440 --> 0:03:31.480 So one of the reasons that spam even exists is 0:03:31.520 --> 0:03:34.360 that it doesn't cost very much to send it out 0:03:34.760 --> 0:03:38.240 at a massive scale. If you had to hire people 0:03:38.520 --> 0:03:42.560 to manually type out spam messages or even just fill 0:03:42.640 --> 0:03:46.640 in the address bar in the email, that would be 0:03:46.760 --> 0:03:50.400 cost prohibitive because the return would be way too low. 0:03:51.160 --> 0:03:54.240 It's actually kind of hard to cite statistics on this 0:03:54.360 --> 0:03:56.640 because there are a lot of different metrics that are 0:03:56.720 --> 0:03:59.640 used in a lot of different time periods we can 0:03:59.680 --> 0:04:03.880 look at. But generally speaking, the response rate on spam, 0:04:03.920 --> 0:04:07.560 that is the percentage of people who actually not only 0:04:07.640 --> 0:04:10.000 open up a spam message, but they act on it 0:04:10.080 --> 0:04:14.640 in some way. That response rate is abysmally low. According 0:04:14.720 --> 0:04:17.479 to a study from the University of California, Berkeley, and 0:04:17.680 --> 0:04:20.159 you see San Diego. Back in two thousand and eight, 0:04:20.400 --> 0:04:26.040 only one in twelve point five million messages gets a response. 0:04:27.480 --> 0:04:31.760 That's way low. Right now, I'm not sure if the 0:04:31.839 --> 0:04:34.720 rate was much higher or if it was even lower 0:04:35.040 --> 0:04:38.520 back in the early nineties when the researchers were working 0:04:38.680 --> 0:04:43.159 on this concept to discourage spam. But when you've got 0:04:43.200 --> 0:04:46.080 a success rate that is that small, the question arises, 0:04:46.440 --> 0:04:49.520 how the heck can it be worthwhile? I mean, how 0:04:49.560 --> 0:04:53.120 can it be worth the time and effort of operating 0:04:53.160 --> 0:04:56.159 a business that sends out spam emails if you have 0:04:56.160 --> 0:04:59.799 a success rate that is that low. Well, the secret 0:05:00.160 --> 0:05:04.120 is to operate on an enormous scale. So, yeah, you're 0:05:04.160 --> 0:05:05.880 only getting one hit out of twelve and a half 0:05:05.880 --> 0:05:09.760 million people, but you're sending out emails to hundreds of 0:05:09.839 --> 0:05:12.520 millions of people. You also have to have a very 0:05:12.560 --> 0:05:15.240 low cost of operation. You know, it can't cost much 0:05:15.279 --> 0:05:18.440 to actually do your business, and you have to have 0:05:18.600 --> 0:05:22.560 a pretty enormous return. When you do have a success, 0:05:22.560 --> 0:05:27.200 like when you get a hit, it's significant, and preferably 0:05:27.200 --> 0:05:30.440 you have all of these at the same time. Keeping 0:05:30.480 --> 0:05:33.560 costs low is a huge part of this with database 0:05:33.720 --> 0:05:39.159 is full of email addresses, automated systems that use boilerplate copy, 0:05:39.560 --> 0:05:43.320 and you know, an automated Robocolors style email program that 0:05:43.360 --> 0:05:46.320 can plug addresses in and and attach it to this 0:05:46.400 --> 0:05:51.120 boiler plate. You can really churn those suckers out. If 0:05:51.120 --> 0:05:54.080 you get a bit over zealous, then you might make 0:05:54.279 --> 0:05:57.960 authorities upset and they might come at you and want 0:05:58.040 --> 0:06:00.800 you to answer some questions. That can be a problem. 0:06:00.800 --> 0:06:04.240 We've seen that happen where spam operations got shut down 0:06:04.279 --> 0:06:07.320 because you know, local politicians got fed up with it 0:06:07.400 --> 0:06:10.960 and started looking into it. But you know, you can 0:06:11.160 --> 0:06:15.440 make a profit working this way. You just again, you 0:06:15.520 --> 0:06:19.599 have to be brutal with cost control in order to 0:06:19.640 --> 0:06:22.960 make this work at scale. So the researchers wanted to 0:06:23.000 --> 0:06:25.880 find ways to make the cost of operation go up. 0:06:26.440 --> 0:06:29.440 Even if it only went up bild tiny little bit, 0:06:29.680 --> 0:06:32.120 that could be enough to wipe out the return on 0:06:32.240 --> 0:06:37.520 investment for spam operators and they would likely abandon the practice. 0:06:38.000 --> 0:06:40.279 If there's no money to be made, then there's no 0:06:40.360 --> 0:06:43.880 reason to send out spam. Right. If you could actually 0:06:43.920 --> 0:06:47.000 make it expensive enough, then it would cost more money 0:06:47.040 --> 0:06:50.720 to send out spam. Then you would recoup whenever you 0:06:50.839 --> 0:06:55.320 got those rare successful responses, and that would definitely bring 0:06:55.400 --> 0:06:58.360 the practice to an end. So let's say you're looking 0:06:58.400 --> 0:07:00.640 at folks who are sending spam out and you're trying 0:07:00.640 --> 0:07:03.000 to discourage them. You're trying to find a way so 0:07:03.040 --> 0:07:06.880 that the spammers give up on what they're doing. Now, 0:07:06.880 --> 0:07:10.320 if you could just put a price on sending an email, 0:07:11.240 --> 0:07:13.640 that would probably do it right. There is a price 0:07:13.680 --> 0:07:19.800 on sending email because operating a computational device has energy requirements, 0:07:20.040 --> 0:07:21.640 and that means you have to pay an energy bill 0:07:21.680 --> 0:07:24.160 at some point. But you want that price to be 0:07:24.200 --> 0:07:26.640 even higher. You want to just attach it straight to 0:07:27.000 --> 0:07:31.720 an email specifically, not just operating a computer. So let's 0:07:31.760 --> 0:07:34.720 say that you decide that all emails will cost a 0:07:34.840 --> 0:07:38.440 fraction of assent to spend to to send one. So 0:07:38.880 --> 0:07:41.480 if you're gonna send an email, you're gonna get charged, 0:07:41.960 --> 0:07:45.600 you know, a fraction of one penny for normal folks 0:07:45.640 --> 0:07:48.160 just sending on emails. It would be such a small 0:07:48.240 --> 0:07:51.240 charge that you probably wouldn't notice. I mean, you wouldn't 0:07:51.280 --> 0:07:54.520 be happy about it, but it's not like it would 0:07:54.560 --> 0:07:56.880 amount too much. If you're sending out maybe ten emails 0:07:56.880 --> 0:07:59.760 a day. Maybe you're getting close to spending half of 0:08:00.040 --> 0:08:03.480 any That would not be a big deal, right, But 0:08:03.560 --> 0:08:06.480 for organizations they are trying to blast out hundreds of 0:08:06.520 --> 0:08:11.560 millions of messages, it quickly becomes cost prohibitive. But this 0:08:11.720 --> 0:08:15.280 approach comes with all sorts of problems because normal folks 0:08:15.440 --> 0:08:17.760 wouldn't be thrilled at having to pay even a fraction 0:08:17.760 --> 0:08:20.360 of a cent to send email. Like, even if you 0:08:20.440 --> 0:08:23.960 framed it that way, people would object. They'd say, why 0:08:24.040 --> 0:08:28.840 are you making it cost me anything to send something electronically? 0:08:28.840 --> 0:08:32.880 There are no physical components to to be handled in this. 0:08:33.520 --> 0:08:35.960 Plus you'd have to set up some sort of payment 0:08:36.000 --> 0:08:38.400 system in the first place, And and whom are you 0:08:38.480 --> 0:08:42.920 paying to whom does the money go? This This makes 0:08:42.960 --> 0:08:46.640 it a difficult and thus unworkable solution. So the authors 0:08:46.679 --> 0:08:50.480 of the paper suggested an alternative. Instead of charging money 0:08:50.559 --> 0:08:54.959 outright to send an email, why not build into email 0:08:55.040 --> 0:08:59.840 systems a processing requirement, as in a computer process or requirement. 0:09:00.200 --> 0:09:03.679 Time someone wants to send an email, their computer must 0:09:03.800 --> 0:09:07.800 first solve a mathematical problem. Uh. And in order to 0:09:07.800 --> 0:09:12.439 solve a mathematical problem, the computer must expend resources. It's 0:09:12.440 --> 0:09:16.079 got to send, spend some of its processing capability on 0:09:16.400 --> 0:09:19.960 solving this problem and also some of its time. The 0:09:19.960 --> 0:09:24.559 difficulty of the problem would require some amount of computational 0:09:24.559 --> 0:09:28.320 output that's equivalent to a fraction of assent. In other words, 0:09:28.760 --> 0:09:33.560 you technically you're still charging folks to use email, but 0:09:33.679 --> 0:09:38.480 the cost is in effort and time, not directly in money, 0:09:38.960 --> 0:09:42.000 and that is something that people would probably be a 0:09:42.000 --> 0:09:44.960 little more receptive to. And again, for the average person, 0:09:45.080 --> 0:09:48.240 they probably wouldn't even notice sending an email might take 0:09:48.280 --> 0:09:51.440 a little longer than it did before, but not by 0:09:51.440 --> 0:09:53.840 so much that they would make that big of a difference. 0:09:54.280 --> 0:09:56.520 So their computer would have to solve some sort of 0:09:56.600 --> 0:10:00.320 mathematical problem, and the proof of the solution would to be, 0:10:00.800 --> 0:10:04.480 you know, signed into the email itself. The problem would 0:10:04.520 --> 0:10:07.600 need to be difficult to solve but easy to verify. 0:10:07.760 --> 0:10:10.640 So in other words, you you cannot send us email 0:10:11.280 --> 0:10:16.120 until whatever system is handling it verifies that you did 0:10:16.360 --> 0:10:19.000 solve the problem. It's kind of like you're not allowed 0:10:19.000 --> 0:10:21.320 to go to bed without your parents checking to make 0:10:21.360 --> 0:10:24.600 sure you did your homework first, same kind of idea. 0:10:25.000 --> 0:10:27.520 So it needed to be the kind of problem where 0:10:27.520 --> 0:10:31.160 you have to work out an answer, and that part 0:10:31.280 --> 0:10:34.240 is hard, But once you have the answer, it's very 0:10:34.280 --> 0:10:37.160 easy to plug that answer into the original problem and 0:10:37.240 --> 0:10:39.959 see that it works. So you can think of something 0:10:40.000 --> 0:10:43.560 like an algebraic equation and it has an unknown value 0:10:43.559 --> 0:10:46.120 in it that you represent as a variable, the classic 0:10:46.160 --> 0:10:50.080 being the letter X. Well, once you solve this equation, 0:10:50.559 --> 0:10:54.480 and you solve for x, you can then plug that 0:10:54.760 --> 0:10:59.600 solution that x value back into the original equation and 0:10:59.640 --> 0:11:02.720 prove that it works well. Their approach was sort of 0:11:02.760 --> 0:11:07.080 the same thing, only much more complicated than that. Moreover, 0:11:07.240 --> 0:11:10.640 they pointed out that if after you implemented the solution, 0:11:10.840 --> 0:11:14.120 you saw spammers trying to, you know, power through it 0:11:14.520 --> 0:11:17.280 and just continue to spam despite the fact that you've 0:11:17.320 --> 0:11:22.440 put this computational requirement in the way, well, you can 0:11:22.559 --> 0:11:25.560 just adjust the difficulty of the problems that they have 0:11:25.679 --> 0:11:28.480 to solve before they can send out more emails. You 0:11:28.520 --> 0:11:33.040 make the problem tougher. Then it takes the computers more 0:11:33.120 --> 0:11:37.640 resources to solve the problems. So the harder the problem gets, 0:11:38.000 --> 0:11:42.360 the more quote unquote expensive it is to send an email. 0:11:43.000 --> 0:11:47.400 And once you get to that tipping point, then spammers 0:11:47.400 --> 0:11:50.320 will see that the amount of time and energy that 0:11:50.360 --> 0:11:52.520 they're using in order to just send out the spam 0:11:52.520 --> 0:11:57.520 emails is not offset by the amount they're making when 0:11:57.559 --> 0:12:01.480 the spam finally starts hitting. Response is this was a 0:12:01.520 --> 0:12:06.319 really interesting proposal. Now let's skip ahead to the two thousand's, 0:12:06.320 --> 0:12:08.560 like two thousand seven, two thousand eight. It was in 0:12:08.600 --> 0:12:10.800 two thousand eight that we first got a white paper 0:12:10.840 --> 0:12:14.200 written by someone using or someone or some some people 0:12:14.440 --> 0:12:19.760 potentially using the pseudonym Satoshi Nakamoto, and this was the 0:12:19.840 --> 0:12:24.600 famous white paper describing Bitcoin. Now, in this piece, the 0:12:24.679 --> 0:12:29.280 author or authors combined the proof of work concept with 0:12:29.360 --> 0:12:33.319 another one that again predated bitcoin, and that was blockchain. 0:12:34.040 --> 0:12:38.679 What blockchain does is establish a timeline of events of 0:12:38.720 --> 0:12:42.600 some sort. So in the case of bitcoin, the events 0:12:42.679 --> 0:12:47.520 are transactions, so their bitcoin transactions when bitcoin changes hands 0:12:47.559 --> 0:12:52.200 from one entity to another. And let's think about timelines 0:12:52.360 --> 0:12:55.839 for a second. In our experience, there is no way 0:12:56.160 --> 0:12:58.839 to travel back in time. The only way to travel 0:12:58.880 --> 0:13:01.400 through time is the way we all do it normally, 0:13:01.920 --> 0:13:06.120 where time progresses forward for us. There's no turning back. 0:13:06.520 --> 0:13:09.520 So that dumb thing you did when you were a kid, 0:13:10.080 --> 0:13:12.360 you know you know which dumb thing I'm talking about. 0:13:12.480 --> 0:13:15.240 It's that dumb thing where sometimes when you're just trying 0:13:15.240 --> 0:13:18.800 to fall asleep, your brain digs up this dumb thing 0:13:18.880 --> 0:13:22.040 and says, hey, remember when you did that dumb thing, 0:13:22.400 --> 0:13:25.800 and do you remember how horrible you feel about it? Now? Well, 0:13:25.800 --> 0:13:28.120 that that dumb thing you did, there's no way for 0:13:28.120 --> 0:13:30.520 you to go back in time and to not do 0:13:30.600 --> 0:13:34.200 that dumb thing. You can't erase it. It's in the timeline. 0:13:34.640 --> 0:13:38.120 And really everything that's happened to you afterward in your 0:13:38.160 --> 0:13:41.800 life has that dumb thing factored into it at least 0:13:41.840 --> 0:13:45.480 on some level. Even if it's undetectable, it's there because 0:13:45.480 --> 0:13:50.720 it happened you know that dumb, dumb thing. Well. Blockchain 0:13:50.840 --> 0:13:56.280 is a computational process that establishes something similar to a timeline. 0:13:56.720 --> 0:14:00.080 The idea is that with a blockchain, you have of 0:14:00.240 --> 0:14:05.000 a timeline of processes, and this timeline is also unalterable. 0:14:05.080 --> 0:14:09.320 Someone cannot go back earlier into the timeline, travel back 0:14:09.440 --> 0:14:13.280 into the blockchain, and make a change, because if they did, 0:14:13.760 --> 0:14:16.240 it would mean that all the later blocks in the 0:14:16.320 --> 0:14:19.440 chain would also have to change, and folks would notice that. 0:14:19.960 --> 0:14:23.560 Because the chain preserves the timeline, everything is built on 0:14:23.680 --> 0:14:28.480 what has come before, So changing something from before would 0:14:28.600 --> 0:14:32.400 change everything that comes afterward, and and the the jig 0:14:32.440 --> 0:14:36.280 would be up. You would be found out immediately. So, 0:14:37.280 --> 0:14:40.720 for example, if you spent bitcoin and then you thought, 0:14:40.880 --> 0:14:43.840 I'm gonna get sneaky, and I'm gonna wait a while, 0:14:44.240 --> 0:14:45.760 and after a while, I'm going to go into the 0:14:45.760 --> 0:14:49.360 blockchain and alter that that record so that I didn't 0:14:49.600 --> 0:14:52.640 spend that bitcoin, and then I magically get the bitcoin back. 0:14:52.680 --> 0:14:56.000 It would be as if money were just magically appearing 0:14:56.000 --> 0:15:00.800 inside your wallet. Well, because all future trans actions are 0:15:00.920 --> 0:15:04.720 built upon past ones, going in and trying to alter 0:15:04.800 --> 0:15:08.120 the blockchain would become visible all the way down and 0:15:08.200 --> 0:15:11.160 you would immediately be found out. So that's how the 0:15:11.160 --> 0:15:16.360 blockchain protects the order of processes that once you start 0:15:16.480 --> 0:15:23.440 to validate a block of transactions, it is cemented effectively. Now, 0:15:23.440 --> 0:15:27.480 occasionally the chain might fork, but at some point one 0:15:27.880 --> 0:15:31.600 branch of this chain is going to be longer than 0:15:31.640 --> 0:15:34.440 the others and it becomes the true chain. The other 0:15:34.560 --> 0:15:39.320 branches become orphaned blocks. Uh. So over time you will 0:15:39.360 --> 0:15:42.840 see things split off from the blockchain, but whichever one 0:15:42.920 --> 0:15:45.760 gets built on the most within a given amount of 0:15:45.800 --> 0:15:52.760 time becomes the true chain. Alright, So blockchains this digital 0:15:52.800 --> 0:15:56.840 method of establishing a series of unalterable processes. Where does 0:15:56.920 --> 0:16:00.880 proof of work come in? All right, So one thing 0:16:00.960 --> 0:16:05.440 that's used a lot in computer science are hash functions. 0:16:05.880 --> 0:16:08.800 These are a little tricky to talk about, all right, 0:16:08.880 --> 0:16:12.400 So first let's talk about encryption. And I want to 0:16:12.440 --> 0:16:15.560 point out right away at the very beginning, encryption is 0:16:15.600 --> 0:16:20.080 not the same thing as a hash function. Encryption is 0:16:20.120 --> 0:16:23.560 where you have some data and you perform a mathematical 0:16:23.640 --> 0:16:28.480 process on that data, and you transform it into different data, 0:16:28.600 --> 0:16:32.000 something that looks absolutely meaningless. You've jumbled it up. No 0:16:32.120 --> 0:16:34.360 one can make head or tail of it just by 0:16:34.400 --> 0:16:38.080 looking at it. But someone with the correct decryption key 0:16:38.280 --> 0:16:42.520 can reverse that process and get at the original data 0:16:42.640 --> 0:16:46.920 and read whatever it was you wrote. That is reversible. 0:16:47.280 --> 0:16:52.200 That is encryption and decryption. Hashing is not reversible. You've 0:16:52.240 --> 0:16:54.880 got some data, all right, let's say it's even the 0:16:54.880 --> 0:16:56.680 same message. Is what we were just talking about with 0:16:56.760 --> 0:17:00.280 encryption and decryption, and you have an operation that is 0:17:00.360 --> 0:17:03.560 one way, which means you can perform this operation on 0:17:03.680 --> 0:17:06.560 the data and you will get a result, But there's 0:17:06.600 --> 0:17:09.760 no reverse process where you can take that result and 0:17:09.840 --> 0:17:13.639 turn it back into the original data. Frequently, hash functions 0:17:13.680 --> 0:17:17.320 have a set number of characters that they will generate 0:17:17.400 --> 0:17:20.760 no matter what original value you plug in. So let's 0:17:20.760 --> 0:17:23.880 say that you've got a hash function that will generate 0:17:23.920 --> 0:17:28.960 an eighty character hash once you apply the function to 0:17:29.119 --> 0:17:33.600 the incoming data. That means your result will have eighty characters. 0:17:33.920 --> 0:17:37.800 Whether your incoming data is a one or if it's 0:17:37.800 --> 0:17:41.040 a one billion or any other number, you end up 0:17:41.080 --> 0:17:45.080 with an eighty character hash. Hashes can be collections of 0:17:45.200 --> 0:17:48.760 letters and numbers, and there are lots of different hash functions, 0:17:49.160 --> 0:17:53.119 which is what proof of work cryptocurrency kind of really 0:17:53.200 --> 0:17:56.399 depends upon. And and here's where we get to the 0:17:56.520 --> 0:18:00.320 key bit. The proof of work cryptocurrencies create a hash 0:18:00.560 --> 0:18:03.280 that is based off the block of transactions that need 0:18:03.359 --> 0:18:06.280 to be verified, as in the next block to join 0:18:06.400 --> 0:18:11.119 the chain. But it doesn't just involve the hash of 0:18:11.160 --> 0:18:15.200 that block or the hashing of that block. The hash 0:18:15.520 --> 0:18:21.040 also incorporates the hash from the previous block of verified transactions, 0:18:21.040 --> 0:18:23.720 the one that came right before. This is where we 0:18:23.800 --> 0:18:26.400 have that link that ultimately goes all the way back 0:18:26.440 --> 0:18:31.119 to the first block, right because block two's hash incorporates 0:18:31.119 --> 0:18:35.119 the hash from block one. Block three's hash incorporates the 0:18:35.119 --> 0:18:38.639 hash from block two, which, as we just mentioned, incorporates 0:18:38.640 --> 0:18:42.600 the hash of block one. So this continues from block 0:18:42.720 --> 0:18:45.879 number one all the way down to the last block 0:18:45.920 --> 0:18:49.680 in the chain. All right, so the bitcoin system generates 0:18:49.720 --> 0:18:53.320 this hash. You've got this value in front of you. 0:18:53.760 --> 0:18:57.840 It's a hash value. You have no idea what information 0:18:57.880 --> 0:19:01.919 went into this to create this hash. Computers connected, you know, 0:19:02.000 --> 0:19:05.400 the nodes connected to the system are essentially all trying 0:19:05.400 --> 0:19:10.840 to figure out how the system generated this specific hash. 0:19:11.119 --> 0:19:13.840 And again, the process isn't reversible, so it's not like 0:19:13.880 --> 0:19:16.320 you can take the hash value that the system presents 0:19:16.480 --> 0:19:20.960 and then reverse engineer it. Instead, essentially you have to 0:19:21.080 --> 0:19:26.879 guess what value would have created this particular hash using 0:19:26.880 --> 0:19:30.320 the hash function of the algorithm. You're you're trying to 0:19:30.359 --> 0:19:34.679 figure out what number was it that made this happen, Essentially, 0:19:35.200 --> 0:19:37.959 And I'll give a really oversimplified kind of idea of 0:19:37.960 --> 0:19:40.399 how this works just in case you're having some trouble 0:19:40.440 --> 0:19:43.960 with it. So again this is an oversimplification. But let's 0:19:44.000 --> 0:19:48.280 say I tell you the answer to this math problem 0:19:48.440 --> 0:19:52.880 is six. What was the math problem? So all I've 0:19:52.920 --> 0:19:54.639 done is given you the answer, and I'm asking you 0:19:54.720 --> 0:19:57.119 what math problem did I do? That gave me the 0:19:57.119 --> 0:20:01.919 answer six, And you could say four plus two, you 0:20:01.960 --> 0:20:06.480 could say two times three, you could say sixteen minus ten, 0:20:06.720 --> 0:20:10.240 and so on. And the point is there's an infinite 0:20:10.359 --> 0:20:13.760 number of potential answers, right, Like, you could say all 0:20:13.800 --> 0:20:16.680 sorts of different things that would be accurate in that 0:20:16.880 --> 0:20:20.000 it would it would create a six, But it doesn't 0:20:20.040 --> 0:20:23.720 necessarily mean that that was the math problem I did, right, 0:20:24.640 --> 0:20:28.880 You're just guessing until someone hits the right math problem. Well, 0:20:28.880 --> 0:20:32.080 in a way, that's what the computer nodes are doing 0:20:32.200 --> 0:20:38.600 within a proof of work blockchain system like Bitcoin, and 0:20:38.680 --> 0:20:43.200 the first computer to guess it correctly wins. Essentially, other 0:20:43.280 --> 0:20:47.000 computers in the system can verify that the guests is 0:20:47.040 --> 0:20:51.040 correct because once you have a guess, then you can 0:20:51.080 --> 0:20:55.200 plug that into the hashing formula and find out if 0:20:55.240 --> 0:20:58.800 in fact it generates the hash you were looking for. 0:20:59.400 --> 0:21:02.320 Then if it does, you got it right, and the 0:21:02.359 --> 0:21:05.639 winning computer system gets the reward of a certain amount 0:21:05.640 --> 0:21:09.959 of cryptocurrency units for bitcoin. Right now, that amount is 0:21:10.119 --> 0:21:14.920 six point to five bitcoins per block. Now, as I 0:21:15.000 --> 0:21:18.159 record this episode, the value of bitcoin is almost fifty 0:21:18.240 --> 0:21:22.840 seven thousand dollars so a six point to five reward 0:21:22.960 --> 0:21:26.000 is equal to nearly three hundred fifty five thousand bucks, 0:21:26.440 --> 0:21:29.560 and there are around one forty four blocks added to 0:21:29.600 --> 0:21:34.480 the chain per day at around three thousand dollars per block. 0:21:34.880 --> 0:21:39.359 So there is a huge financial incentive to run a 0:21:39.400 --> 0:21:43.560 computer system or network of systems that is the first 0:21:43.600 --> 0:21:46.120 to get to this right answer. Right. I mean, there's 0:21:46.160 --> 0:21:49.040 just an enormous amount of money to be made if 0:21:49.080 --> 0:21:52.359 you are number one, So there's a huge incentive to 0:21:52.400 --> 0:21:55.200 be number one. This is why you'll hear about bitcoin 0:21:55.280 --> 0:21:59.880 mining operations that have incredibly powerful machines just racing constantly 0:22:00.000 --> 0:22:03.120 to get the right answer. These machines need a lot 0:22:03.160 --> 0:22:06.800 of power, thus they need a lot of electricity. This 0:22:06.840 --> 0:22:09.479 means a lot of power consumption for any sort of 0:22:09.480 --> 0:22:13.760 proof of work cryptocurrency, with bitcoin obviously being the really 0:22:13.800 --> 0:22:16.520 big one, and that number can go through the roof 0:22:16.720 --> 0:22:21.720 as a currency's value increases, so bitcoin mining actually eats 0:22:21.760 --> 0:22:25.240 up more electricity than some countries do. I've got a 0:22:25.240 --> 0:22:27.399 lot more to say both about proof of work and 0:22:27.440 --> 0:22:38.240 its alternatives, but first let's take a quick break. So 0:22:38.400 --> 0:22:42.560 I left off talking about how bitcoin mining leads to 0:22:42.600 --> 0:22:47.919 the sort of escalation um with people putting more and 0:22:47.960 --> 0:22:51.960 more powerful systems at play to compete against one another 0:22:52.040 --> 0:22:55.600 and try and mind each block in a blockchain in 0:22:55.680 --> 0:22:58.480 order to get more and more bitcoin. This becomes a 0:22:58.560 --> 0:23:02.000 kind of a vicious cycle, right because as long as 0:23:02.040 --> 0:23:05.080 the amount of bitcoin you're getting back is greater than 0:23:05.119 --> 0:23:08.480 the investment you've put forward to try and get the bitcoin, 0:23:09.240 --> 0:23:15.359 it's profit. Right. If I'm spending you know, five dollars 0:23:15.480 --> 0:23:19.160 on a computer system and power needs like I'm I'm 0:23:19.200 --> 0:23:23.040 paying you know these rates to get electricity to power 0:23:23.080 --> 0:23:26.520 all these computers. If I'm if I spend half a 0:23:26.560 --> 0:23:30.280 million on that, well, really, I just I just need 0:23:30.320 --> 0:23:34.600 to successfully mine two blocks a bitcoin to pay off 0:23:34.600 --> 0:23:39.560 that investment. Right, then, as long as I'm hitting more 0:23:39.640 --> 0:23:44.320 success in the future frequently enough, I can offset the 0:23:44.400 --> 0:23:49.120 costs of operation and just keep making profit. So that's 0:23:49.119 --> 0:23:53.360 why it's so um tempting to get into the bitcoin 0:23:53.440 --> 0:23:58.280 mining is that? Yeah? At this point, being a serious 0:23:58.400 --> 0:24:01.240 mining operation means you to put in a huge amount 0:24:01.280 --> 0:24:04.400 of money because there are huge players out there already 0:24:04.440 --> 0:24:11.120 that are running ridiculously powerful computer networks, sometimes co located 0:24:11.720 --> 0:24:15.840 with power plants like you've got old coal based power 0:24:15.880 --> 0:24:17.840 plants in different parts of the world where people have 0:24:18.000 --> 0:24:21.760 built out bitcoin mining operations in the power plant itself 0:24:22.000 --> 0:24:26.479 in order to have direct access to electricity at all 0:24:26.600 --> 0:24:29.040 at a cost that's as low as they can possibly 0:24:29.040 --> 0:24:31.760 get it. And again it's so that you can get 0:24:31.800 --> 0:24:35.239 that that maximum amount of profit um and even then 0:24:35.240 --> 0:24:37.760 it's not guaranteed because there's so many of these systems 0:24:37.800 --> 0:24:42.639 all around the world. So this has obviously led to 0:24:42.800 --> 0:24:47.800 some people to have some objections to bitcoin because it 0:24:47.880 --> 0:24:52.959 has this kind of runaway UH consumption associated to it. 0:24:53.960 --> 0:24:57.080 And it also means that you could argue that bitcoin 0:24:57.160 --> 0:25:01.119 can be connected to things like carbon emissions and climate change, 0:25:01.160 --> 0:25:05.359 because if the power that is, you know, allowing these 0:25:05.440 --> 0:25:09.080 systems to operate, if it's coming from a power plant 0:25:09.119 --> 0:25:13.399 that's using fossil fuels, then that power plant is having 0:25:13.400 --> 0:25:18.120 to to generate enough electricity to send to these systems 0:25:18.200 --> 0:25:21.160 and thus consuming more and more fossil fuels and generating 0:25:21.160 --> 0:25:25.440 more carbon emissions. Now, there are some bitcoin defenders who 0:25:25.480 --> 0:25:28.800 say that the vast majority of bitcoin are connected to 0:25:28.840 --> 0:25:32.520 systems that are running on renewables. But even if you 0:25:32.560 --> 0:25:34.280