WEBVTT - How Bitcoin Works 0:00:01.360 --> 0:00:11.480 Welcome to Stuff you Should Know fromhouse Stuff Works dot com. Hey, 0:00:11.520 --> 0:00:13.760 and welcome to the podcast. I'm Josh Clark, and there's 0:00:13.800 --> 0:00:16.680 Charles W. Chuck Bryant, and uh, this is Stuff you 0:00:16.680 --> 0:00:20.959 Should Know the podcast the Tech Edition, which we don't 0:00:21.160 --> 0:00:24.760 dive into tech too much because that's that's Jay Strick 0:00:25.040 --> 0:00:30.160 and Lauren's territory. Yeah, and frankly, we're a little scared 0:00:30.160 --> 0:00:32.520 of our cohorts at Tech Stuff. They do a great job, 0:00:33.240 --> 0:00:37.040 but we've gotten so many requests for this topic that 0:00:37.200 --> 0:00:39.120 we were like, you know, we got we gotta satisfied 0:00:39.920 --> 0:00:41.559 the Stuff you should Know fans. We don't want them 0:00:41.560 --> 0:00:44.839 showing up with torches led by Moe the bartender at 0:00:44.840 --> 0:00:47.760 our door. You know, you know, this might be the 0:00:47.840 --> 0:00:52.879 most requested of all time. Possibly, Oh you think, I 0:00:52.920 --> 0:00:55.000 think it might be. I can't think of another one 0:00:55.080 --> 0:00:59.200 that that comes to mind. That was maybe like mormon Ism, Yeah, 0:00:59.240 --> 0:01:02.800 Mormonism apology. And I see accents a lot. People want 0:01:02.840 --> 0:01:04.600 to get to the bottom of accents. That would be 0:01:04.600 --> 0:01:06.880 a good one. We need to do that. You want 0:01:06.959 --> 0:01:11.280 to do that now? Instead? Crikey, that's good. I could do. 0:01:11.319 --> 0:01:14.959 How bad accents work? Do it? Do? Italian No, I'm 0:01:15.000 --> 0:01:18.440 not to your monkey. That's good stuff. It's not that 0:01:18.440 --> 0:01:21.080 I think you're my monkey. It's that you do um 0:01:21.400 --> 0:01:25.480 accents way better than me. No, meaning that I attempt 0:01:25.560 --> 0:01:27.360 them and do with them poorly, where you you don't 0:01:27.400 --> 0:01:32.160 even attempt them, and it is off the charts. It's 0:01:32.200 --> 0:01:38.880 not bad, so chuckers. Yes, you know much about money? Um, 0:01:39.040 --> 0:01:42.440 not much? No, No, I know that I got a 0:01:42.440 --> 0:01:44.959 few pennies in the bank and that's about it. How 0:01:45.000 --> 0:01:48.480 that works? Okay, Well, we've talked about money before. We 0:01:48.520 --> 0:01:51.760 where where was it that the first a lot of 0:01:51.800 --> 0:01:54.480 financial stuff? There was something we did recently where we 0:01:54.520 --> 0:01:59.400 were talking about how Mesopotamia the first system of wasn't 0:01:59.400 --> 0:02:02.080 it like the first coinage in China? Of course too. 0:02:03.480 --> 0:02:08.440 But um, nowadays, when we think money here in the U. S. 0:02:08.480 --> 0:02:11.359 At least, and in Canada and actually pretty much the 0:02:11.400 --> 0:02:15.240 world because the world uses dollars um, we think of 0:02:16.320 --> 0:02:20.320 paper money or coins printed by the U. S. Mint 0:02:20.400 --> 0:02:22.840 at the behest of the U. S. Treasury on behalf 0:02:22.919 --> 0:02:29.080 of the United States government banks are backed and insured. Clearly, 0:02:29.080 --> 0:02:31.480 we know that they're covered in case something goes wrong. Yeah, 0:02:31.480 --> 0:02:34.920 because you and I are covering them buddy, Yeah, basically, 0:02:35.080 --> 0:02:38.320 but it wasn't this system that we take very much 0:02:38.400 --> 0:02:42.680 for granted now of you know ones, fives, tens, twenties, hundreds, 0:02:42.760 --> 0:02:45.160 and then there were some other ones. This is fairly new. 0:02:45.280 --> 0:02:47.239 It was just the beginning of the twentieth century that 0:02:47.280 --> 0:02:52.800 the Federal Reserve was created. Before that and during the 0:02:52.840 --> 0:02:55.679 Civil War era, I think maybe even post Civil War, 0:02:56.960 --> 0:03:02.200 there was there more than eight thousand different entities, typically banks, 0:03:02.720 --> 0:03:05.200 that we're printing their own currency. Yeah. Man, we talked 0:03:05.240 --> 0:03:07.800 about that. What was that? Was that the barter thing? Maybe? 0:03:07.880 --> 0:03:12.280 So yeah, but you're right, it's a great wall to 0:03:12.320 --> 0:03:16.720 go back to because it's so interesting and like, you know, 0:03:16.760 --> 0:03:18.359 if you're a bank, you can just be like, hey, 0:03:18.360 --> 0:03:20.400 I got a bunch of gold here, I'll print some 0:03:20.440 --> 0:03:22.560 money based on this, and I'm gonna put my picture 0:03:22.600 --> 0:03:24.560 on it, or maybe a picture of my favorite horse. 0:03:24.680 --> 0:03:29.760 This is a Jim At Fearson dollar exactly. See. Anyway, um, 0:03:29.919 --> 0:03:32.239 all that went to the wayside when the Federal Reserve 0:03:32.280 --> 0:03:36.080 came about, and then everybody's like stop, just the federal 0:03:36.120 --> 0:03:38.000 government can print money from now on, and we're gonna 0:03:38.000 --> 0:03:39.880 back it with golden and you know what, We're not 0:03:39.880 --> 0:03:42.080 gonna back with gold anymore. Let's just say you guys 0:03:42.120 --> 0:03:44.400 believe this has value, will go with that. Well, at 0:03:44.400 --> 0:03:47.520 that point that everyone's had bought in literally and figuratively, 0:03:47.600 --> 0:03:50.320 so exactly, so we went from the gold standard to 0:03:50.560 --> 0:03:53.840 a fiat currency, which is everybody, come make believe that 0:03:53.920 --> 0:03:56.960 this actually has value, and it actually will have have value. 0:03:56.960 --> 0:04:00.680 It's pretty magic. And that transition to a yeah currency 0:04:00.720 --> 0:04:03.440 gave birth to what we're going to to talk to today, 0:04:03.560 --> 0:04:05.240 or the possibility of what we're going to talk to 0:04:05.360 --> 0:04:08.400 about today, which is bitcoin, which is a real thing 0:04:08.480 --> 0:04:11.200 right now. It's you know, will it survive who knows, 0:04:11.280 --> 0:04:14.480 But as of the recording of this podcast, it is 0:04:14.520 --> 0:04:17.880 super legit and what about a billion dollars It may 0:04:17.960 --> 0:04:21.480 in fact be too legit to quit. Maybe. Um, I 0:04:21.880 --> 0:04:25.200 didn't see an estimated value of all the bitcoins and circulation. 0:04:25.279 --> 0:04:27.520 I saw that, but it, as we will find out, 0:04:27.640 --> 0:04:34.880 it fluctuates like on a minute to minute basiss next week. Yeah. Um, 0:04:34.960 --> 0:04:38.080 but like you said, though, the whole thing hasn't crashed. 0:04:38.480 --> 0:04:40.680 It may be what we're seeing is a bubble and 0:04:40.720 --> 0:04:44.080 then another bubble and they just bubbles bursting. But the 0:04:44.120 --> 0:04:47.520 system hasn't crashed, and that's because the system, the theory 0:04:47.560 --> 0:04:52.160 behind it, and the practice it turns out is extremely sound. Yeah. 0:04:52.600 --> 0:04:55.880 And what's even more awesome about bitcoin, which is, we 0:04:55.880 --> 0:05:03.040 should say the world's first digital, entirely digital, decentralized currency, um, 0:05:03.320 --> 0:05:06.640 is that it has a great origin story. It's shrouded 0:05:06.640 --> 0:05:10.000 in mystery. No one knows who created it, and the 0:05:10.000 --> 0:05:13.880 things that it's used for it can be shady and weird, 0:05:14.000 --> 0:05:16.479 and it's all just very you know, some of it's 0:05:16.480 --> 0:05:19.039 on the deep web, and it's just very interesting and 0:05:19.200 --> 0:05:22.919 like salacious, and it's very anarchistic in nature. It's there's 0:05:22.960 --> 0:05:25.720 no not only is it not backed by any government, 0:05:26.400 --> 0:05:30.280 it's not issued by any central authority. Yeah, it's part 0:05:30.480 --> 0:05:33.440 if you're part of the bitcoin network, then you are 0:05:33.600 --> 0:05:38.000 part of this the authority to issue it. Yeah. And 0:05:38.040 --> 0:05:41.120 it's actually technically it's mathematics that has the authority to 0:05:41.160 --> 0:05:43.359 issue bitcoins. Yeah. It took me while to wrap my 0:05:43.400 --> 0:05:46.400 head around it because it's such an entirely new thing 0:05:46.680 --> 0:05:49.960 and it's very complex. Yeah. And well, although it really 0:05:50.040 --> 0:05:52.359 isn't like when you break it down, that's what I 0:05:52.400 --> 0:05:54.360 had to eventually figure out. I studied enough, or I 0:05:54.400 --> 0:05:56.240 was like, oh wait, this is actually kind of simple 0:05:56.640 --> 0:05:59.159 and at the root of it all, as who wrote this, 0:05:59.240 --> 0:06:02.440 it's strickling, right, No, this is a Nathan Chandler. Um 0:06:02.600 --> 0:06:04.799 Chandler points out, at the root of it all, basically, 0:06:05.960 --> 0:06:08.279 all that you have to do to invent a currency 0:06:08.360 --> 0:06:11.800 is have enough people say this is currency, and then 0:06:11.880 --> 0:06:14.640 you have currency. Whether, like I said, whether it sticks around, 0:06:14.640 --> 0:06:16.880 who knows. But as of now there are enough people 0:06:17.720 --> 0:06:22.160 buying and selling bitcoins and use speculating and using bitcoins, well, 0:06:22.440 --> 0:06:25.479 that's that's trade. Then it's it's a thing. That's the 0:06:25.520 --> 0:06:27.600 other thing that gives it value is that if there's 0:06:27.640 --> 0:06:30.800 somebody out there who's willing to accept that currency for 0:06:30.880 --> 0:06:34.120 a pizza, then it has the value of a pizza 0:06:34.360 --> 0:06:37.839 at least. Right, So let's talk about the origin first. 0:06:38.440 --> 0:06:42.680 Uh sure, the origin. Back in two thousand eight, a 0:06:42.720 --> 0:06:51.039 mysterious pseudonym popped up, uh Satoshi Nakamoto. And we don't 0:06:51.040 --> 0:06:53.279 know if this is a lady or a man, or 0:06:53.480 --> 0:06:56.760 men or women or both, could be a group who knows, 0:06:57.760 --> 0:07:02.799 and uh they or he or she or it published 0:07:02.800 --> 0:07:06.640 a document that outlined what bitcoin was said, this is 0:07:06.680 --> 0:07:09.200 a new thing that we or I or me are 0:07:09.240 --> 0:07:13.640 trying to create. And I believe that person mented the 0:07:13.680 --> 0:07:17.320 first fifty coins himself or herself or themselves. Yeah, that 0:07:17.440 --> 0:07:20.280 was two thousand nine. And the document that that he 0:07:20.480 --> 0:07:25.960 she that Satoshi published, um, it was really groundbreaking because 0:07:25.960 --> 0:07:30.320 it it figured out a longstanding problem that was preventing 0:07:30.400 --> 0:07:33.640 digital currency from being established. And that was what was 0:07:33.760 --> 0:07:37.960 to prevent anybody from copying and pasting the code that 0:07:38.000 --> 0:07:40.360 makes up your digital currency and then using it again 0:07:40.400 --> 0:07:43.280 and again and again. Well, there's one easy way around it. 0:07:43.320 --> 0:07:45.600 You have a ledger, but you have to have somebody 0:07:45.640 --> 0:07:47.960 you trust to keep track of the ledger. And what 0:07:48.120 --> 0:07:51.880 Satoshi came up with and that what bitcoin does is 0:07:51.920 --> 0:07:56.520 it makes the ledger entirely public, so that everyone is 0:07:56.680 --> 0:08:00.160 working out the ledger and it's actually that process of 0:08:00.480 --> 0:08:03.000 keeping track of the ledger and who has what coin 0:08:03.040 --> 0:08:07.080 and what coin has been transferred to whom uh that 0:08:07.200 --> 0:08:10.400 actually mints new coins. So we need to step back 0:08:10.400 --> 0:08:12.400 and explain what's going on here, because I think people 0:08:12.400 --> 0:08:14.720 are already confused. If you don't know what bitcoin is, 0:08:14.760 --> 0:08:17.720 You're like, what are these guys talking about? Bitcoin is 0:08:18.160 --> 0:08:22.360 virtual money that you can now use online to buy 0:08:22.440 --> 0:08:27.600 and sell things and there are a number of retailers 0:08:27.600 --> 0:08:30.600 that are accepting this. Um, it's not just the deep web. 0:08:30.600 --> 0:08:32.839 We'll get to that in a minute. UM. And now 0:08:32.840 --> 0:08:36.000 they're even go between companies that allow you to I 0:08:36.040 --> 0:08:40.520 guess they uh not transfer, but they convert your real 0:08:40.559 --> 0:08:43.760 dollars into bitcoins too. You know, if you want to 0:08:43.760 --> 0:08:46.640 shop at like Macy's, let's say they convert your bitcoins 0:08:46.640 --> 0:08:49.280 into real dollars, bitcoins and real dollars the other way around. 0:08:49.360 --> 0:08:51.440 And Chandler points out a good way to think of 0:08:51.480 --> 0:08:55.920 bitcoins is it's a digital standing for cash because it's anonymous, exactly. 0:08:55.920 --> 0:08:58.600 And that's the big key. So if you want to 0:08:58.800 --> 0:09:01.800 buy things anonymously, or if you are a libertarian and 0:09:01.840 --> 0:09:04.040 you just want to stick it to the government, or 0:09:04.080 --> 0:09:06.360 if you don't trust the government, or you don't trust banks. 0:09:06.800 --> 0:09:10.400 A big thing that um Nakamoto preyed on was the 0:09:10.400 --> 0:09:14.400 financial collapse, obviously, and uh was basically like, hey, look around, 0:09:14.440 --> 0:09:16.880 what's going on, Like you're gonna trust your money there? 0:09:17.320 --> 0:09:19.720 Like why not trust this new thing. Let's give it 0:09:19.760 --> 0:09:22.640 a try. Let's give it a try. So basically, if 0:09:22.679 --> 0:09:24.120 there are a couple of different things you can do, 0:09:24.200 --> 0:09:28.240 you can either participate as just someone who buys bitcoins 0:09:28.240 --> 0:09:31.080 with your credit card or whatever and then uses them 0:09:31.120 --> 0:09:34.439 to shop. Chandler says that you can buy with credit cards, 0:09:34.440 --> 0:09:36.200 but I saw from a couple of different sources that 0:09:36.240 --> 0:09:39.080 like most places do not take credit cards, that you 0:09:39.120 --> 0:09:41.440 either have to give them your bank account or else 0:09:41.720 --> 0:09:44.640 figure out a way to pay cash, like using money. Graham, Well, 0:09:44.760 --> 0:09:47.160 that's been the more preferred way as of late, but 0:09:47.200 --> 0:09:49.480 they're still credit card people that will take a credit card. 0:09:50.280 --> 0:09:52.040 So the first thing you need to do is set 0:09:52.080 --> 0:09:54.920 up set up your wallet, and that is basically your account, 0:09:55.160 --> 0:09:58.679 your digital account, and then you buy bitcoins and they 0:09:58.679 --> 0:10:01.400 are in your account and you use them for whoever 0:10:01.440 --> 0:10:03.200 takes them right, and you buy them from like a 0:10:03.280 --> 0:10:08.320 central currency exchange, probably Mount Cox, although we'll talk about 0:10:08.360 --> 0:10:10.720 them in a minute too, but they've been handling about 0:10:10.760 --> 0:10:15.679 six of all bitcoin transactions. Um well, purchases of bitcoins 0:10:15.800 --> 0:10:18.280 you go to Mount Cox typically, So, like I said, 0:10:18.320 --> 0:10:19.800 one reason you might want to do this is if 0:10:19.800 --> 0:10:21.520 you don't trust the banks, or you're tired of the 0:10:21.520 --> 0:10:25.120 government getting involved in your money, or if you just 0:10:25.160 --> 0:10:27.280 want to save some money. Because what you're doing is 0:10:27.320 --> 0:10:30.319 you're skipping middlemen and so you're saving on a lot 0:10:30.360 --> 0:10:33.199 of transaction fees. Oh yeah, if you have you ever 0:10:33.280 --> 0:10:37.640 purchased something overseas through PayPal? No, not overseas. Oh man, 0:10:37.760 --> 0:10:43.000 it is expensive that pleas to Bitcoin has no central authority, 0:10:43.440 --> 0:10:46.839 and so there's no bank you're dealing with, so you're 0:10:46.840 --> 0:10:50.040 not gonna be charged the bank's fees. And the transfer 0:10:50.080 --> 0:10:54.240 companies that do work with bitcoin typically charge like two bucks, 0:10:54.320 --> 0:10:57.520 three bucks something like that, So you skip all that, 0:10:57.960 --> 0:11:01.040 you're not paying as many fees. Uh. The wallet is 0:11:01.080 --> 0:11:04.280 a software program, so it's not like a literal wallet. Obviously. 0:11:04.480 --> 0:11:07.160 You download your wallet, you've got your little account, you 0:11:07.200 --> 0:11:10.400 buy your bitcoins, and you can just do that if 0:11:10.400 --> 0:11:13.640 you want. You can just buy things. You can buy 0:11:13.679 --> 0:11:15.520 things on the regular web. You can buy things on 0:11:15.559 --> 0:11:17.760 the deep hidden web. You can also just hang on 0:11:17.800 --> 0:11:20.000 to them and speculate. Well, that's the second thing you 0:11:20.000 --> 0:11:22.840 can do. You can speculate and buy and sell the 0:11:22.880 --> 0:11:26.760 apparently the Winkle Boss Twins the Winkleby the Winkelby from 0:11:26.800 --> 0:11:30.400 the Facebook movie. Uh, in real life? Are they have 0:11:30.480 --> 0:11:35.520 like eleven million dollars worth of bitcoins now? And how 0:11:35.600 --> 0:11:37.280 much it will be worth tomorrow? But yeah, they have 0:11:37.360 --> 0:11:40.080 millions of dollars worth of bitcoins. Yes, so they're apparently 0:11:40.360 --> 0:11:45.319 supposedly bitcoin millionaires that have made their money speculating by 0:11:45.360 --> 0:11:50.199 buying and selling just like you would a stock, let's say. Right, 0:11:50.320 --> 0:11:52.719 so that's another thing you can do. The other thing 0:11:52.800 --> 0:11:56.440 you can do is actually participate in mind these coins, 0:11:56.480 --> 0:11:59.400 which is sounds complex but it's really not. All right, well, 0:11:59.440 --> 0:12:02.000 let's get into this because now we're talking about the 0:12:02.040 --> 0:12:04.559 Bitcoin network, right, Yeah, it's a peer to peer we 0:12:04.559 --> 0:12:07.080 should point that out. That's very important peer to peer network, right, 0:12:07.160 --> 0:12:11.320 like bit torrent or Skype. Yeah, there's no centralized like 0:12:11.480 --> 0:12:14.920 mainframe running this thing exactly. If the whole thing operates 0:12:15.040 --> 0:12:17.920 on the computers of the people who are part of 0:12:17.960 --> 0:12:22.240 bitcoin network. That's right. Okay, So the mining is really 0:12:22.280 --> 0:12:23.760 the most important, and I think that's where a lot 0:12:23.800 --> 0:12:27.040 of people get tripped up. There's three things basically that 0:12:27.120 --> 0:12:33.840 mining coins. You're creating coins essentially, um you are, Uh, well, 0:12:33.920 --> 0:12:36.640 let's let's get into it. They transactions are released in 0:12:36.720 --> 0:12:42.000 six ten minute blocks, so every ten minutes now coins 0:12:42.040 --> 0:12:45.360 are released into the system. That's the approximate about how 0:12:45.400 --> 0:12:49.359 long it's been taking computers to figure out this mathematical problem. 0:12:49.440 --> 0:12:51.800 Now they're released every ten minutes, whether or not they're 0:12:51.800 --> 0:12:54.240 figured out or not. Might it might take longer than that. 0:12:54.400 --> 0:12:56.280 So okay, well then you can explain this to me 0:12:56.280 --> 0:12:58.280 because I was a little tripped up by this too. 0:12:58.760 --> 0:13:02.560 Um So every ten minutes, the computer that happens to 0:13:02.640 --> 0:13:08.040 be working on the math problem and solves it at 0:13:08.040 --> 0:13:12.960 that ten minute part gets the coin. So is it random? Well, 0:13:13.000 --> 0:13:15.400 I think we need to step back again and explain 0:13:15.440 --> 0:13:18.320 what these are. It is. It sounds confusing, but it's not. 0:13:19.280 --> 0:13:21.240 Every ten minutes they release what's called a block, and 0:13:21.280 --> 0:13:26.480 a block is essentially a group of transactions across the 0:13:26.480 --> 0:13:30.480 bit coin network. So it is up to a person, 0:13:30.600 --> 0:13:33.000 but usually a group of people team up to do 0:13:33.040 --> 0:13:35.680 this because it requires a lot of computing power two 0:13:36.440 --> 0:13:41.840 perform um to basically handle these transactions, just like American 0:13:41.880 --> 0:13:45.240 Express pay someone to handle their transaction. Totally got it, 0:13:45.320 --> 0:13:47.560 I got it, Thank you. This is the this is 0:13:47.559 --> 0:13:50.400 what was tripping me up. Yeah, okay, okay. And then 0:13:50.440 --> 0:13:53.880 that block is a group of transactions, right, and this 0:13:53.960 --> 0:13:57.240 is the transactions formed the ledger, like who has what coin? 0:13:57.360 --> 0:13:59.920 What coin got transferred to what person? Like verifying all 0:14:00.040 --> 0:14:02.439 that stuff. All that takes money. That's the usually those 0:14:02.480 --> 0:14:04.640 are the fees you're paying like amex to do something 0:14:04.679 --> 0:14:08.679 like that, right, okay, and this this is also encrypted information. 0:14:08.800 --> 0:14:11.200 Well yeah, that's the key. So that block is basically 0:14:11.240 --> 0:14:15.079 a math problem for a computer to workout and everybody. 0:14:15.080 --> 0:14:17.640 So every ten minutes, everybody on the network gets that 0:14:17.679 --> 0:14:20.560 same block, and whoever figures that out first gets the 0:14:20.600 --> 0:14:24.200 newly minted bitcoins gets that reward. They call it a reward. 0:14:24.320 --> 0:14:27.520 I got it. That's pretty much it. So here's the thing, though, 0:14:27.520 --> 0:14:30.520 it's a diminishing return at this point. Um they have 0:14:30.760 --> 0:14:34.800 it every four years. Every four years the number of 0:14:34.800 --> 0:14:38.400 bitcoins that are released. They're figuring out a math problem 0:14:38.520 --> 0:14:41.440 is had. So when it started out, it was fifty 0:14:41.480 --> 0:14:43.920 and now we just reached the four year point. Two 0:14:43.960 --> 0:14:46.760 thousand thirteam is the beginning of the year, so now 0:14:46.840 --> 0:14:49.400 it's twenty five. When you unlock it, a block that's 0:14:49.480 --> 0:14:52.400 right in two thousand seventeen will be twelve fifty. So 0:14:52.480 --> 0:14:55.320 every ten minutes they're releasing these coins. So it has 0:14:55.400 --> 0:14:59.440 two three functions. Really, it's a two to satisfy the 0:14:59.480 --> 0:15:02.520 transaction and you know, get everyone working together is a 0:15:02.520 --> 0:15:04.440 big group to make sure the transactions are good. It 0:15:04.520 --> 0:15:06.200 keeps the ledger up to date, keeps the ledger up 0:15:06.200 --> 0:15:10.120 to date too. It releases more money into the system. Um, 0:15:10.160 --> 0:15:12.280 and it's you know, carefully planned out, so it's not 0:15:12.320 --> 0:15:15.280 like it's a very steady rise basically over the years, right, 0:15:15.320 --> 0:15:18.520 so nobody so like a central bank can't flood the 0:15:18.520 --> 0:15:21.960 market with more money to devalue what's out there. It's 0:15:22.520 --> 0:15:26.360 you basically forty they know exactly how many coins will 0:15:26.400 --> 0:15:28.800 be out there, and it will be twenty one million 0:15:28.840 --> 0:15:31.200 on the nose. And then that's it. Yeah, it's all controlled. 0:15:31.640 --> 0:15:33.440 And then the third thing it does, is it it 0:15:33.520 --> 0:15:37.480 keeps the system secure. Yeah, so that's what mining is. 0:15:37.600 --> 0:15:43.240 And each block two uh, it's very energy inefficient. Each 0:15:43.320 --> 0:15:46.520 block to fully satisfy over the course of twelve months 0:15:46.960 --> 0:15:50.880 takes about ten tho dollars worth of electricity. I read 0:15:51.520 --> 0:15:54.120 way more than that. I read a d fifty k 0:15:54.560 --> 0:15:58.640 for block for twenty four hours of hardcore data mining 0:15:58.760 --> 0:16:02.240 or of hardcore bitcoin mining. Sorry, costs up to a 0:16:02.360 --> 0:16:06.840 hundred and fifty thou dollars in electricity. Yeah, and that's 0:16:06.840 --> 0:16:09.160 but that's with one of these there's like certain computers 0:16:09.200 --> 0:16:12.359 out there that people have set up that are dedicated 0:16:12.520 --> 0:16:16.520 just to bitcoin mine because bitcoinshit like two bucks apiece 0:16:17.280 --> 0:16:19.400 five of those puppies. That adds up. And if you 0:16:19.400 --> 0:16:20.640 can get more and more and more, and you have 0:16:20.680 --> 0:16:24.080 computers dedicated to it, then people have they're they're just 0:16:24.160 --> 0:16:27.480 bitcoin miners and they have computer systems or they're parts 0:16:27.480 --> 0:16:30.520 of co ops that divide the bitcoin. Right. Well, that's 0:16:30.600 --> 0:16:32.080 kind of the only way to do it now. They say, 0:16:32.080 --> 0:16:34.560 if you're a single user, then you have virtually no 0:16:34.640 --> 0:16:38.000 chance these days. I would imagine it just takes too 0:16:38.040 --> 0:16:41.360 much computing power for that average you know, home computer, right, 0:16:41.360 --> 0:16:42.640 And if you team out, even if you've got a 0:16:42.640 --> 0:16:45.160 great system, if you team up with ten people with 0:16:45.200 --> 0:16:48.160 a great system, then you're ten times. It's likely because 0:16:48.160 --> 0:16:50.480 that was the other thing that the number of bitcoins 0:16:50.480 --> 0:16:55.000 that come out or had right. And um, the math problem, 0:16:55.440 --> 0:16:59.200 the encrypted math problem that is released as a block 0:16:59.720 --> 0:17:03.040 because is increasingly difficult. They wanted to be hard, right, 0:17:03.120 --> 0:17:06.439 that's the whole point. Um. And there was an article 0:17:06.560 --> 0:17:08.200 I don't know if you read this that I sent 0:17:08.280 --> 0:17:10.960 you that right now, you can still make money mining, 0:17:11.760 --> 0:17:14.480 but it won't be long because it's a diminishing thing 0:17:15.040 --> 0:17:17.240 before it's going to cost too much in power and 0:17:17.560 --> 0:17:20.119 hardware to even make it worth your while. So I'm 0:17:20.160 --> 0:17:21.840 kind of curious how that's gonna work out. Yeah. I 0:17:21.880 --> 0:17:26.640 saw like a computer built specifically to mind bitcoins started 0:17:26.640 --> 0:17:30.080 about six grand on eBay and that's like, again, the 0:17:30.200 --> 0:17:34.320 electricity involved this just ridiculous. Yeah. Plus, if you're splitting 0:17:34.440 --> 0:17:37.320 twenty five bitcoins, I mean that ain't a lot of 0:17:37.320 --> 0:17:40.600 dough right, Well, it depends, like we'll see. Yeah. Um 0:17:40.720 --> 0:17:43.240 so so that's it. That's the network. That's how the 0:17:43.240 --> 0:17:48.359 the bitcoin network functions, right, Yeah, and it's beautiful. Think 0:17:48.359 --> 0:17:52.680 about the elegantness of the figuring out a math problem 0:17:52.720 --> 0:17:56.080 to unlock new coins. Is what you're doing to keep 0:17:56.119 --> 0:17:59.720 the ledger up to date, that's awesome. So like it's 0:17:59.720 --> 0:18:02.920 it's providing these three functions. And not only is an 0:18:02.920 --> 0:18:05.920 open ledger, they have open source, so their their code. 0:18:05.960 --> 0:18:08.920 If you're a programmer and you know what you're doing, 0:18:09.040 --> 0:18:11.120 you can actually look at their code and figure it out. 0:18:11.800 --> 0:18:13.679 Because it's not like it's not a big deal. If 0:18:13.680 --> 0:18:16.160 you understand their code, it's not like you can hack 0:18:16.200 --> 0:18:21.080 into them. It's very secure on that side of things, 0:18:21.119 --> 0:18:24.760 but it can also be uh not secure. As we're learning, 0:18:25.040 --> 0:18:29.400 hackers are now getting into like uh, the the like 0:18:29.480 --> 0:18:32.520 you can actually convert your bitcoins into real cash, and 0:18:32.560 --> 0:18:35.200 those are the places that are susceptible to being hacked 0:18:35.240 --> 0:18:38.280 at this point, right right it is um just one 0:18:38.320 --> 0:18:42.640 more thing about why it's secure or the in theory. Um, 0:18:42.880 --> 0:18:46.160 when that computer figures out that math problem that unlocks 0:18:46.160 --> 0:18:48.919 that block. Yeah, that what they came up with is 0:18:49.040 --> 0:18:52.400 shared with every other computer in the network to verify 0:18:52.520 --> 0:18:56.480 that this ledger is accurate and is that a hole? Yes, 0:18:56.600 --> 0:19:01.080 So that's why that's why it's secure, because everybody knows 0:19:01.400 --> 0:19:04.800 everybody's computer knows what's what, and if there's a discrepancy, 0:19:04.840 --> 0:19:07.399 then it has to be worked out. That's why a 0:19:07.480 --> 0:19:11.760 transfer bitcoins transaction can take a long time because it 0:19:11.840 --> 0:19:15.200 has to go across all the network. Gotcha for a verification? Yeah, 0:19:16.440 --> 0:19:19.920 all right, well that's cool, okay. But insecurity, well many 0:19:19.920 --> 0:19:21.600 ways it can be insecure. Like we said, they can 0:19:21.680 --> 0:19:24.600 hack into like when you go to a like what's 0:19:24.640 --> 0:19:28.160 one of the places they listed for um converting back 0:19:28.160 --> 0:19:32.719 to cash? Um bit spin this one, I believe, and 0:19:32.960 --> 0:19:36.240 uh what was the other one. Yes, bit pay and 0:19:36.280 --> 0:19:40.679 bits spin. They convert your bitcoins into credit or whatever 0:19:41.160 --> 0:19:44.360 you can shop anyway, whatever, or or your local currency 0:19:44.400 --> 0:19:46.080 like if you want to cash them out and get 0:19:46.119 --> 0:19:48.320 your cash back, right, their companies that do that, and 0:19:48.320 --> 0:19:51.400 that apparently is where hackers can get in there. Yeah, 0:19:51.440 --> 0:19:53.439 and they can also get to Mount Cox, which is 0:19:53.480 --> 0:19:56.160 the currency exchange, which apparently if you have an account 0:19:56.280 --> 0:19:58.760 at Mount Cox, a lot of people are like, oh well, 0:19:58.800 --> 0:20:01.119 this is like a bank. It's not like a bank. 0:20:01.680 --> 0:20:05.800 And whether it's Mount Cox or whoever, Um, that's a 0:20:05.800 --> 0:20:08.960 really bad place to actually keep your virtual currency. Because 0:20:09.040 --> 0:20:14.800 number one, since it's a decentralized system, anywhere where there's 0:20:14.800 --> 0:20:18.119 a bunch of people's stuff parked, that's a target. And 0:20:18.160 --> 0:20:20.159 since there are fewer targets, that means that people can 0:20:20.200 --> 0:20:23.800 get better at better at attacking them. Since a terrible 0:20:23.800 --> 0:20:26.399 place to keep your your bitcoins. And then also a 0:20:26.440 --> 0:20:28.760 lot of those places, a lot of those currency exchanges, 0:20:29.160 --> 0:20:32.439 if they go under, your bitcoins go with them. And 0:20:32.480 --> 0:20:35.800 that's the thing where have your bitcoins are gone? They're 0:20:35.840 --> 0:20:37.840 just gone and you don't have them any longer, which 0:20:37.880 --> 0:20:40.240 is why if you have a bitcoin wallet or account. 0:20:40.560 --> 0:20:45.119 You want a physically removable backup of them somewhere a 0:20:45.160 --> 0:20:48.400 flash drive or removable hard drive away from your computer, 0:20:48.640 --> 0:20:51.760 so that if your computer crashes where Mount Cox goes under, 0:20:52.000 --> 0:20:55.200 or the FED swoop in and sees something or freeze something, 0:20:55.640 --> 0:20:58.320 you still have your bitcoins because you've got that that 0:20:58.440 --> 0:21:00.440 account of it on your flash drive back. Yeah. I 0:21:00.440 --> 0:21:02.720 would back it up two or three times exactly. I 0:21:02.800 --> 0:21:04.520 did read one account of this guy that lost like 0:21:04.560 --> 0:21:07.439 eight hundred of him because his laptop crashed. Oh my god. 0:21:07.560 --> 0:21:09.720 But it was early on, so he was just like 0:21:09.760 --> 0:21:11.040 it was no big deal at the time because they 0:21:11.040 --> 0:21:14.200 were like twenty cents apiece. But can you imagine No, 0:21:14.400 --> 0:21:16.960 I couldn't. So, I mean that's one of the dangers 0:21:16.960 --> 0:21:19.160 of it and one of the risks. So let's talk 0:21:19.160 --> 0:21:21.320 a little bit about this whole speculation thing in the 0:21:21.359 --> 0:21:25.320 wild ride a bitcoin, because it's like the wild West 0:21:25.320 --> 0:21:27.919 out there, so early on it and it's gone from 0:21:27.960 --> 0:21:32.560 twenty cents at the beginning to hive about two hundred 0:21:32.560 --> 0:21:37.640 and sixty dollars per bitcoin early this year, right uh 0:21:37.640 --> 0:21:41.399 in two thousand and eleven, it went from uh thirty 0:21:41.440 --> 0:21:45.159 dollars in the middle. I'm sorry, in two it was 0:21:45.200 --> 0:21:47.760 worth a few cents. It rose to thirty bucks in 0:21:47.760 --> 0:21:50.960 two thousand eleven, and then it dropped down towards the 0:21:51.000 --> 0:21:53.360 end of the year to two bucks. Like, currencies are 0:21:53.400 --> 0:21:56.399 not supposed to do that. That's and that's one of 0:21:56.440 --> 0:21:59.160 the big problems is like it it cree's wildly all 0:21:59.200 --> 0:22:02.800 over the place because of speculation. Yeah, some people are 0:22:02.800 --> 0:22:06.360 attracted to that though. Yeah, like the cowboys are into that, 0:22:06.440 --> 0:22:09.600 like get rich really quick and get out right. But 0:22:09.640 --> 0:22:12.280