WEBVTT - Brother Can You Spare a 01100100? 0:00:00.160 --> 0:00:07.200 Brought to you by Toyota. Let's go places. Welcome to 0:00:07.320 --> 0:00:15.600 Forward Thinking. Welcome everyone to the Forward Thinking podcast, where 0:00:15.600 --> 0:00:20.079 we talk about all stuff that is the future. That's right, 0:00:20.160 --> 0:00:24.520 and today we're going to talk Yeah, I'm clearly not 0:00:24.560 --> 0:00:28.560 alone in it in this. Uh So, today we wanted 0:00:28.560 --> 0:00:31.280 to talk about the future of digital currency. Now, let's 0:00:31.320 --> 0:00:35.279 introduce ourselves. I'm Jonathan Strickland, I'm Lauren vocal Bum, I'm 0:00:35.320 --> 0:00:37.680 Joe McCormick, and we have a case of the sillies. 0:00:38.479 --> 0:00:40.600 Now today we want to talk about digital currency. We've 0:00:40.640 --> 0:00:44.400 already had one podcast that was about what cash is, 0:00:44.440 --> 0:00:47.640 what currency is, what it represents, and uh, you know, 0:00:47.720 --> 0:00:50.919 we're all pretty familiar with physical cash, maybe not as 0:00:50.920 --> 0:00:53.920 familiar as we would like to be were not personally, 0:00:53.960 --> 0:00:57.360 but hypothetically, I mean ideologically, I get it, I've seen it, 0:00:58.760 --> 0:01:01.440 I want more of it. But we wanted to talk 0:01:01.480 --> 0:01:05.000 about some digital currency. Really, it's the first one I 0:01:05.040 --> 0:01:06.680 was going to talk about. The main one I'm going 0:01:06.720 --> 0:01:09.920 to talk about is bitcoin, which is really an alternative currency. 0:01:10.200 --> 0:01:13.840 It's not a currency that is backed by any particular government, 0:01:14.160 --> 0:01:17.160 which is kind of an interesting idea. UM, So we 0:01:17.200 --> 0:01:19.720 should probably start with the idea of what makes a 0:01:19.760 --> 0:01:23.240 currency a currency? All right? So yeah, what does make 0:01:23.319 --> 0:01:25.440 what What does make a currency a currency if it 0:01:25.480 --> 0:01:27.800 doesn't have to be backed by a government. What makes 0:01:27.840 --> 0:01:30.840 a currency a currency? Well, I've got a theory on that, 0:01:30.920 --> 0:01:34.720 all right, probably not original at all, but it seems 0:01:34.760 --> 0:01:39.440 that a currency is just something that everybody wants, okay, right, 0:01:39.520 --> 0:01:43.559 it's it's a standardized unit of wealth. And what makes 0:01:43.560 --> 0:01:46.360 a currency valuable is that you can get pretty much 0:01:46.400 --> 0:01:51.559 everybody to agree that they want it, um so. And 0:01:51.560 --> 0:01:55.640 and this comes in where we have the idea that 0:01:55.760 --> 0:01:59.800 like currency is magic, right, that that that a US dollar, 0:02:00.040 --> 0:02:04.160 little green rectangle of paper that says one dollar, you know, 0:02:04.320 --> 0:02:07.840 and has the creepy triangle pyramid eye on it, like 0:02:07.880 --> 0:02:12.839 that magically equals one dollar. Well why why does that 0:02:12.880 --> 0:02:15.880 thing equal one dollar when this piece of paper that 0:02:15.919 --> 0:02:18.160 I just wrote some notes on doesn't, Or why this 0:02:18.200 --> 0:02:20.800 other piece of paper that has a slightly different design 0:02:20.840 --> 0:02:23.640 on it is worth one hundred of those dollars? Exactly? 0:02:24.040 --> 0:02:26.840 They're made of the same stuff, Yeah, exactly. I mean, 0:02:27.000 --> 0:02:33.040 there's nothing about this little physical object that magically equally 0:02:33.160 --> 0:02:36.000 has that amount of value. Right, It's simply that we 0:02:36.000 --> 0:02:38.240 we've all agreed, we've assigned to it. We've assigned that 0:02:38.280 --> 0:02:40.400 to it. Sure, Yeah, and we've agreed to it, not 0:02:40.480 --> 0:02:43.079 just assigned it, but that everyone has bought into it. Yeah. 0:02:43.120 --> 0:02:45.840 It is a like I said in the last episode, 0:02:45.840 --> 0:02:49.040 it is a belief system than anything else. Well, it's 0:02:49.080 --> 0:02:53.000 sort of an illusion also because it's the thing. All 0:02:53.080 --> 0:02:55.919 you have to do to make this hundred dollar bill 0:02:56.040 --> 0:02:59.520 not worth a hundred dollars is convinced enough people that 0:02:59.600 --> 0:03:02.679 it's not worth a hundred dollars, right, and then that 0:03:03.480 --> 0:03:05.160 before any of you go out there and thinks, I 0:03:05.280 --> 0:03:07.560 think this is gonna make me rich. If I convince 0:03:07.600 --> 0:03:09.960 everybody that the money in their wallets is worthless, then 0:03:09.960 --> 0:03:12.280 I can take all their money. But you're a hard 0:03:12.360 --> 0:03:13.920 job of it, right, Well, first of all, you have 0:03:13.960 --> 0:03:15.440 a hard job of it. But too, if you actually 0:03:15.520 --> 0:03:18.520 did convince enough people for that to make you fabulously wealthy, 0:03:18.560 --> 0:03:21.040 you wouldn't actually be fabulously wealthy because the money itself 0:03:21.080 --> 0:03:24.640 would in fact be worthless because again, it's only worth 0:03:24.760 --> 0:03:27.520 anything because people want it, So if people don't want it, 0:03:27.560 --> 0:03:30.760 then it's not worth anything. The point is that the 0:03:31.200 --> 0:03:34.359 value of a piece of money is not magically assigned 0:03:34.400 --> 0:03:38.040 by FIA. The government can't really say what something is worth. 0:03:38.400 --> 0:03:42.080 The people as a whole determine what sometimes, yeah, and 0:03:42.080 --> 0:03:43.640 and the and that a certain amount of food or 0:03:43.680 --> 0:03:46.640 a gallon of gas or work that I do for 0:03:46.720 --> 0:03:50.840 somebody is worth that amount. Right. So so with bitcoin again, 0:03:50.920 --> 0:03:53.280 because you know, you don't have to have a government 0:03:53.320 --> 0:03:57.160 to back it. If people say this bitcoin has value, 0:03:57.680 --> 0:03:59.960 and they and enough people believe in that in enough 0:04:00.240 --> 0:04:02.320 and enough of a structure there supports it, then it 0:04:02.360 --> 0:04:05.440 does have value. Well, Jonathan, what is a bitcoin? You're 0:04:05.520 --> 0:04:09.800 using this word? So, bitcoin is a unit of digital currency. 0:04:10.120 --> 0:04:13.400 It was first proposed by a guy named y Day 0:04:13.600 --> 0:04:17.440 who proposed it in nine. It's an idea. The idea 0:04:17.480 --> 0:04:22.480 is it's a cryptocurrency, meaning that it is secret like cryptozoology. 0:04:22.520 --> 0:04:26.040 Well like like not such secret, like cryptography. Yeah, you're 0:04:26.040 --> 0:04:30.839 talking about encryption. Yeah, something about the currency has to 0:04:30.839 --> 0:04:33.359 be based on encryption. I'll get into that in a second. 0:04:33.839 --> 0:04:37.720 But it's essentially to a digital currency that's used that 0:04:37.800 --> 0:04:40.719 can be used in transactions, just as any other currency 0:04:40.760 --> 0:04:43.960 could be. So you would use this digital currency to 0:04:44.120 --> 0:04:47.920 buy stuff. That stuff could be digital or it could 0:04:47.960 --> 0:04:51.440 be physical so you could use the this digital currency 0:04:51.520 --> 0:04:54.760 to buy a real car, assuming that there was a 0:04:54.760 --> 0:04:58.280 car dealer out there willing to deal in this digital currency. 0:04:58.320 --> 0:05:01.760 If they accepted it, then you could buy a car 0:05:01.880 --> 0:05:06.840 with it or anything else. Um. Now, the actual currency itself, 0:05:06.880 --> 0:05:10.320 even though it was proposed in didn't start to show 0:05:10.400 --> 0:05:13.520 up until two thousand nine. And that's when someone who 0:05:13.600 --> 0:05:19.280 was using a pseudonym. The pseudonym was Satoshi Nakamoto, began 0:05:19.520 --> 0:05:22.000 to published a paper in a in a we'll not 0:05:22.040 --> 0:05:26.320 published a paper wrote in a forum actually about cryptography, 0:05:26.360 --> 0:05:29.839 about a proof of concept for this digital currency, and 0:05:29.920 --> 0:05:34.320 that was the birth of bitcoin. Interesting thing, Uh, only 0:05:34.360 --> 0:05:37.240 a few people, I assume know who this person is 0:05:37.320 --> 0:05:41.760 because this person has never been publicly identified or one 0:05:41.800 --> 0:05:45.160 of them. No, I do not know the actual identity. 0:05:46.120 --> 0:05:50.920 I am not privy to such information. Um And if 0:05:50.920 --> 0:05:52.880 I did, I wouldn't tell you. So maybe I do, 0:05:53.680 --> 0:05:56.720 but I don't. So here you think about it. If 0:05:56.760 --> 0:06:00.000 you have a digital currency, can you think of any 0:06:00.080 --> 0:06:02.560 questions off the top of your head, like things that 0:06:02.839 --> 0:06:05.640 if if the currency is digital, what are some of 0:06:05.680 --> 0:06:08.200 the questions that arise in your mind? Well, first of all, 0:06:08.600 --> 0:06:10.840 what is it? I mean, a US dollar is a 0:06:10.880 --> 0:06:13.799 little square or not square, a little rectangle of paper 0:06:13.839 --> 0:06:16.359 I put in my wallet. What what is this unit 0:06:16.400 --> 0:06:19.520 of currency? It's a block of data. Okay, yeah, where 0:06:19.560 --> 0:06:24.320 does that come from? Okay? So, uh the furs it's mind, 0:06:24.920 --> 0:06:27.599 which sounds kind of interesting. The way it works is 0:06:27.600 --> 0:06:30.719 that you have to create transactions and then through those 0:06:30.720 --> 0:06:34.120 transactions you create these blocks of data, which when you 0:06:34.200 --> 0:06:38.320 analyze the blocks of data, will create more bitcoins. That's 0:06:38.360 --> 0:06:41.719 a gross over simplification of what's going on here, but 0:06:41.880 --> 0:06:44.480 it all comes down to that idea of cryptography. Within 0:06:44.520 --> 0:06:47.960 that block of data, there is what is called a hash. 0:06:48.320 --> 0:06:52.120 Hash is essentially when you take uh, some numbers and 0:06:52.160 --> 0:06:54.520 then you apply math to it. And when I say 0:06:54.560 --> 0:06:57.080 apply math, the reason why that's vague is because it 0:06:57.160 --> 0:07:00.360 depends upon the hash about you know what math radical 0:07:00.400 --> 0:07:03.960 processes going on? Right? But let's say I tell you 0:07:04.480 --> 0:07:07.240 that I've got you know, I've created a hash, and 0:07:07.279 --> 0:07:10.960 I've got a number and that number is fifteen, And 0:07:11.000 --> 0:07:13.920 I tell you, Joe that I arrived at the number 0:07:14.040 --> 0:07:17.200 fifteen by adding two other numbers together, but I don't 0:07:17.240 --> 0:07:19.680 tell you which two numbers they are. And for you 0:07:19.760 --> 0:07:21.800 to be able to get a bitcoin, you have to 0:07:21.840 --> 0:07:26.400 tell me which two numbers I added together to get fifteen. Now, uh, 0:07:26.680 --> 0:07:28.640 I haven't given you any other information, so you just 0:07:28.680 --> 0:07:31.680 have to start handing me guesses as to how I 0:07:31.720 --> 0:07:34.440 got to that number fifteen, Right, And we knew it 0:07:34.440 --> 0:07:36.640 would be pretty reasonable for you to use a computer 0:07:36.720 --> 0:07:39.280 to do this rather than just shouting out numbers. Right, 0:07:39.280 --> 0:07:41.640 But in this let's let's say, in this instance, I 0:07:41.640 --> 0:07:43.520 tell both of you, Joe and Lauren, that I've got 0:07:43.520 --> 0:07:45.400 a number fifteen. So you have to tell me which 0:07:45.400 --> 0:07:49.320 two numbers I added together to get that number. And uh, 0:07:49.400 --> 0:07:53.880 the first one who guesses correctly gets fifty new bitcoins. 0:07:54.160 --> 0:07:59.320 Which what's your guess? What'n eight zero? No? That wasn't 0:07:59.360 --> 0:08:01.920 that any sorry, but so so what happens? You would 0:08:02.000 --> 0:08:03.920 keep on guessing until you were to get the ones 0:08:03.960 --> 0:08:06.320 and it was sixteen, a negative one by the way. Um, 0:08:06.360 --> 0:08:08.760 if you were to it once you once you were 0:08:08.840 --> 0:08:12.000 to guess it, I would hand you some bitcoins, not 0:08:12.120 --> 0:08:15.080 from me. I would actually generate through this process. It's 0:08:15.160 --> 0:08:17.800 kind of like the idea of mining a mountain for gold. 0:08:18.160 --> 0:08:21.080 Would be as if you had found a gold vein 0:08:21.240 --> 0:08:24.880 while just digging randomly in the mountain, same sort of idea, 0:08:24.960 --> 0:08:28.440 you were actually digging randomly using math. Now, in the 0:08:28.480 --> 0:08:31.600 case of bitcoins, the numbers and hashes are way more 0:08:31.720 --> 0:08:35.240 complicated than what two numbers that I used to create fifteen, 0:08:35.840 --> 0:08:38.240 And so you have to use a computer to go 0:08:38.360 --> 0:08:44.000 through all the various UH guesses that could potentially reach 0:08:44.240 --> 0:08:49.720 whatever the hashes in order to find uh the result. Now, 0:08:49.880 --> 0:08:52.680 it takes quite a bit of computing power, actually usually 0:08:52.840 --> 0:08:55.440 more in fact than than just one laptop. There's a 0:08:55.480 --> 0:08:57.840 lot of computers that are usually working on one of 0:08:57.840 --> 0:08:59.800 these at the same time right now. Well, in the 0:08:59.800 --> 0:09:03.319 early days, very early days of bitcoin, this is how 0:09:03.360 --> 0:09:06.360 brilliant this system is, you know, and I say brilliant. 0:09:06.480 --> 0:09:09.160 This is beyond whether or not bit you consider bitcoin 0:09:09.160 --> 0:09:12.880 of valuable currency, al right, just the system itself is brilliant. 0:09:13.320 --> 0:09:16.560 So in the early early days of bitcoin, those hashes 0:09:16.720 --> 0:09:20.760 were not so complex, meaning that if you had a 0:09:20.760 --> 0:09:24.840 decent computer with a decent CPU, you could start having 0:09:24.840 --> 0:09:29.960 it run these various guesses and expect to maybe solve 0:09:30.240 --> 0:09:35.120 a problem within um like you know, ten twenty minutes maybe, 0:09:35.440 --> 0:09:39.080 and and you're you would get bitcoins. So you're just 0:09:39.160 --> 0:09:42.520 like Mario jumping repeatedly into the block that gives a 0:09:42.520 --> 0:09:45.920 coin every Now you're like Mario jumping at all these 0:09:45.920 --> 0:09:48.600 different blocks. In one of those blocks gives coins, the 0:09:48.640 --> 0:09:52.439 other blocks don't. That's the that's a better analogy. Um, 0:09:52.520 --> 0:09:55.679 And so what would happen is that as more people 0:09:55.720 --> 0:09:58.080 started joining in, and when I said ten or twenty minutes, 0:09:58.080 --> 0:10:02.240 that's really again that's really exaggerating. But when as more 0:10:02.240 --> 0:10:04.880 people joined in, that would mean that more bitcoins were 0:10:04.920 --> 0:10:08.560 being mined because you have more computers working on these problems, 0:10:08.559 --> 0:10:12.320 and so things start to unravel faster. Well, then the 0:10:12.440 --> 0:10:17.360 system itself has a a way of fixing that, because 0:10:17.360 --> 0:10:19.439 you don't want to flood the market with bitcoins and 0:10:19.480 --> 0:10:23.040 then you devalue the currency. Right, That's what would happen 0:10:23.080 --> 0:10:26.000 if if the FED just said, well, let's print infinite money, 0:10:26.200 --> 0:10:27.800 or it would would be what would happen if you 0:10:27.960 --> 0:10:31.400 dug under you know, you you reached a mountain, you 0:10:31.720 --> 0:10:34.160 removed one shovel of dirt and realized that everything under 0:10:34.200 --> 0:10:37.240 one layer of dirt is gold. If the mountain is 0:10:37.280 --> 0:10:40.400 solid gold, you would suddenly devalue gold because there'd be 0:10:40.440 --> 0:10:45.520 a ton literally, there'll be tons of it flooding the market. Yeah, 0:10:45.679 --> 0:10:48.920 so there you go. You just devalued gold. Same sort 0:10:48.920 --> 0:10:51.400 of thing with with bitcoins. You cannot, you know, you 0:10:51.440 --> 0:10:55.400 have to control that release of bitcoins into circulations. It's 0:10:55.440 --> 0:11:00.079 intentionally making it difficult to create an artificial scarcity that 0:11:00.200 --> 0:11:03.160 will keep the value in tax. It's actually you're you're 0:11:03.320 --> 0:11:06.760 creating a real scarcity, but you're doing it through artificial means. Yes, 0:11:06.800 --> 0:11:10.880 synthetic or a forced scarce, yes, yes, yes, So there's 0:11:10.920 --> 0:11:15.040 a there's already a designated number of bitcoins that will 0:11:15.160 --> 0:11:18.360 ever be in existence, and beyond that there are no more. 0:11:18.760 --> 0:11:22.480 That's twenty around twenty one million bitcoins. Now, the bitcoin 0:11:22.559 --> 0:11:25.480 itself can be divided into smaller amounts down to eight 0:11:25.480 --> 0:11:29.680 decimal places. So as we get closer and closer to 0:11:30.040 --> 0:11:33.559 that limit, it actually decreases the number of bitcoins you 0:11:33.600 --> 0:11:39.200 will get per successful mining. So like when the it started, 0:11:39.840 --> 0:11:44.439 the first uh, successful attempts at mining got you about 0:11:44.440 --> 0:11:48.680 fifty bitcoins. Okay, and uh and what's a bitcoin run 0:11:48.760 --> 0:11:52.000 these days? It all depends. Uh. In March, it has 0:11:52.080 --> 0:11:55.040 fluctuated from forty three dollars per bitcoin to seventy eight 0:11:55.040 --> 0:11:58.079 dollars per bitcoin. As as of this very moment, it 0:11:58.160 --> 0:12:00.839 is seventy eight point four U S dollars. Yeah, so 0:12:01.120 --> 0:12:04.120 but as of half an hour ago, things could have changed. Ye. Well, 0:12:04.160 --> 0:12:06.280 actually we know that it does. Right, that the bitcoin 0:12:06.360 --> 0:12:10.160 value fluctuates wildly, crazy amount of fluctuation. What makes some 0:12:10.200 --> 0:12:12.600 people kind of hesitant to invest in it right now. 0:12:12.640 --> 0:12:14.440 A lot of people say it's not even a currency, 0:12:14.880 --> 0:12:17.600 that it's really more speculation, like it's like speculating in 0:12:17.600 --> 0:12:19.679 a stock that a lot of people are making their 0:12:19.679 --> 0:12:23.720 money just from buying and selling bitcoin or mining and 0:12:23.840 --> 0:12:26.880 selling bitcoins. All right, So getting back to the mining 0:12:27.120 --> 0:12:30.280 and making it more difficult as more machines join on. 0:12:30.920 --> 0:12:35.560 It was built directly into the design of bitcoins so 0:12:35.640 --> 0:12:38.760 that as more computing power is applied to the problem 0:12:38.840 --> 0:12:41.320 of figuring out these hashes, these transactions each time a 0:12:41.320 --> 0:12:45.280 transaction is made, that's what's allowing people to mine these 0:12:45.320 --> 0:12:50.000 other bitcoins um in order to make that when by 0:12:50.040 --> 0:12:51.600 making it more difficult, it means that you have to 0:12:51.880 --> 0:12:56.640 apply more processing power to successfully mine another bitcoin. It's 0:12:56.640 --> 0:12:59.640 the idea of you're you're in a giant mountain. Let's 0:12:59.640 --> 0:13:01.640 go back to the mountain idea you're in a giant mountain. 0:13:01.679 --> 0:13:04.760 There's a finite amount of gold in this mountain, and 0:13:04.760 --> 0:13:08.040 it's scattered randomly throughout the mountain. Uh. And as you 0:13:08.120 --> 0:13:11.040 get more and more of the gold from the easier 0:13:11.400 --> 0:13:14.120 places to mind, the stuff that's left is harder to 0:13:14.120 --> 0:13:16.840 get to. It's that the you know, by nature, just 0:13:16.960 --> 0:13:18.920 the natural design, it's harder for you to get to 0:13:18.960 --> 0:13:22.400 those places. But here's the other thing, is that if 0:13:22.440 --> 0:13:25.760 people start backing off of mining, like if if people 0:13:25.800 --> 0:13:29.400 were to stop dedicating so many computer resources to mining bitcoins, 0:13:29.880 --> 0:13:33.440 then because there would be less computer power dedicated to 0:13:33.640 --> 0:13:35.920 trying to get out the bitcoins, it would actually get 0:13:35.920 --> 0:13:39.680 easier to mind them again, so that the supply of 0:13:39.960 --> 0:13:45.199 bitcoins into the circulation would remain fairly steady. Right. It's 0:13:45.240 --> 0:13:46.760 the way, the way that I understand it and correct 0:13:46.760 --> 0:13:48.280 me if I'm wrong, is that is that they're using 0:13:48.320 --> 0:13:53.120 the actual computation of the processing of transactions as a 0:13:53.160 --> 0:13:58.679 monetary unit. Yeah. Essentially, the as as there are transactions 0:13:58.679 --> 0:14:01.840 that are going on, that providing the essentially the math 0:14:01.960 --> 0:14:04.640 problem that you have to solve in order to get 0:14:04.679 --> 0:14:08.079 more coins. So as more transactions happened, there are more 0:14:08.120 --> 0:14:11.240 opportunities as well. Uh. And what happened was early on 0:14:11.320 --> 0:14:16.000 people started figuring out, hey, the CPU on my computer 0:14:16.200 --> 0:14:19.320 solves problems essentially going one at a time. Right, it 0:14:19.360 --> 0:14:22.760 tries option one. Option one didn't work out, Let's move 0:14:22.760 --> 0:14:25.080 on to option two. That didn't work out, Let's move 0:14:25.080 --> 0:14:27.280 on to option three. But they discovered that if they 0:14:27.320 --> 0:14:32.240 were to use graphics processing units, which can do calculations 0:14:32.240 --> 0:14:35.680 in parallel, then you could do options one through fifty 0:14:35.800 --> 0:14:38.120 all at the same time, and then fifty one through 0:14:38.120 --> 0:14:41.280 one hundred all at the same time. You rapidly sped 0:14:41.360 --> 0:14:44.080 up the process of trying to solve these problems. So 0:14:44.120 --> 0:14:46.680 people started using GPUs, they started to mind bit coins. 0:14:46.680 --> 0:14:49.600 It was really successful, and then the difficulty ratcheted up 0:14:49.640 --> 0:14:53.440 to meet the fact that people were using other systems. 0:14:54.200 --> 0:14:57.240 Then you start networking computers together, and now you've got 0:14:57.280 --> 0:15:01.520 a group of computers all working to mine bitcoins, which 0:15:01.520 --> 0:15:04.400 means that again you've got more processing power, so it 0:15:04.520 --> 0:15:07.840 ratchets up the difficulty. It's essentially got to the point 0:15:07.840 --> 0:15:11.120 pretty early on that unless you were designing a computer 0:15:11.240 --> 0:15:15.800 specifically to mind bitcoins with that sort of processing in mind, 0:15:16.360 --> 0:15:18.840 you might as well not even try because your computer 0:15:18.920 --> 0:15:21.440 is just not going to have the needed Like you 0:15:21.480 --> 0:15:25.400 could still, in theory solve the problem that everyone else 0:15:25.520 --> 0:15:27.840 is trying to solve, and you could do it first, 0:15:28.160 --> 0:15:33.480 but but the likelihood was way low, so might as 0:15:33.480 --> 0:15:36.360 well pay a lotto. Yeah yeah, same sort of odds. 0:15:36.400 --> 0:15:40.200 Really is what it boils down to. So okay, So 0:15:40.280 --> 0:15:43.880 now we've established that we've created this economy based on 0:15:43.960 --> 0:15:47.120 a or not an economy, but just a currency exactly 0:15:47.360 --> 0:15:52.000 exists in the regular economy. You've created a commodity, not 0:15:52.080 --> 0:15:55.600 even a currency, because it's not a currency until someone 0:15:55.640 --> 0:15:59.600 accepts it as payment for something else. People do that. Yes, 0:15:59.760 --> 0:16:02.000 so it is a currency. But what we had talked 0:16:02.000 --> 0:16:06.520 about right now was just as So let's assume now 0:16:06.560 --> 0:16:09.240 that we're moving on to a currency, people want to 0:16:09.320 --> 0:16:14.120 use this to pay for stuff. Um. I I have 0:16:14.240 --> 0:16:17.760 a friend who's a near do well um, and he's 0:16:17.800 --> 0:16:22.520 always looking for schemes to get money without working. He 0:16:22.640 --> 0:16:28.040 thinks up an idea. He's like, I'm gonna buy some bitcoins, okay. 0:16:28.080 --> 0:16:29.920 And I know when I have a dollar in my 0:16:29.960 --> 0:16:31.840 pocket and I go to the store and I pay 0:16:31.920 --> 0:16:35.200 for a bag of doritos, I have to give the 0:16:35.240 --> 0:16:38.640 dollar to the person working the cash register and I 0:16:38.680 --> 0:16:42.520 can't get it back. What if I want to pay 0:16:42.720 --> 0:16:45.320 for something with a bitcoin, but I figure out a 0:16:45.360 --> 0:16:48.640 way to make copies of my bitcoins so that I 0:16:48.640 --> 0:16:50.920 can use it more than once. Okay, here's where the 0:16:50.920 --> 0:16:55.000 cryptography also comes in. So if you want your do Rito's, 0:16:55.160 --> 0:16:59.840 as you say, I humans call it doritos. But that's cool. 0:17:00.080 --> 0:17:03.240 Do Rito's. If I wanted my bag of I'm just 0:17:03.280 --> 0:17:05.640 giving you a hard time now. No. Uh, this good 0:17:05.680 --> 0:17:07.879 question was what they grew up in East Tennessee. That 0:17:08.000 --> 0:17:12.359 that's fair do Ritos. Well, they use what's called a 0:17:12.400 --> 0:17:15.920 block chain, and the blockchain is part of that that 0:17:16.000 --> 0:17:19.760 hash I was talking about that transaction, the history of 0:17:19.840 --> 0:17:25.760 every transaction for a bitcoin is tracked and incorporated as 0:17:25.800 --> 0:17:29.080 part of that hash, meaning that when you use that 0:17:29.080 --> 0:17:32.040 that bitcoin in a transaction, let's say the first transaction, 0:17:32.040 --> 0:17:34.840 which is when you get the bitcoins. Um, then you 0:17:34.920 --> 0:17:37.800 spend the bitcoins on something. There's a vendor out there 0:17:37.880 --> 0:17:41.320 that accepts bitcoins. You have purchased something from that vendor. 0:17:41.640 --> 0:17:44.840 The vendor now takes possession of those bitcoins. That information 0:17:44.880 --> 0:17:48.560 gets incorporated into the hash, that block of text and 0:17:48.600 --> 0:17:52.600 it's part of the history of that bitcoin. Now you 0:17:52.680 --> 0:17:54.320 no longer have possession of that. If you were to 0:17:54.359 --> 0:17:56.919 try and duplicate that in some way, you would have 0:17:56.920 --> 0:17:58.399 to do it in such a way that would actually 0:17:58.400 --> 0:18:01.800 invalidate the bitcoins you've already spent. But there's a record 0:18:01.840 --> 0:18:04.199 of that. It exists, and it's across all these notes that. 0:18:04.240 --> 0:18:06.480 One of the things we didn't talk about is bitcoins 0:18:06.480 --> 0:18:11.120 appear to peer currency, So the information for all those 0:18:11.160 --> 0:18:14.240 bitcoins is spread throughout the entire network, which means that 0:18:14.280 --> 0:18:17.600 once you spend it, that information is out there every Yeah, 0:18:17.640 --> 0:18:20.840 I mean, I mean they don't know that. They don't 0:18:20.840 --> 0:18:24.239 know that you bought something with the bitcoins. They know 0:18:24.320 --> 0:18:26.960 that that particular bitcoin was used in a transaction and 0:18:27.000 --> 0:18:29.359 where it is now. So for you to be able 0:18:29.400 --> 0:18:32.199 to to hack the system, you would have to not 0:18:32.320 --> 0:18:38.159 only figure out the hash of whatever particular transaction you 0:18:38.200 --> 0:18:41.879 were aiming for, you would alter all the transactions that 0:18:41.920 --> 0:18:44.680 happened after that point. So if that bitcoin had been 0:18:44.800 --> 0:18:48.159 in eighteen other transactions, that means that you would have 0:18:48.200 --> 0:18:50.639 to figure out a way of hacking that earlier point. 0:18:50.800 --> 0:18:53.919 Where you've discovered that there's a vulnerability and then no 0:18:53.960 --> 0:18:56.760 one would have to notice the fact that seventeen or 0:18:56.800 --> 0:19:00.239 eighteen other transactions were invalidated as a result. So that's 0:19:00.240 --> 0:19:04.440 where the protection is. It. Actually, the system itself rejects, uh, 0:19:04.920 --> 0:19:08.520 anything that looks like it's an attempt to double spend, 0:19:09.080 --> 0:19:12.080 So that that was the because, I mean, that had 0:19:12.080 --> 0:19:13.880 to be built in there. Otherwise, whenever you talk about 0:19:13.880 --> 0:19:15.840 digital you're like, well, what stops me from just making 0:19:15.880 --> 0:19:18.000 a copy and then a copy of a copy so 0:19:18.040 --> 0:19:20.119 that I become an instant millionaire once I get my 0:19:20.160 --> 0:19:23.240 first bitcoin. That's what stops you, right, Yeah, Supposedly, there's 0:19:23.240 --> 0:19:25.840 only been one major security incident. I think that happened 0:19:25.840 --> 0:19:30.520 in Uh yeah, there was there was there actually okay, yes, 0:19:30.560 --> 0:19:33.439 there was a hacking incident there where uh and it 0:19:33.520 --> 0:19:37.720 ended up getting fixed. But whereas there was that one 0:19:37.760 --> 0:19:41.640 major incident, there was also the problem of institutions. They're 0:19:41.640 --> 0:19:44.600 acting more or less kind of like banks and exchanges 0:19:45.080 --> 0:19:48.520 that hold bitcoins, which is kind of the opposite of 0:19:48.560 --> 0:19:50.600 the purpose of the bitcoin, isn't it. I mean, kind 0:19:50.640 --> 0:19:53.360 of it's supposed to be. I mean, it's like counterculture 0:19:53.359 --> 0:19:55.680 in that it doesn't require you to have a third 0:19:55.720 --> 0:19:58.560 party you're you're processing everything. Yeah, they I think the 0:19:58.600 --> 0:20:02.359 exchange Well, we'll get into some reasons why exchanges exist 0:20:02.400 --> 0:20:05.000 in a minute, but it's this would be places that 0:20:05.000 --> 0:20:09.080 would end up exchanging bitcoins for other currencies that kind 0:20:09.080 --> 0:20:12.480 of stuff. Um, and there have been a few that 0:20:12.560 --> 0:20:15.359 had been hacked. In fact, a few that that have 0:20:15.520 --> 0:20:20.120 gone under since uh the hacking attacks because all all 0:20:20.320 --> 0:20:25.080 uh confidence on the consumer level stapped away. Yeah, so 0:20:25.359 --> 0:20:28.040 that's really one of the issues. Another issue with bitcoins 0:20:28.040 --> 0:20:31.560 is that, uh, it's come under fire from some critics 0:20:31.600 --> 0:20:34.960 because one of the things that people are using some 0:20:35.040 --> 0:20:37.480 people are using bitcoins for is to make what would 0:20:37.480 --> 0:20:41.840 otherwise be illegal purchases that are not traceable. So they 0:20:41.920 --> 0:20:44.600 end up buying bitcoins and then use those bitcoins on 0:20:44.640 --> 0:20:47.280 something like the Silk Road, which is one of those 0:20:47.840 --> 0:20:51.200 uh it's it's essentially a black market, and black market 0:20:51.240 --> 0:20:54.560 for drugs is what's mainly known as Star Wars collectors 0:20:54.600 --> 0:20:59.080 items and mostly drugs. So so you know, we sit 0:20:59.160 --> 0:21:00.800 there and say like, well, you know, I can't buy 0:21:00.800 --> 0:21:05.200 heroin with uh with cash because it's gonna yeah, well, 0:21:05.400 --> 0:21:08.320 because I'll get caught. We're taking morality and ethics and 0:21:08.320 --> 0:21:10.880 everything out. This is someone this is someone who who 0:21:10.920 --> 0:21:13.679 wants heroin and they say, well, I've got bitcoin, so 0:21:13.720 --> 0:21:16.880 I'm gonna spend it on on silk road. It's completely untraceable. 0:21:17.160 --> 0:21:20.919 That's one of the criticisms, right, and so, uh, you know, 0:21:21.040 --> 0:21:23.520 the idea that you could have an entire black market 0:21:23.600 --> 0:21:27.120 supported by it that's untraceable, that could end up supporting 0:21:27.119 --> 0:21:30.320 illegal activity. That's one of the reasons why the bitcoin 0:21:30.520 --> 0:21:34.520 currency has has received some criticism. Another big criticism is 0:21:34.560 --> 0:21:37.120 the fact of its volatility, the fact that the value 0:21:37.200 --> 0:21:42.399 changes so dramatically and so quickly. Um, that's that's an issue. 0:21:42.560 --> 0:21:45.640 And some people say that it really is more like, 0:21:45.960 --> 0:21:50.040 uh like a speculative investment as opposed to a currency 0:21:50.119 --> 0:21:53.080 that not many people are actually using it to purchase stuff. 0:21:53.400 --> 0:21:56.320 They're using it to buy into it as if it 0:21:56.359 --> 0:21:59.679 were a star hypothetical wealth. Yeah, so that's not in 0:21:59.760 --> 0:22:03.080 that case, it's not you know, really working as a currency. 0:22:03.160 --> 0:22:05.120 So that that's a valid I think that's a valid 0:22:05.119 --> 0:22:09.760 criticism as well. So here's the thing that we might 0:22:09.800 --> 0:22:14.159 have to wonder about with bitcoin or any alternative currency, 0:22:14.240 --> 0:22:16.119 right because bitcoins are not the only one, no, but 0:22:16.200 --> 0:22:18.720 it's it's the one that's known as being open source 0:22:18.760 --> 0:22:22.160 and peer to peer. There are a couple of yeah, 0:22:22.240 --> 0:22:27.560 but so is it possible for an alternative currency to 0:22:27.800 --> 0:22:32.560 overtake the mainstream currency if enough people uh if yeah, 0:22:32.560 --> 0:22:36.000 if enough people have confidence in the alternative currency and 0:22:36.080 --> 0:22:39.200 not enough confidence in the quote unquote official currency, then 0:22:39.240 --> 0:22:43.040