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Speaker 1: Welcome to brain stuff from how Stuff Works. Hey, their

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Speaker 1: brain stuff, Lauren Vogel bomb here in sevente loan. The

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Speaker 1: price of a bitcoin exploded from under one thousand dollars

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Speaker 1: in January to more than ten thousand dollars in early December,

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Speaker 1: earning the top cryptocurrency a market capitalization of more than

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Speaker 1: one hundred and sixty seven billion dollars. Surprise success of

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Speaker 1: bitcoin has opened the floodgates to a torrent of new

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Speaker 1: cryptocurrencies competing for investor dollars. Bitcoin is a strictly digital

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Speaker 1: currency with no physical backing, that can be sent from

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Speaker 1: one Internet user to another. It runs on blockchain technology.

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Speaker 1: The blockchain works by recording financial transactions on a shared

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Speaker 1: digital ledger that's encrypted on a peer to peer network,

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Speaker 1: instead of relying on a large financial institution or centralized

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Speaker 1: servers to process payments. The blockchain runs on thousands of

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Speaker 1: computers or nodes worldwide. Advanced cryptography keeps financial information secure

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Speaker 1: and largely anonymous, so to breaches are impossible. The blockchain

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Speaker 1: is being heralded as a world changing technology that will

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Speaker 1: permanently disrupt the highly centralized and fee based financial system.

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Speaker 1: Investors eager to get in on the ground floor of

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Speaker 1: this potentially revolutionary technology. Are throwing money not only at Bitcoin,

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Speaker 1: but at the more than one thousand crypto competitors known

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Speaker 1: collectively as alt coins. Skeptics are comparing this to the

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Speaker 1: dot com bubble. Bitcoin was first released in two thousand

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Speaker 1: nine by anonymous coders under the pseudonym Satoshi Nakamoto. Critics

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Speaker 1: initially dismissed Bitcoin as a futurist pipe dream or worse,

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Speaker 1: a boon to black market criminals, but now Bitcoin's underlying

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Speaker 1: technology is being hailed by some as the future of finance.

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Speaker 1: We spoke with Andrew Miller, an assistant professor of electrical

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Speaker 1: and Computer engineering at the University of Illinois at urbanash

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Speaker 1: Champaigne and the associate director for the Initiative for Cryptocurrencies

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Speaker 1: and Contracts. He thinks the bubble talk is irrelevant. What's

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Speaker 1: more important, he says, is that investors speculation is fostering

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Speaker 1: rapid innovation, creating hundreds of really exciting experiments in the

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Speaker 1: form of new cryptocurrencies, each with unique functionalities. He said,

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Speaker 1: anyone investing in technology understands that there will be many failures.

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Speaker 1: It seems to be the case with cryptocurrencies that the

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Speaker 1: speculation is funding what is hopefully a really important infrastructure

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Speaker 1: development infrastructure. I thought we were talking about nonphysical currency. Well,

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Speaker 1: you can't have cryptocurrencies without the blockchain, and the impact

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Speaker 1: of the distributed blockchain infrastructure will likely be far bigger

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Speaker 1: than any individual cryptocurrency, and that's why so many blockchain

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Speaker 1: enthusiasts are big on a Bitcoin alternative called Etherium. Ethereum

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Speaker 1: isn't just a cryptocurrency, it's a platform for building applications

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Speaker 1: that run on the blockchain. Like bitcoin, Ethereum has its

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Speaker 1: own programming language, but it's more powerful and versatile than bitcoins,

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Speaker 1: and unlike Bitcoin, Ethereum isn't out to replace conventional money,

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Speaker 1: but simply to enable more secure transactions on the blockchain.

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Speaker 1: Ethereum has its own to currency called Ether, but it's

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Speaker 1: only useful within the Ethereum platform. You'll never use Ether,

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Speaker 1: for example, to buy Xbox games like you can with bitcoin.

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Speaker 1: We also spoke with Vople Goyle, who teaches a graduate

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Speaker 1: course on blockchain and cryptocurrencies at Carnegie Mellon University. He

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Speaker 1: thinks that the surge in new cryptocurrencies will soon stabilize,

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Speaker 1: leaving only a few dozen in circulation. He also thinks

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Speaker 1: that Bitcoin's position at the top may not be permanent,

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Speaker 1: and predicts that Ethereum will wind up becoming the biggest

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Speaker 1: His reasoning is that Ethereum's programming language and platform make

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Speaker 1: it easy for startups and developers to create decentralized apps

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Speaker 1: that empower individuals and businesses in new ways. One of

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Speaker 1: the biggest, says Goyle, is the idea of smart contracts.

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Speaker 1: Instead of paying lawyers to write and enforce a contract,

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Speaker 1: the deal can be programmed on the blockchain. Smart contracts

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Speaker 1: enforce themselves, even imposing penalties for a breach. Before coming

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Speaker 1: to Carnegie Melon, Goyle worked for Microsoft India, where he

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Speaker 1: says the company was moving contracts for real world properties

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Speaker 1: like office buildings onto the blockchain to avoid it'd costly

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Speaker 1: legal disputes. Ethereum also makes it easier to use what

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Speaker 1: Miller at the University of Illinois calls programmable money. He

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Speaker 1: uses the example of a college student's bank account that's

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Speaker 1: programmed with certain parental controls. The student can withdraw up

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Speaker 1: to a one dollars a week for expenses, but anything

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Speaker 1: beyond that requires an authorization by the parents. Unique cryptography.

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Speaker 1: Key Miller thinks that programmable money is one of those

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Speaker 1: ideas that will quickly spread into mainstream banking. Besides Ethereum,

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Speaker 1: some of the other alt coins gaining traction promised greater

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Speaker 1: security and anonymity than Bitcoin. Miller says that the initial

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Speaker 1: media buzz over bitcoin's unbreakable privacy was only partially true,

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Speaker 1: and that the original version of blockchain still leaves users

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Speaker 1: vulnerable to hackers. He says that some next generation cryptocurrencies,

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Speaker 1: like z cash, for which he is an advisor, by

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Speaker 1: the way, Manaro and Dash, employ much more advanced cryptography

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Speaker 1: that completely hides the identity of users and the value

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Speaker 1: of transactions. There are still plenty of obstacles that may

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Speaker 1: delay or potentially do rail the widespread adoption of cryptocurrencies.

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Speaker 1: Transaction speed is a big one. With Bitcoin, transactions need

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Speaker 1: to be verified by half of all active nodes on

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Speaker 1: the network, which Goyles says takes thirty minutes on average.

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Speaker 1: Ethereum can only handle thirteen transactions per second, which is

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Speaker 1: still way too slow like two D and fifty times

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Speaker 1: too slow to serve a user base of ten million,

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Speaker 1: which means we won't be using it to buy our

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Speaker 1: groceries anytime soon. Another potential monkey wrench is government regulation.

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Speaker 1: One of the benefits of cryptocurrencies is that they operate

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Speaker 1: outside of highly regulated financial systems and government control. But

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Speaker 1: some companies are getting ready to offer bitcoin futures contracts,

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Speaker 1: which will encourage mainstream investors to get involved, as well

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Speaker 1: as spur federal regulation via the Commodity Futures Trading Commission.

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Speaker 1: Whether all this means you should invest in cryptocurrencies, well,

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Speaker 1: that one's up to you. Today's episode was written by

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Speaker 1: Dave Ruse and produced by Tristan McNeil. For more on

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Speaker 1: this and lots of other technological topics, visit our home planet,

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Speaker 1: past off Works dot com m