WEBVTT - Will Bitcoin Remain the Biggest Cryptocurrency?

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<v Speaker 1>Welcome to brain stuff from how Stuff Works. Hey, their

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<v Speaker 1>brain stuff, Lauren Vogel bomb here in sevente loan. The

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<v Speaker 1>price of a bitcoin exploded from under one thousand dollars

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<v Speaker 1>in January to more than ten thousand dollars in early December,

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<v Speaker 1>earning the top cryptocurrency a market capitalization of more than

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<v Speaker 1>one hundred and sixty seven billion dollars. Surprise success of

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<v Speaker 1>bitcoin has opened the floodgates to a torrent of new

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<v Speaker 1>cryptocurrencies competing for investor dollars. Bitcoin is a strictly digital

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<v Speaker 1>currency with no physical backing, that can be sent from

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<v Speaker 1>one Internet user to another. It runs on blockchain technology.

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<v Speaker 1>The blockchain works by recording financial transactions on a shared

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<v Speaker 1>digital ledger that's encrypted on a peer to peer network,

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<v Speaker 1>instead of relying on a large financial institution or centralized

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<v Speaker 1>servers to process payments. The blockchain runs on thousands of

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<v Speaker 1>computers or nodes worldwide. Advanced cryptography keeps financial information secure

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<v Speaker 1>and largely anonymous, so to breaches are impossible. The blockchain

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<v Speaker 1>is being heralded as a world changing technology that will

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<v Speaker 1>permanently disrupt the highly centralized and fee based financial system.

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<v Speaker 1>Investors eager to get in on the ground floor of

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<v Speaker 1>this potentially revolutionary technology. Are throwing money not only at Bitcoin,

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<v Speaker 1>but at the more than one thousand crypto competitors known

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<v Speaker 1>collectively as alt coins. Skeptics are comparing this to the

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<v Speaker 1>dot com bubble. Bitcoin was first released in two thousand

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<v Speaker 1>nine by anonymous coders under the pseudonym Satoshi Nakamoto. Critics

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<v Speaker 1>initially dismissed Bitcoin as a futurist pipe dream or worse,

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<v Speaker 1>a boon to black market criminals, but now Bitcoin's underlying

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<v Speaker 1>technology is being hailed by some as the future of finance.

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<v Speaker 1>We spoke with Andrew Miller, an assistant professor of electrical

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<v Speaker 1>and Computer engineering at the University of Illinois at urbanash

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<v Speaker 1>Champaigne and the associate director for the Initiative for Cryptocurrencies

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<v Speaker 1>and Contracts. He thinks the bubble talk is irrelevant. What's

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<v Speaker 1>more important, he says, is that investors speculation is fostering

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<v Speaker 1>rapid innovation, creating hundreds of really exciting experiments in the

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<v Speaker 1>form of new cryptocurrencies, each with unique functionalities. He said,

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<v Speaker 1>anyone investing in technology understands that there will be many failures.

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<v Speaker 1>It seems to be the case with cryptocurrencies that the

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<v Speaker 1>speculation is funding what is hopefully a really important infrastructure

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<v Speaker 1>development infrastructure. I thought we were talking about nonphysical currency. Well,

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<v Speaker 1>you can't have cryptocurrencies without the blockchain, and the impact

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<v Speaker 1>of the distributed blockchain infrastructure will likely be far bigger

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<v Speaker 1>than any individual cryptocurrency, and that's why so many blockchain

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<v Speaker 1>enthusiasts are big on a Bitcoin alternative called Etherium. Ethereum

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<v Speaker 1>isn't just a cryptocurrency, it's a platform for building applications

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<v Speaker 1>that run on the blockchain. Like bitcoin, Ethereum has its

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

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<v Speaker 1>and unlike Bitcoin, Ethereum isn't out to replace conventional money,

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<v Speaker 1>but simply to enable more secure transactions on the blockchain.

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<v Speaker 1>Ethereum has its own to currency called Ether, but it's

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

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<v Speaker 1>for example, to buy Xbox games like you can with bitcoin.

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<v Speaker 1>We also spoke with Vople Goyle, who teaches a graduate

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<v Speaker 1>course on blockchain and cryptocurrencies at Carnegie Mellon University. He

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<v Speaker 1>thinks that the surge in new cryptocurrencies will soon stabilize,

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<v Speaker 1>leaving only a few dozen in circulation. He also thinks

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<v Speaker 1>that Bitcoin's position at the top may not be permanent,

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<v Speaker 1>and predicts that Ethereum will wind up becoming the biggest

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<v Speaker 1>His reasoning is that Ethereum's programming language and platform make

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<v Speaker 1>it easy for startups and developers to create decentralized apps

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<v Speaker 1>that empower individuals and businesses in new ways. One of

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<v Speaker 1>the biggest, says Goyle, is the idea of smart contracts.

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<v Speaker 1>Instead of paying lawyers to write and enforce a contract,

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<v Speaker 1>the deal can be programmed on the blockchain. Smart contracts

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<v Speaker 1>enforce themselves, even imposing penalties for a breach. Before coming

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<v Speaker 1>to Carnegie Melon, Goyle worked for Microsoft India, where he

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<v Speaker 1>says the company was moving contracts for real world properties

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<v Speaker 1>like office buildings onto the blockchain to avoid it'd costly

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<v Speaker 1>legal disputes. Ethereum also makes it easier to use what

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<v Speaker 1>Miller at the University of Illinois calls programmable money. He

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<v Speaker 1>uses the example of a college student's bank account that's

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<v Speaker 1>programmed with certain parental controls. The student can withdraw up

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<v Speaker 1>to a one dollars a week for expenses, but anything

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<v Speaker 1>beyond that requires an authorization by the parents. Unique cryptography.

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<v Speaker 1>Key Miller thinks that programmable money is one of those

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<v Speaker 1>ideas that will quickly spread into mainstream banking. Besides Ethereum,

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<v Speaker 1>some of the other alt coins gaining traction promised greater

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<v Speaker 1>security and anonymity than Bitcoin. Miller says that the initial

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<v Speaker 1>media buzz over bitcoin's unbreakable privacy was only partially true,

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<v Speaker 1>and that the original version of blockchain still leaves users

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<v Speaker 1>vulnerable to hackers. He says that some next generation cryptocurrencies,

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<v Speaker 1>like z cash, for which he is an advisor, by

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<v Speaker 1>the way, Manaro and Dash, employ much more advanced cryptography

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<v Speaker 1>that completely hides the identity of users and the value

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<v Speaker 1>of transactions. There are still plenty of obstacles that may

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<v Speaker 1>delay or potentially do rail the widespread adoption of cryptocurrencies.

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<v Speaker 1>Transaction speed is a big one. With Bitcoin, transactions need

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<v Speaker 1>to be verified by half of all active nodes on

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<v Speaker 1>the network, which Goyles says takes thirty minutes on average.

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<v Speaker 1>Ethereum can only handle thirteen transactions per second, which is

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<v Speaker 1>still way too slow like two D and fifty times

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<v Speaker 1>too slow to serve a user base of ten million,

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<v Speaker 1>which means we won't be using it to buy our

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<v Speaker 1>groceries anytime soon. Another potential monkey wrench is government regulation.

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<v Speaker 1>One of the benefits of cryptocurrencies is that they operate

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<v Speaker 1>outside of highly regulated financial systems and government control. But

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<v Speaker 1>some companies are getting ready to offer bitcoin futures contracts,

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<v Speaker 1>which will encourage mainstream investors to get involved, as well

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<v Speaker 1>as spur federal regulation via the Commodity Futures Trading Commission.

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<v Speaker 1>Whether all this means you should invest in cryptocurrencies, well,

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<v Speaker 1>that one's up to you. Today's episode was written by

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<v Speaker 1>Dave Ruse and produced by Tristan McNeil. For more on

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<v Speaker 1>this and lots of other technological topics, visit our home planet,

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<v Speaker 1>past off Works dot com m