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Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio.

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Speaker 1: Hey there, and welcome to tech Stuff. I'm your host,

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Speaker 1: John than Strickland. I'm an executive producer with I Heart Radio,

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Speaker 1: and I love all things tech. And one thing that

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Speaker 1: I have covered in the past on this show is

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Speaker 1: cryptocurrency and blockchain. But I pretty much always talk about

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Speaker 1: blockchain in terms of proof of work. Cryptocurrencies and proof

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Speaker 1: of work blockchains and there are other types. So I

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Speaker 1: thought we could go over some of this and talk

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Speaker 1: about what all of this means and what the differences are.

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Speaker 1: And to start off, we need to talk about proof

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Speaker 1: of work. Even though I've done it before, We've got

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Speaker 1: to establish that first. So when you've heard me talk

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Speaker 1: about how bitcoin mining, you know, is really equivalent to

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Speaker 1: a computer solving a really hard math problem, or that

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Speaker 1: your computer is essentially making the first accurate guests for

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Speaker 1: a particularly large unknown number, you know, I've I've often

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Speaker 1: kind of made that analogy. Proof of work is related

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Speaker 1: to that. However, the actual concept of proof of work

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Speaker 1: predates that of blockchain, or at least of blockchain in

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Speaker 1: the term of cryptocurrencies. Blockchain itself also predates cryptocurrency. In fact,

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Speaker 1: one could argue that the brilliance of bitcoin was bringing

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Speaker 1: these different ideas together into a a new format. So

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Speaker 1: the proof of work concept was first described in a

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Speaker 1: paper that Cynthia Dwark and Mony Nyor wrote back in

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Speaker 1: the early nineties. They did not coin the phrase proof

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Speaker 1: of work, but what they described effectively is proof of work.

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Speaker 1: They were looking to solve a different problem from cryptocurrencies,

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Speaker 1: you know, how do we create a system of which

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Speaker 1: people can mine a digital currency and validate transactions. They

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Speaker 1: were looking at ways to discourage spam email. Their paper

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Speaker 1: is titled Pricing via Processing or Combating Junk Mail. So

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Speaker 1: one of the reasons that spam even exists is that

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Speaker 1: it doesn't cost very much to send it out at

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Speaker 1: a massive scale. If you had to hire people to

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Speaker 1: manually type out spam messages or even just fill in

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Speaker 1: the address bar in the email, that would be cost

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Speaker 1: prohibitive because the return would be way too low. It's

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Speaker 1: actually kind of hard to cite statistics on this because

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Speaker 1: there are a lot of different metrics that are used

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Speaker 1: in a lot of different time periods we can look at.

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Speaker 1: But generally speaking, the response rate on spam, that is

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Speaker 1: the percentage of people who actually not only open up

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Speaker 1: a spam message, but they on it in some way.

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Speaker 1: That response rate is abysmally low. According to a study

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Speaker 1: from the University of California, Berkeley, and you see San

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Speaker 1: Diego back in two thousand and eight, only one in

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Speaker 1: twelve point five million messages gets a response. That's way low.

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Speaker 1: Right now, I'm not sure if the rate was much

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Speaker 1: higher or if it was even lower back in the

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Speaker 1: early nineties when the researchers were working on this concept

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Speaker 1: to discourage spam. But when you've got a success rate

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Speaker 1: that is that small, the question arises, how the heck

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Speaker 1: can it be worthwhile? I mean, how can it be

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Speaker 1: worth the time and effort of operating a business that

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Speaker 1: sends out spam emails if you have a success rate

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Speaker 1: that is that low. Well, the secret is to operate

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Speaker 1: on an enormous scale. So, yeah, you're only getting one

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Speaker 1: hit out of twelve and a half million people, but

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Speaker 1: you're sending out emails two hundreds of millions of people.

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Speaker 1: You also have to have a very low cost of operation.

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Speaker 1: You know, it can't cost much to actually do your business,

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Speaker 1: and you have to have a pretty enormous return when

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Speaker 1: you do have a success, like when you get a hit,

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Speaker 1: it's significant, and preferably you have all of these at

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Speaker 1: the same time. Keeping costs low is a huge part

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Speaker 1: of this. With database is full of email addresses, automated

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Speaker 1: systems that use boilerplate copy, and you know, an automated

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Speaker 1: robocolor style email program that can plug addresses in and

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Speaker 1: and attach it to this boiler plate, you can really

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Speaker 1: churn those suckers out. If you get a bit over zealous,

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Speaker 1: then you might make authorities upset and they might come

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Speaker 1: at you and wants you to answer some questions. That

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Speaker 1: can be a problem. We've seen that happen where spam

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Speaker 1: operations got shut down because you know, local politicians got

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Speaker 1: fed up with it and started looking into it. But

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Speaker 1: you know, you can make a profit working this way.

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Speaker 1: You just again, you have to be brutal with cost

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Speaker 1: control in order to make this work at scale. So

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Speaker 1: the researchers wanted to find ways to make the cost

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Speaker 1: of operation go up. Even if it only went up

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Speaker 1: by a tiny little bit, that could be enough to

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Speaker 1: wipe out the return on investment for spam operators and

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Speaker 1: they would likely abandon the practice. If there's no money

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Speaker 1: to be made, then there's no reason to send out spam, right,

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Speaker 1: if you could actually make it expensive enough, then it

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Speaker 1: would cost more money to send out spam. Then you

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Speaker 1: would recoup whenever you got those rare successful responses, and

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Speaker 1: that would definitely bring the practice to an end. So

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Speaker 1: let's say you're looking at folks who are sending spam

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Speaker 1: out and you're trying to discourage them. You're trying to

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Speaker 1: find a way so that the spammers give up on

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Speaker 1: what they're doing. Now, if you could just put a

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Speaker 1: price on sending an email, that would probably do it. Right.

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Speaker 1: There is a price on sending email because operating a

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Speaker 1: computational device has energy requirements, and that means you have

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Speaker 1: to pay an energy bill at some point. But you

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Speaker 1: want that price to be even higher. You want to

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Speaker 1: just attach it straight to an email specifically, not just

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Speaker 1: operating a computer. So let's say that you decide that

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Speaker 1: all emails will cost a fraction of a cent to

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Speaker 1: spend to to send one. So if you're gonna send

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Speaker 1: an email, you're gonna get charged, you know, a fraction

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Speaker 1: of one penny for normal folks just sending on emails.

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Speaker 1: It would be such a small charge that you probably

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Speaker 1: wouldn't notice. I mean, you wouldn't be happy about it,

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Speaker 1: But it's not like it would amount too much. If

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Speaker 1: you're sending out maybe ten emails a day, maybe you're

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Speaker 1: getting close to spending half a penny. That would not

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Speaker 1: be a big deal, right, But for organizations that are

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Speaker 1: trying to blast out hundreds of millions of messages, it

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Speaker 1: quickly becomes cost for hipative. But this approach comes with

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Speaker 1: all sorts of problems because normal folks wouldn't be thrilled

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Speaker 1: at having to pay even a fraction of a cent

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Speaker 1: to send email. Like even if you framed it that way,

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Speaker 1: people would object. They'd say, why are you making it

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Speaker 1: cost me anything to send something electronically? There are no

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Speaker 1: physical components to to be handled in this. Plus you'd

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Speaker 1: have to set up some sort of payment system in

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Speaker 1: the first place, and and whom are you paying? To

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Speaker 1: whom does the money go? This This makes it a

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Speaker 1: difficult and thus unworkable solution. So the authors of the

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Speaker 1: paper suggested an alternative. Instead of charging money outright to

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Speaker 1: send an email, why not build into email systems a

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Speaker 1: processing requirement, as in a computer process or requirement. Each

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Speaker 1: time someone wants to send an email, their computer must

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Speaker 1: first solve a mathematical problem. Uh. And in order to

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Speaker 1: solve a mathematical problem, the eater must expend resources it's

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Speaker 1: got to send spend some of its processing capability on

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Speaker 1: solving this problem, and also some of its time. The

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Speaker 1: difficulty of the problem would require some amount of computational

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Speaker 1: output that's equivalent to a fraction of assent. In other words,

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Speaker 1: you technically you're still charging folks to use email, but

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Speaker 1: the cost is in effort and time, not directly in money,

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Speaker 1: and that is something that people would probably be a

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Speaker 1: little more receptive to. And again, for the average person,

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Speaker 1: they probably wouldn't even notice sending an email might take

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Speaker 1: a little longer than it did before, but not by

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Speaker 1: so much that they would make that big of a difference.

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Speaker 1: So their computer would have to solve some sort of

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Speaker 1: mathematical problem, and the proof of the solution would need

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Speaker 1: to be you know, signed into the email itself. The

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Speaker 1: problem would need to be difficult to solve but easy

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Speaker 1: to verify. So in other words, you you can send

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Speaker 1: this email until whatever system is handling it verifies that

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Speaker 1: you did solve the problem. It's kind of like they're

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Speaker 1: not allowed to go to bed without your parents checking

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Speaker 1: to make sure you did your homework first. Same kind

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Speaker 1: of idea, So it needed to be the kind of

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Speaker 1: problem where you have to work out an answer, and

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Speaker 1: that part is hard, but once you have the answer,

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Speaker 1: it's very easy to plug that answer into the original

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Speaker 1: problem and see that it works. So you can think

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Speaker 1: of something like an algebraic equation and it has an

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Speaker 1: unknown value in it that you represent as a variable,

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Speaker 1: the classic being the letter X. Well, once you solve

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Speaker 1: this equation, and you solve for x, you can then

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Speaker 1: plug that solution that x value back into the original

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Speaker 1: equation and prove that it works well. Their approach was

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Speaker 1: sort of the same thing, only much more complicated than that. Moreover,

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Speaker 1: they pointed out that if after you limited the solution,

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Speaker 1: you saw spammers trying to, you know, power through it

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Speaker 1: and just continue to spam despite the fact that you've

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Speaker 1: put this computational requirement in the way, well, you can

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Speaker 1: just adjust the difficulty of the problems that they have

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Speaker 1: to solve before they can send out more emails. You

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Speaker 1: make the problem tougher. Then it takes the computers more

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Speaker 1: resources to solve the problems. So the harder the problem

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Speaker 1: gets the more quote unquote expensive it is to send

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Speaker 1: an email. And once you get to that tipping point,

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Speaker 1: then spammers will see that the amount of time and

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Speaker 1: energy that they're using in order to just send out

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Speaker 1: the spam emails is not offset by the amount they're

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Speaker 1: making when the spam finally starts hitting responses. This was

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Speaker 1: a really interesting proposal. Now let's skip ahead to the

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Speaker 1: two thousand's, like two thousand seven, two thousand eight. It

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Speaker 1: was in two thousand eight that we first got a

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Speaker 1: white paper written by someone using or someone or some

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Speaker 1: some people potentially using the pseudonym Satoshi Nakamoto, and this

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Speaker 1: was the famous white paper describing bitcoin. Now, in this piece,

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Speaker 1: the author or authors combined the proof of work concept

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Speaker 1: with another one that again predated bitcoin, and that was blockchain.

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Speaker 1: What blockchain does is establish a timeline of events of

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Speaker 1: some sort. So in the case of bitcoin, the events

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Speaker 1: are transactions, so their bitcoin transactions when bitcoin changes hands

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Speaker 1: from one entity to another. And let's think about timelines

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Speaker 1: for a second. In our experience, there is no way

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Speaker 1: to travel back in time. The only way to travel

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Speaker 1: through time is the way we all do it normally,

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Speaker 1: where time progresses forward for us there's no turning back.

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Speaker 1: So that dumb thing you did when you were a kid,

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Speaker 1: you know, you know which dumb thing I'm talking about.

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Speaker 1: It's that dumb thing where sometimes when you're just trying

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Speaker 1: to fall asleep, your brain digs up this dumb thing

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Speaker 1: and says, hey, remember when you did that dumb thing,

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Speaker 1: and do you remember how horrible you feel about it? Now? Well,

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Speaker 1: that that dumb thing you did, there's no way for

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Speaker 1: you to go back in time and to not do

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Speaker 1: that dumb thing. You can't erase it. It's in the timeline.

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Speaker 1: And really, everything that's happened to you afterward in your

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Speaker 1: life has that dumb thing factored into it, at least

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Speaker 1: on some level. Even if it's undetectable, it's there because

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Speaker 1: it happened, you know, that dumb dumb thing. Well. Blockchain

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Speaker 1: is a computational process that establishes something similar to a timeline.

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Speaker 1: The idea is that with a blockchain, you have a

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Speaker 1: timeline of processes, and this timeline is also unalterable. Someone

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Speaker 1: cannot go back earlier into the timeline, travel back into

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Speaker 1: the blockchain, and make a change, because if they did,

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Speaker 1: it would mean that all the later blocks in the

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Speaker 1: chain would also have to change, and folks would notice that.

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Speaker 1: Because the chain preserves the timeline, everything is built on

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Speaker 1: what has come before, So changing something from before would

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Speaker 1: change everything that comes afterward, and and the the jig

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Speaker 1: would be up. You would be found out immediately. So,

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Speaker 1: for example, if you spent bitcoin and then you thought,

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Speaker 1: I'm gonna get sneaky, and I'm gonna wait a while,

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Speaker 1: and after a while, I'm going to go into the

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Speaker 1: blockchain and alter that that record so that I didn't

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Speaker 1: spend that bitcoin, and then I magically get the bitcoin back,

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Speaker 1: it would be as if money were just magically appearing

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Speaker 1: inside your wallet. Well, because all future transactions are built

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Speaker 1: upon past ones, going in and trying to alter the

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Speaker 1: blockchain would become visible all the way down and you

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Speaker 1: would immediately be found out. So that's how the blockchain

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Speaker 1: protects the order of processes that once you start to

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Speaker 1: validate a block of transactions, it is cemented effectively. Now,

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Speaker 1: occasionally the chain might fork, but at some point one

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Speaker 1: branch of this chain is going to be longer than

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Speaker 1: the others and it becomes the true chain. The other

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Speaker 1: branches become orphaned blocks. Uh, So over time you will

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Speaker 1: see things split off from the blockchain, but whichever one

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Speaker 1: gets built on the most within a given amount of

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Speaker 1: time becomes the true chain. Alright, So block chains this

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Speaker 1: digital method of establishing a series of unalterable processes. Where

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Speaker 1: does proof of work come in? All right? So one

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Speaker 1: thing that's used a lot in computer science are hash functions.

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Speaker 1: These are a little tricky to talk about, all right.

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Speaker 1: So first let's talk about encryption. And I want to

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Speaker 1: point out right away at the very beginning, encryption is

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Speaker 1: not the same thing as a hash function. Encryption is

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Speaker 1: where you have some data and you perform a mathematical

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Speaker 1: process on that data, and you transform it into different data,

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Speaker 1: something that looks absolutely meaningless. You've jumbled it up. No

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Speaker 1: one can make head or tail of it just by

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Speaker 1: looking at it. But someone with the correct decryption key

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Speaker 1: can reverse that process and get at the original data

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Speaker 1: and read whatever it was you wrote. That is reversible.

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Speaker 1: That is encryption and decryption. Hashing is not reversible. You've

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Speaker 1: got some data, all right, let's say it's even the

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Speaker 1: same message. Is what we were just talking about with

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Speaker 1: encryption and decryption, and you have an operation that is

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Speaker 1: one way, which means you can perform this operation on

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Speaker 1: the data, and you will get a result, but there's

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Speaker 1: no reverse process where you can take that result and

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Speaker 1: turn it back into the original data. Frequently, hash functions

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Speaker 1: have a set number of characters that they will generate

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Speaker 1: no matter what original value you plug in. So let's

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Speaker 1: say that you've got a hash function that will generate

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Speaker 1: an eighty character hash once you apply the function to

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Speaker 1: the incoming data. That means your result will have eighty characters.

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Speaker 1: Whether your incoming data is a one or if it's

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Speaker 1: a one billion or any other number, you end up

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Speaker 1: with an eighty character hash. Hashes can be collections of

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Speaker 1: letters and numbers, and there are lots of different hash functions,

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Speaker 1: which is what proof of work cryptocurrency kind of really

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Speaker 1: depends upon. And and here's where we get to the

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Speaker 1: key bit. The proof of work cryptocurrencies create a hash

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Speaker 1: that is based off the block of transactions that need

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Speaker 1: to be verified, as in the next block to join

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Speaker 1: the chain. But it doesn't just involved the hash of

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Speaker 1: that block or the hashing of that block. The hash

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Speaker 1: also incorporates the hash from the previous block of verified transactions,

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Speaker 1: the one that came right before. This is where we

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Speaker 1: have that link that ultimately goes all the way back

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Speaker 1: to the first block, right, because block two's hash incorporates

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Speaker 1: the hash from block one. Block three's hash incorporates the

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Speaker 1: hash from block two, which, as we just mentioned, incorporates

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Speaker 1: the hash of block one. So this continues from block

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Speaker 1: number one all the way down to the last block

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Speaker 1: in the chain. All right, So the bitcoin system generates

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Speaker 1: this hash. You've got this value in front of you.

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Speaker 1: It's a hash value. You have no idea what information

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Speaker 1: went into this to create this hash. Computers connected, you know,

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Speaker 1: the nodes connected to the system are essentially all trying

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Speaker 1: to figure out how the system generated this specific ific hash.

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Speaker 1: And again, the process isn't reversible, so it's not like

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Speaker 1: you can take the hash value that the system presents

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Speaker 1: and then reverse engineer it. Instead, essentially you have to

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Speaker 1: guess what value would have created this particular hash using

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Speaker 1: the hash function of the algorithm. You're you're trying to

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Speaker 1: figure out what number was it that made this happen essentially,

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Speaker 1: and I'll give a really oversimplified kind of idea of

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Speaker 1: how this works just in case you're having some trouble

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Speaker 1: with it. So again this is an oversimplification, but Let's

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Speaker 1: say I tell you the answer to this math problem

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Speaker 1: is six? What was the math problem? So all I've

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Speaker 1: done is given you the answer, and I'm asking you

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Speaker 1: what math problem did I do that gave me the

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Speaker 1: answer six? And you could say four plus two, you

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Speaker 1: could say two times three, you could say sixteen minus ten,

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Speaker 1: and so on. And the point is there's an infinite

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Speaker 1: number of potential answers, right Like, you could say all

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Speaker 1: sorts of different things that would be accurate in that

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Speaker 1: it would it would create a six, but doesn't necessarily

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Speaker 1: mean that that was the math problem I did, Right,

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Speaker 1: You're just guessing until someone hits the right math problem. Well,

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Speaker 1: in a way, that's what the computer nodes are doing

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Speaker 1: within a proof of work blockchain system like Bitcoin, and

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Speaker 1: the first computer to guess it correctly wins. Essentially, other

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Speaker 1: computers in the system can verify that the guess is correct,

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Speaker 1: because once you have a guess, then you can plug

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Speaker 1: that into the hashing formula and find out if in fact,

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Speaker 1: it generates the hash you were looking for. Then if

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Speaker 1: it does, you got it right, and the winning computer

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Speaker 1: system gets the reward of a certain amount of cryptocurrency

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Speaker 1: units for bitcoin. Right now, that I'm out is six

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Speaker 1: point to five bitcoins per block. Now, as I record

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Speaker 1: this episode, the value bitcoin is almost fifty seven thousand dollars,

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Speaker 1: so a six point to five reward is equal to

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Speaker 1: nearly three hundred fifty five thousand bucks. And there are

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Speaker 1: around one forty four blocks added to the chain per

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Speaker 1: day at around three thousand dollars per block. So there

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Speaker 1: is a huge financial incentive to run a computer system

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Speaker 1: or network of systems that is the first to get

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Speaker 1: to this right answer. Right. I mean, there's just an

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Speaker 1: enormous amount of money to be made if you are

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Speaker 1: number one, So there's a huge incentive to be number one.

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Speaker 1: This is why you'll hear about bitcoin mining operations that

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Speaker 1: have incredibly powerful machines just racing constantly to get the

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Speaker 1: right answer. These machines need a lot of power. Thus

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Speaker 1: they need a lot of electricity. This means a lot

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Speaker 1: of power consumption for any sort of proof of work cryptocurrency,

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Speaker 1: with Bitcoin obviously being the really big one, and that

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Speaker 1: number can go through the roof as a currency's value increases,

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Speaker 1: so bitcoin mining actually eats up more electricity than some

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Speaker 1: countries do. I've got a lot more to say, both

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Speaker 1: about proof of work and its alternatives. But first let's

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Speaker 1: take a quick break. So I left off talking about

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Speaker 1: how bitcoin mining leads to this sort of escalation um

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Speaker 1: with people putting more and more powerful systems at play

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Speaker 1: to compete against one another and try and mind each

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Speaker 1: block in a blockchain in order to get more and

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Speaker 1: more bitcoin. This becomes a kind of a vicious cycle,

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Speaker 1: right because as long as the amount of bitcoin you're

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Speaker 1: getting back is greater than the investment you've put forward

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Speaker 1: to try and get the bitcoin, it's off it. Right.

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Speaker 1: If I'm spending you know, five dollars on a computer

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Speaker 1: system and power needs like I'm I'm paying you know

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Speaker 1: these rates to get electricity to power all these computers.

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Speaker 1: If I'm if I spend half a million on that, well, really,

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Speaker 1: I just I just need to successfully mine two blocks

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Speaker 1: a bitcoin to pay off that investment. Right, then, as

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Speaker 1: long as I'm hitting more success in the future frequently enough,

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Speaker 1: I can offset the costs of operation and just keep

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Speaker 1: making profit. So that's why it's so um tempting to

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Speaker 1: get into bitcoin mining, is that. Yeah, At this point,

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Speaker 1: being a serious mining operation means you have to put

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Speaker 1: in a huge amount of money because there are huge

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Speaker 1: players out there already that are running ridiculously powerful computer networks,

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Speaker 1: some times co located with power plants, like you've got

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Speaker 1: old coal based power plants in different parts of the

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Speaker 1: world where people have built out bitcoin mining operations in

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Speaker 1: the power plant itself in order to have direct access

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Speaker 1: to electricity at all at a cost that's as low

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Speaker 1: as they can possibly get it. And again it's so

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Speaker 1: that you can get that that maximum amount of profit

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Speaker 1: um and even then it's not guaranteed because there's so

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Speaker 1: many of these systems all around the world. So this

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Speaker 1: has obviously led to some people to have some objections

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Speaker 1: to bitcoin because it has this kind of runaway UH

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Speaker 1: consumption associated to it. And it also means that you

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Speaker 1: could argue that bitcoin can be connected to things like

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Speaker 1: carbon emissions and climate change, because if the power that is,

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Speaker 1: you know, allowing these systems to operate, if it's coming

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Speaker 1: from a power plant that's using fossil fuels, then that

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Speaker 1: power plant is having to to generate enough electricity to

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Speaker 1: send to these systems and thus consuming more and more

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Speaker 1: fossil fuels and generating more carbon emissions. Now, there are

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Speaker 1: some bitcoin defenders who say that the vast majority of

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Speaker 1: bitcoin are connected to systems that are running on renewables.

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Speaker 1: But even if you look at it that way, you're saying, well,

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Speaker 1: this is a significant drain on our energy resources. There's

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Speaker 1: an enormous amount of energy that's having to go just

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Speaker 1: towards bitcoin mining. And even if you argue that's coming

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Speaker 1: from renewable sources, you could say, well, that that energy

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Speaker 1: could be either stored so that we can use it

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Speaker 1: for other stuff down the line when we aren't able

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Speaker 1: to get at those renewable sources as easily, for example,

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Speaker 1: solar at night, or that we can just direct that

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Speaker 1: energy towards something else besides bitcoin mining. Anyway, I also

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Speaker 1: have to add that the bitcoin approach has some built

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Speaker 1: in adjustments that are kind of ingenious. So the goal

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Speaker 1: is to keep this process more or less consistent with

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Speaker 1: an ideal solution time of ten minutes per block in

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Speaker 1: the chain, So a new block getting added to the

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Speaker 1: chain approximately every ten minutes, that's the goal. Well, obviously,

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Speaker 1: if you add more and more a computational power to

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Speaker 1: the system, the time it would be needed to to

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Speaker 1: reach the solution for any given block is going to

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Speaker 1: come down. Right, for a given difficulty of mathematical problem.

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Speaker 1: If you're throwing more and more computer power at it,

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Speaker 1: you're gonna reduce the amount of time it takes to

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Speaker 1: get the solution. Well, that means that the system will

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Speaker 1: take an automatic kind of assessment of how long it takes,

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Speaker 1: generally speaking, for a block to get verified, and if

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Speaker 1: it's below ten minutes, it'll make those problems more difficult,

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Speaker 1: thus increasing the amount of time it takes to solve

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Speaker 1: those problems. So it's self correcting. In other words, it's saying,

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Speaker 1: all right, these blocks are starting to come out a

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Speaker 1: little too frequently. We need to slow it down. We'll

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Speaker 1: make the problems even harder. And now these computer systems

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Speaker 1: will have to work harder, it will take longer for

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Speaker 1: them to get the right answer. And again, as long

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Speaker 1: as the return on investment is good, that is, as

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Speaker 1: long as the bitcoin being mined is more than enough

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Speaker 1: to pay for the expense of operating a bunch of

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Speaker 1: power hungry computers, then you've got a positive return on investment,

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Speaker 1: and you'll have people investing even more in their systems.

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Speaker 1: They'll be making them more powerful, adding more computers to

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Speaker 1: their networks. But if it ever gets you know, more

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Speaker 1: expensive to operate to mine then you get from your cryptocurrency.

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Speaker 1: Let's say that you factor in like you figure out,

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Speaker 1: I'm actually losing money in the long run in this

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Speaker 1: process because of how much I have to spend to

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Speaker 1: keep pace with everybody else and in order to pay

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Speaker 1: my power bill. If it gets too expensive, then more

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Speaker 1: and more people will drop out of the system, and

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Speaker 1: the total computational power connected to the system will also drop.

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Speaker 1: That can sometimes mean that it starts to take longer

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Speaker 1: to solve the problem than ten minutes. Well again, the

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Speaker 1: system says, all right, well, now it's taking you know,

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Speaker 1: fourteen minutes to solve a block instead of ten. I'm

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Speaker 1: going to make the problems a little easier. So it's

434
00:27:34,440 --> 00:27:39,520
Speaker 1: constantly tweaking itself. Well, not constantly, it's regularly tweaking itself

435
00:27:39,920 --> 00:27:44,800
Speaker 1: to meet the abilities of the overall system in order

436
00:27:44,840 --> 00:27:51,800
Speaker 1: to keep that time to solve more or less consistent. However,

437
00:27:51,840 --> 00:27:54,679
Speaker 1: one of the downsides of this is that it that

438
00:27:55,160 --> 00:27:58,320
Speaker 1: the system totally doesn't care how much computational power is

439
00:27:58,359 --> 00:28:03,879
Speaker 1: being used. Right, It doesn't care if if coal power

440
00:28:03,920 --> 00:28:06,920
Speaker 1: plants all over the world are firing up more than

441
00:28:06,960 --> 00:28:12,480
Speaker 1: ever just in order to fuel bitcoin mining operations. Uh,

442
00:28:12,600 --> 00:28:15,280
Speaker 1: the the algorithm is just concerned with trying to keep

443
00:28:15,320 --> 00:28:20,200
Speaker 1: that time to solve pretty consistent. So that is another potential,

444
00:28:20,359 --> 00:28:24,600
Speaker 1: you know, downfall of proof of work systems. But let's

445
00:28:24,600 --> 00:28:28,120
Speaker 1: talk about the probably you know, some of the best

446
00:28:28,160 --> 00:28:30,800
Speaker 1: known cryptocurrencies that use proof of work, and of course

447
00:28:30,880 --> 00:28:33,760
Speaker 1: the top of that list is Bitcoin. I would argue

448
00:28:33,760 --> 00:28:37,440
Speaker 1: Bitcoin really was responsible for putting cryptocurrency on the map.

449
00:28:37,520 --> 00:28:40,080
Speaker 1: Not only was it famous in that paper, but it

450
00:28:40,120 --> 00:28:43,040
Speaker 1: remains like the best known of all the cryptocurrencies that

451
00:28:43,080 --> 00:28:47,280
Speaker 1: have come out since Bitcoin debut. But there's also Ethereum

452
00:28:47,320 --> 00:28:51,000
Speaker 1: one point oh, that's a proof of work cryptocurrency. We'll

453
00:28:51,000 --> 00:28:54,880
Speaker 1: talk about Ethereum two point oh in uh just a

454
00:28:54,920 --> 00:28:58,680
Speaker 1: short while. And also dog coin does cooin is another

455
00:28:58,760 --> 00:29:01,000
Speaker 1: proof of work crypto currency, and there are plenty of

456
00:29:01,040 --> 00:29:05,240
Speaker 1: other famous ones bitcoins. The heavy hitter Ethereum has really

457
00:29:05,240 --> 00:29:09,120
Speaker 1: emerged as a popular cryptocurrency, and a lot of other

458
00:29:09,120 --> 00:29:12,640
Speaker 1: technologies like n f t s actually rely on Ethereum's blockchain.

459
00:29:12,720 --> 00:29:17,800
Speaker 1: So ethereums blockchain allows for other innovations to exist on

460
00:29:17,840 --> 00:29:21,920
Speaker 1: top of it. In addition to ethereum cryptocurrency, which is

461
00:29:21,920 --> 00:29:25,440
Speaker 1: called ether dose coins started off as a joke, and

462
00:29:25,920 --> 00:29:28,320
Speaker 1: despite a few attempts to turn it into a legit currency,

463
00:29:28,400 --> 00:29:30,800
Speaker 1: is still mostly a joke that a lot of people

464
00:29:30,800 --> 00:29:33,400
Speaker 1: poured a lot of money into. I'm not saying people

465
00:29:33,440 --> 00:29:36,920
Speaker 1: didn't make money off doge coin. I'm saying that a

466
00:29:36,960 --> 00:29:40,240
Speaker 1: lot of people made money off doge coin by convincing

467
00:29:40,280 --> 00:29:44,280
Speaker 1: other people to get into doge coin, thus potentially artificially

468
00:29:44,360 --> 00:29:47,040
Speaker 1: driving up the value of the cryptocurrency. That's another thing

469
00:29:47,080 --> 00:29:50,080
Speaker 1: I should really address very quickly. A lot of this

470
00:29:50,200 --> 00:29:54,520
Speaker 1: stuff we'll talk about talks about the value of cryptocurrency.

471
00:29:55,120 --> 00:29:58,800
Speaker 1: Cryptocurrency doesn't necessarily have an innate value to it because

472
00:29:58,800 --> 00:30:03,400
Speaker 1: it's not tied to like a centralized financial institution. Its

473
00:30:03,520 --> 00:30:07,560
Speaker 1: value is dictated by the market, like the system itself.

474
00:30:08,120 --> 00:30:12,720
Speaker 1: It's it's kind of self supportive that way. So we

475
00:30:12,840 --> 00:30:16,600
Speaker 1: see a lot of these cryptocurrencies have pretty volatile values.

476
00:30:16,640 --> 00:30:21,120
Speaker 1: They go up and down dramatically sometimes sometimes why they

477
00:30:21,240 --> 00:30:23,560
Speaker 1: order of tens of thousands of dollars. In the case

478
00:30:23,560 --> 00:30:26,680
Speaker 1: of bitcoin, you know, we saw it nearly at sixty

479
00:30:27,000 --> 00:30:30,480
Speaker 1: dollars per bitcoin, then down to around twenty thousand dollars.

480
00:30:30,600 --> 00:30:34,040
Speaker 1: Now it's back up to almost sixty thousand. Again, that's

481
00:30:34,480 --> 00:30:39,800
Speaker 1: all within the span of a year. It's crazy anyway. Um, yeah,

482
00:30:39,800 --> 00:30:44,000
Speaker 1: it's that that's a separate entity that doesn't necessarily have

483
00:30:44,040 --> 00:30:47,280
Speaker 1: anything to do with the tech. So now we're gonna

484
00:30:47,280 --> 00:30:50,760
Speaker 1: talk about proof of steak. Uh. And in order to

485
00:30:51,040 --> 00:30:53,000
Speaker 1: understand that, we have to talk about what proof of

486
00:30:53,040 --> 00:30:56,720
Speaker 1: steak and proof of work both need to do. So again,

487
00:30:56,720 --> 00:30:59,080
Speaker 1: we've got our blockchain, we have to have a way

488
00:30:59,080 --> 00:31:03,040
Speaker 1: to verify transactions. We need some sort of system in

489
00:31:03,080 --> 00:31:08,400
Speaker 1: place that says person X sent person why some cryptocurrency

490
00:31:08,560 --> 00:31:13,840
Speaker 1: equaling z amount? Right, you gotta have some record of this. Otherwise,

491
00:31:13,960 --> 00:31:16,800
Speaker 1: because it's all digital, people could just try and keep

492
00:31:16,840 --> 00:31:19,480
Speaker 1: spending the same digital unit of currency more than once,

493
00:31:20,040 --> 00:31:22,560
Speaker 1: or they might you know, quote unquote give themselves a

494
00:31:22,600 --> 00:31:25,720
Speaker 1: billion dollars by copying a digital unit. So you have

495
00:31:25,800 --> 00:31:29,760
Speaker 1: to have some method to keep order in this system,

496
00:31:29,880 --> 00:31:32,560
Speaker 1: or else the system just doesn't work. So there has

497
00:31:32,600 --> 00:31:36,480
Speaker 1: to be a process by which you verify and publish

498
00:31:36,680 --> 00:31:41,400
Speaker 1: these transactions. Uh. In the case of cryptocurrencies and blockchains,

499
00:31:41,440 --> 00:31:45,600
Speaker 1: that's in a centralized ledger, not a central a decentralized ledger. Actually,

500
00:31:46,200 --> 00:31:50,880
Speaker 1: because every node has access to seeing the ledger um.

501
00:31:51,000 --> 00:31:53,720
Speaker 1: You also need to have some means of circulating new

502
00:31:53,840 --> 00:31:56,960
Speaker 1: units of currency into the system. You have to have

503
00:31:57,040 --> 00:32:00,680
Speaker 1: some way of mining. In other words, So let's talk

504
00:32:00,720 --> 00:32:03,840
Speaker 1: about bitcoin again for a second. Bitcoin launched with a

505
00:32:03,920 --> 00:32:07,360
Speaker 1: cap on how many bitcoin there will ever be. Ever,

506
00:32:07,800 --> 00:32:12,560
Speaker 1: that cap is twenty one million bitcoin, and Nakamoto did

507
00:32:12,640 --> 00:32:16,560
Speaker 1: not release all twenty one million units of bitcoin into

508
00:32:16,600 --> 00:32:21,959
Speaker 1: circulation at once. Instead, bitcoin stands as a reward for

509
00:32:22,160 --> 00:32:26,480
Speaker 1: verifying bitcoin transactions. It's an incentive for people to dedicate

510
00:32:26,520 --> 00:32:32,080
Speaker 1: computational power to provide proof of work and verify transactions.

511
00:32:32,360 --> 00:32:35,640
Speaker 1: So it's a very delicate ecosystem designed to perpetuate the

512
00:32:35,680 --> 00:32:40,360
Speaker 1: usefulness of bitcoin. So every time a computer solves a block,

513
00:32:41,280 --> 00:32:44,240
Speaker 1: it gets a bitcoin reward, but the amount of that

514
00:32:44,320 --> 00:32:48,600
Speaker 1: reward decreases by half every four years or so. So

515
00:32:48,800 --> 00:32:51,560
Speaker 1: back in two thousand nine, in the early days of bitcoin,

516
00:32:52,080 --> 00:32:57,400
Speaker 1: the reward to minor block was fifty bitcoin. Well by

517
00:32:57,480 --> 00:33:00,640
Speaker 1: two thousand twelve, that came down to twenty five bitcoin.

518
00:33:00,960 --> 00:33:03,320
Speaker 1: By two thousand and sixteen we got down to twelve

519
00:33:03,360 --> 00:33:06,880
Speaker 1: and a half bitcoin. Now we're at six point to

520
00:33:07,160 --> 00:33:11,160
Speaker 1: five bitcoin. In four it will drop again to three

521
00:33:11,280 --> 00:33:15,600
Speaker 1: point one to five bitcoin and so on. Also, the

522
00:33:15,680 --> 00:33:20,760
Speaker 1: total number of unmined bitcoin has dropped, right like, over time,

523
00:33:20,800 --> 00:33:23,680
Speaker 1: we have mined more and more of the total bitcoin.

524
00:33:24,520 --> 00:33:27,160
Speaker 1: Today we're looking at around two million bitcoin that have

525
00:33:27,280 --> 00:33:31,680
Speaker 1: yet to be mined. So that means that almost nineteen

526
00:33:31,720 --> 00:33:35,160
Speaker 1: million bitcoin are already out in circulation, some of which

527
00:33:35,520 --> 00:33:38,320
Speaker 1: are just lost forever because they got stored in you know,

528
00:33:38,360 --> 00:33:43,880
Speaker 1: like uh hard drive that got inaccessible. So not all

529
00:33:43,880 --> 00:33:48,200
Speaker 1: of the those nearly nineteen million bitcoin are still valid

530
00:33:48,240 --> 00:33:51,959
Speaker 1: these days. They I mean, they exist, they still have value,

531
00:33:52,240 --> 00:33:54,240
Speaker 1: just no one can get to them. Well, you might

532
00:33:54,280 --> 00:33:58,160
Speaker 1: wonder what happens when all the bitcoins that can be

533
00:33:58,280 --> 00:34:03,280
Speaker 1: mined have been mined. Now, due to the way bitcoin

534
00:34:03,400 --> 00:34:06,640
Speaker 1: does rounding, it actually means we're not going to see

535
00:34:06,680 --> 00:34:10,360
Speaker 1: all twenty one million bitcoins intercirculation. There will be a

536
00:34:10,440 --> 00:34:13,960
Speaker 1: small amount, a very very small amount that just remains

537
00:34:14,080 --> 00:34:18,399
Speaker 1: unmined because the math just doesn't work out. There are

538
00:34:18,400 --> 00:34:20,719
Speaker 1: a lot of unknown variables about this that we have

539
00:34:20,800 --> 00:34:23,239
Speaker 1: to take into account. Uh, and so it means that

540
00:34:23,440 --> 00:34:27,799
Speaker 1: ultimately nobody really knows. But one thing that we, you know,

541
00:34:28,239 --> 00:34:29,920
Speaker 1: have to think about is that we don't know what

542
00:34:30,000 --> 00:34:31,840
Speaker 1: the value of bitcoin is going to be by the

543
00:34:31,880 --> 00:34:35,000
Speaker 1: time we get to the point where the final bitcoins

544
00:34:35,000 --> 00:34:38,800
Speaker 1: are going to be mined. Because the number awarded drops

545
00:34:38,880 --> 00:34:43,440
Speaker 1: by every four years, we see the total unmined number

546
00:34:43,440 --> 00:34:48,040
Speaker 1: of bitcoin dropping less during each four year period. So

547
00:34:48,080 --> 00:34:51,280
Speaker 1: early on we saw that the total number dropped quickly

548
00:34:51,400 --> 00:34:54,759
Speaker 1: because folks were getting fifty bitcoin per block, hundred forty

549
00:34:54,840 --> 00:34:59,279
Speaker 1: four blocks per day, it's going down pretty fast. These days,

550
00:34:59,320 --> 00:35:02,360
Speaker 1: the number drops more slowly because it's six point to

551
00:35:02,600 --> 00:35:06,080
Speaker 1: five bitcoins per block now. It will be even slower

552
00:35:06,280 --> 00:35:10,000
Speaker 1: after four and so on. So the schedule means that

553
00:35:10,200 --> 00:35:14,640
Speaker 1: while we've mined around nine percent of all bitcoins already,

554
00:35:14,920 --> 00:35:19,920
Speaker 1: we won't have hit the bottom until that's the year

555
00:35:20,280 --> 00:35:24,560
Speaker 1: where we will essentially have all the bitcoins out. So

556
00:35:25,120 --> 00:35:29,680
Speaker 1: unless the value for bitcoin really goes bonkers, and it might,

557
00:35:30,320 --> 00:35:32,880
Speaker 1: then we should see more folks drop off of bitcoin

558
00:35:32,960 --> 00:35:36,040
Speaker 1: mining in several years, because again the returns will be lower,

559
00:35:36,600 --> 00:35:40,040
Speaker 1: like if if it's you know, if it holds steady,

560
00:35:40,040 --> 00:35:43,319
Speaker 1: if the value holds steady, but you're getting fewer bitcoins

561
00:35:43,640 --> 00:35:47,400
Speaker 1: than eventually you start to hit that that negative return

562
00:35:47,440 --> 00:35:51,160
Speaker 1: on investment where you're losing money to go so hard

563
00:35:51,360 --> 00:35:53,920
Speaker 1: trying to get bitcoin. Then if it costs more to

564
00:35:53,960 --> 00:35:56,839
Speaker 1: operate your computer, then you're getting back in bitcoins thence

565
00:35:56,840 --> 00:36:00,279
Speaker 1: and that loss you're gonna stop, and once all the

566
00:36:00,280 --> 00:36:03,799
Speaker 1: bitcoin er in circulation, there are no more coins to mine.

567
00:36:04,320 --> 00:36:07,920
Speaker 1: So verifying a block of transactions could generate payouts the

568
00:36:07,960 --> 00:36:12,000
Speaker 1: form of transaction fees, and that means there will still

569
00:36:12,040 --> 00:36:15,360
Speaker 1: be at least an incentive for nodes to participate in

570
00:36:15,440 --> 00:36:20,000
Speaker 1: the bitcoin system, but the transaction fees might be really

571
00:36:20,040 --> 00:36:24,200
Speaker 1: modest compared to what we're seeing in mining, and honestly,

572
00:36:24,239 --> 00:36:26,160
Speaker 1: no one's really sure how this is all going to

573
00:36:26,239 --> 00:36:28,319
Speaker 1: shake out in the long run. But the reason I

574
00:36:28,360 --> 00:36:31,160
Speaker 1: even talk about that is because proof of steake has

575
00:36:31,200 --> 00:36:34,040
Speaker 1: to solve the same issues proof of work does. In

576
00:36:34,160 --> 00:36:38,360
Speaker 1: order for the blockchain to be useful, there has to

577
00:36:38,400 --> 00:36:40,719
Speaker 1: be a way to verify transactions. There needs to be

578
00:36:40,760 --> 00:36:44,040
Speaker 1: a way to release more cryptocurrency into circulation. You have

579
00:36:44,120 --> 00:36:47,879
Speaker 1: to reward people for participating in order to encourage them

580
00:36:47,920 --> 00:36:51,400
Speaker 1: to participate in the first place, and unless you're just

581
00:36:51,520 --> 00:36:54,560
Speaker 1: dumping everything out at once, there does have to be

582
00:36:54,600 --> 00:36:58,320
Speaker 1: a method of, you know, metering out a certain amount

583
00:36:58,320 --> 00:37:03,680
Speaker 1: of cryptocurrency every given amount of time. So proof of steak.

584
00:37:04,400 --> 00:37:06,799
Speaker 1: The phrase gives you a bit of a hint about

585
00:37:06,880 --> 00:37:10,720
Speaker 1: what's going on. The people, or rather you know, the nodes,

586
00:37:11,120 --> 00:37:17,520
Speaker 1: the computer systems that are participating within this cryptocurrency block chain. Uh,

587
00:37:17,680 --> 00:37:19,880
Speaker 1: the ones that are responsible for verifying a block of

588
00:37:19,920 --> 00:37:24,399
Speaker 1: transactions have to post a stake of cryptocurrency that they

589
00:37:24,480 --> 00:37:28,759
Speaker 1: possess within that system. Something of that native cryptocurrency has

590
00:37:28,800 --> 00:37:33,319
Speaker 1: to go into a pool of steaks, so they have

591
00:37:33,360 --> 00:37:36,840
Speaker 1: to contribute some minimum amount in order to be part

592
00:37:36,920 --> 00:37:40,759
Speaker 1: of the verification process. Now, in proof of work approaches,

593
00:37:41,040 --> 00:37:46,000
Speaker 1: we talk about systems being miners, right, they are mining cryptocurrency.

594
00:37:46,160 --> 00:37:50,120
Speaker 1: In proof of steak systems, we talk about validators. These

595
00:37:50,120 --> 00:37:53,759
Speaker 1: are people who have systems that validate or verify a transaction,

596
00:37:53,920 --> 00:37:58,839
Speaker 1: and then the other stakeholders validate that verified block so

597
00:37:58,920 --> 00:38:01,360
Speaker 1: that joins a chain. And other words, they're checking the

598
00:38:01,480 --> 00:38:07,480
Speaker 1: work of the primary validator. They're saying, is this a

599
00:38:07,640 --> 00:38:12,200
Speaker 1: valid block in the blockchain? All right, I'm gonna need

600
00:38:12,239 --> 00:38:14,799
Speaker 1: to take a quick breath and then we'll come back

601
00:38:14,960 --> 00:38:27,839
Speaker 1: with more about proof of steak. Okay, so we've got

602
00:38:27,880 --> 00:38:30,560
Speaker 1: this proof of steak approach where in order to participate,

603
00:38:30,760 --> 00:38:36,160
Speaker 1: you have to put up a steak of the native cryptocurrency,

604
00:38:36,680 --> 00:38:41,000
Speaker 1: and that will allow you to be a validator. Uh.

605
00:38:41,080 --> 00:38:45,400
Speaker 1: The systems reward people who have established uh that sufficient

606
00:38:45,400 --> 00:38:49,640
Speaker 1: amount of cryptocurrency. And let's use an example, because this

607
00:38:49,719 --> 00:38:53,480
Speaker 1: is getting too vague, we'll use ethereum two point oh.

608
00:38:53,520 --> 00:38:56,239
Speaker 1: So you remember I said ethereum one point oh is

609
00:38:56,280 --> 00:38:59,480
Speaker 1: proof of work. Well, for a few years now, Ethereum

610
00:38:59,480 --> 00:39:02,560
Speaker 1: has been laying the groundwork to switch over to a

611
00:39:02,640 --> 00:39:05,800
Speaker 1: proof of steak system, and that's going to be Ethereum

612
00:39:05,800 --> 00:39:08,920
Speaker 1: two point oh and essentially one point oh is going

613
00:39:08,960 --> 00:39:12,520
Speaker 1: to get merged into two point oh. Now, in order

614
00:39:12,560 --> 00:39:16,560
Speaker 1: to be a validator in ethereum two's ecosystem, you have

615
00:39:16,680 --> 00:39:21,040
Speaker 1: to put up a stake of at least thirty to ether.

616
00:39:21,640 --> 00:39:25,799
Speaker 1: Ether is the unit of currency within Ethereum. Now at

617
00:39:25,800 --> 00:39:29,480
Speaker 1: the moment, one unit of ether, so one ether is

618
00:39:29,600 --> 00:39:33,799
Speaker 1: equivalent to nearly three thousand, six hundred bucks, and you

619
00:39:33,880 --> 00:39:37,359
Speaker 1: have to have at least thirty two of them, which

620
00:39:37,440 --> 00:39:41,520
Speaker 1: is the equivalent of around a hundred fifteen thousand dollars

621
00:39:41,920 --> 00:39:45,040
Speaker 1: to be a validator for Ethereum two point oh. So

622
00:39:46,000 --> 00:39:48,480
Speaker 1: you probably already see something that's a bit of a

623
00:39:48,520 --> 00:39:51,560
Speaker 1: barrier in here but we'll get back to that all right.

624
00:39:51,680 --> 00:39:54,440
Speaker 1: So to be part of proof of steak, you have

625
00:39:54,480 --> 00:39:57,399
Speaker 1: to stake whatever that minimum amount is, you know, like

626
00:39:57,480 --> 00:40:00,440
Speaker 1: the thirty two ether. The system then's the likes a

627
00:40:00,600 --> 00:40:04,680
Speaker 1: winning validator from the pool of people who have placed

628
00:40:04,719 --> 00:40:09,279
Speaker 1: a stake into this cryptocurrency pool, and the system will

629
00:40:09,320 --> 00:40:13,239
Speaker 1: typically choose a winner based on two criteria. How much

630
00:40:13,280 --> 00:40:17,880
Speaker 1: cryptocurrency have they staked. So remember thirty two is the minimum,

631
00:40:18,160 --> 00:40:21,000
Speaker 1: it's not the maximum. So if you put in way more,

632
00:40:21,520 --> 00:40:24,960
Speaker 1: you are increasing your chances of being chosen as the winner.

633
00:40:25,560 --> 00:40:30,959
Speaker 1: Two uh to verify or validate a block of transactions.

634
00:40:31,800 --> 00:40:35,759
Speaker 1: The other criteria is that how long the steak has

635
00:40:35,760 --> 00:40:39,600
Speaker 1: actually been in the pool, So the system rewards people

636
00:40:39,600 --> 00:40:42,640
Speaker 1: who have been part of the system longest and who

637
00:40:42,640 --> 00:40:46,200
Speaker 1: have the largest steaks in the system. So the more

638
00:40:46,239 --> 00:40:48,279
Speaker 1: you stake and the longer you do it, the more

639
00:40:48,360 --> 00:40:51,480
Speaker 1: likely you're gonna get chosen as the winner. When you

640
00:40:51,520 --> 00:40:53,600
Speaker 1: are chosen as the winner, then your computer goes through

641
00:40:53,640 --> 00:40:57,200
Speaker 1: the process of validating the transactions and upon your system

642
00:40:57,239 --> 00:41:00,360
Speaker 1: saying all right, I figured it out. I've got this lution.

643
00:41:00,880 --> 00:41:04,320
Speaker 1: Then the other validators that have put a stake into

644
00:41:04,360 --> 00:41:10,600
Speaker 1: this cryptocurrency pool will test your solution during the atestation phase,

645
00:41:10,920 --> 00:41:14,680
Speaker 1: and once enough validators have verified that your solution is correct,

646
00:41:15,120 --> 00:41:19,359
Speaker 1: that block joins the blockchain. All participating validators then get

647
00:41:19,400 --> 00:41:23,680
Speaker 1: paid out a reward in cryptocurrency. So in the ethereum case,

648
00:41:23,680 --> 00:41:26,759
Speaker 1: they would get some ethereum, and the amount given to

649
00:41:26,880 --> 00:41:31,920
Speaker 1: each validator would be you know, proportional in some regard

650
00:41:32,440 --> 00:41:35,839
Speaker 1: to the size of the steak that they put in.

651
00:41:36,120 --> 00:41:38,319
Speaker 1: So if you put in a really big steak, you'll

652
00:41:38,360 --> 00:41:41,839
Speaker 1: get a bigger percentage of the reward each time. Now,

653
00:41:41,880 --> 00:41:43,920
Speaker 1: you don't have to be a winner to get a reward,

654
00:41:44,239 --> 00:41:46,560
Speaker 1: you just have to participate in the process. You have

655
00:41:46,600 --> 00:41:50,160
Speaker 1: to be an active node in the ethereum system. In

656
00:41:50,200 --> 00:41:53,000
Speaker 1: this case, however, this does mean that in order to

657
00:41:53,000 --> 00:41:56,279
Speaker 1: be a participant, you first have to meet that minimum criteria.

658
00:41:56,400 --> 00:42:00,640
Speaker 1: And this is a really steep cost, and it's so

659
00:42:00,719 --> 00:42:03,440
Speaker 1: much though that it's effectively a barrier. I mean, it's

660
00:42:03,440 --> 00:42:07,880
Speaker 1: a system that disproportionately rewards the people who already have

661
00:42:08,160 --> 00:42:12,759
Speaker 1: a substantial ownership in that system, or if you want

662
00:42:12,800 --> 00:42:16,040
Speaker 1: to think of it in another way, the rich get richer,

663
00:42:16,640 --> 00:42:19,799
Speaker 1: and they get richer because they're already rich. If you're

664
00:42:19,840 --> 00:42:24,040
Speaker 1: not a hundred gees deep in ether, you're out of luck.

665
00:42:24,120 --> 00:42:27,239
Speaker 1: You don't have enough to post a thirty two ether

666
00:42:27,480 --> 00:42:30,320
Speaker 1: steak and become a validator. It becomes a bit of

667
00:42:30,320 --> 00:42:32,839
Speaker 1: a catch twenty two because you can't afford to join

668
00:42:32,920 --> 00:42:36,160
Speaker 1: the validators without making more ether, and you're not going

669
00:42:36,200 --> 00:42:39,040
Speaker 1: to make more ether without being a validator and getting

670
00:42:39,040 --> 00:42:42,880
Speaker 1: those rewards. Now, you could always purchase more ether and

671
00:42:42,920 --> 00:42:46,479
Speaker 1: thus build up your ether over time, or you could

672
00:42:46,560 --> 00:42:50,440
Speaker 1: join a steak pool. This is something that is sometimes

673
00:42:50,440 --> 00:42:53,640
Speaker 1: called delegating. This is where you join a group of

674
00:42:53,640 --> 00:42:56,799
Speaker 1: folks who are all pooling smaller amounts of cryptocurrency that

675
00:42:56,920 --> 00:43:00,640
Speaker 1: collectively meet the requirements of a full steak in the

676
00:43:00,719 --> 00:43:07,600
Speaker 1: validation process. So essentially, there's a leader who's who's node

677
00:43:07,880 --> 00:43:11,200
Speaker 1: is acting as the focal point for all this. Everyone

678
00:43:11,200 --> 00:43:17,239
Speaker 1: else pours their smaller cryptocurrency investments into a pool the

679
00:43:17,280 --> 00:43:22,160
Speaker 1: again collectively gets staked for this one node. The node

680
00:43:22,320 --> 00:43:26,480
Speaker 1: ends up receiving rewards based upon the size and of

681
00:43:26,520 --> 00:43:30,640
Speaker 1: that steak, and then divvies it up amongst the people

682
00:43:30,680 --> 00:43:33,600
Speaker 1: who invested in that pool. Essentially, it's the same thing

683
00:43:34,040 --> 00:43:36,799
Speaker 1: as the general proof of steak approach, but on a

684
00:43:36,840 --> 00:43:41,520
Speaker 1: smaller level. Now, that does tend to be one of

685
00:43:41,520 --> 00:43:44,279
Speaker 1: the big criticisms for proof of steak, that it's something

686
00:43:44,320 --> 00:43:46,880
Speaker 1: that prevents a lot of people from meaningful participation in

687
00:43:46,920 --> 00:43:51,319
Speaker 1: the system, and it's rewarding people who are already financially

688
00:43:51,440 --> 00:43:55,720
Speaker 1: well off because that's how the system works. While cryptocurrencies

689
00:43:55,760 --> 00:43:58,400
Speaker 1: are decentralized and that they don't rely on a single

690
00:43:58,520 --> 00:44:03,239
Speaker 1: financial authority, they can somewhat functionally become centralized, kind of

691
00:44:03,239 --> 00:44:06,000
Speaker 1: like by a cabal that has a large enough steak

692
00:44:06,080 --> 00:44:08,120
Speaker 1: in the stuff and everybody else is just kind of

693
00:44:08,200 --> 00:44:11,879
Speaker 1: on the periphery. Uh. It's also possible to have your

694
00:44:11,920 --> 00:44:16,960
Speaker 1: steak reduced in these systems. So let's say that you

695
00:44:17,120 --> 00:44:20,920
Speaker 1: were picked as a winner to verify a block of

696
00:44:20,960 --> 00:44:25,719
Speaker 1: transactions and you end up validating a bad block of transactions,

697
00:44:25,840 --> 00:44:29,399
Speaker 1: and then others during the aida station phase they test

698
00:44:29,440 --> 00:44:33,960
Speaker 1: your solution and they realize this, there's something wrong here. Well,

699
00:44:34,000 --> 00:44:36,360
Speaker 1: you could get dinged for that, and you can see

700
00:44:36,640 --> 00:44:39,719
Speaker 1: the system actually take away part of your steak that

701
00:44:39,800 --> 00:44:42,279
Speaker 1: you had put up into the cryptocurrency pool. You might

702
00:44:42,320 --> 00:44:45,759
Speaker 1: even fall below the amount needed to be a validator

703
00:44:45,800 --> 00:44:49,160
Speaker 1: and you would have to add in extra cryptocurrency to

704
00:44:49,200 --> 00:44:51,799
Speaker 1: bring you back up to the minimum, so you could

705
00:44:51,800 --> 00:44:55,080
Speaker 1: get really hurt that way. Or let's say your validation

706
00:44:55,160 --> 00:44:58,319
Speaker 1: node hasn't met the minimum requirement for active hours on

707
00:44:58,360 --> 00:45:02,040
Speaker 1: the system. Now remember these validate as are necessary to

708
00:45:02,160 --> 00:45:04,799
Speaker 1: make sure that transactions actually get verified or else the

709
00:45:04,800 --> 00:45:08,000
Speaker 1: whole system just doesn't work as a financial system. So

710
00:45:08,160 --> 00:45:11,480
Speaker 1: if someone's not pulling their weight, then they might also

711
00:45:11,719 --> 00:45:15,200
Speaker 1: see their steake get dinged as a result. Now that

712
00:45:15,239 --> 00:45:18,560
Speaker 1: being said, proof of steake does have some pretty big

713
00:45:18,600 --> 00:45:21,120
Speaker 1: advantages as well. One of those is that proof of

714
00:45:21,160 --> 00:45:25,839
Speaker 1: steake approach generally speaking, has a lower resource requirement than

715
00:45:25,920 --> 00:45:29,400
Speaker 1: proof of work, or at least lower resource requirements than

716
00:45:29,440 --> 00:45:33,200
Speaker 1: proof of work systems that are as active as say bitcoins.

717
00:45:33,600 --> 00:45:37,120
Speaker 1: When a proof of work cryptocurrencies value increases, as I

718
00:45:37,200 --> 00:45:41,759
Speaker 1: said earlier, it incentivizes people to mind the cryptocurrency, so

719
00:45:41,800 --> 00:45:45,399
Speaker 1: the overall computational power in that system goes up, as

720
00:45:45,840 --> 00:45:49,479
Speaker 1: do the resource requirements to run those systems. But proof

721
00:45:49,520 --> 00:45:52,759
Speaker 1: of stake doesn't rely on computer systems racing against each

722
00:45:52,760 --> 00:45:55,080
Speaker 1: other to come up with the right answers, so you

723
00:45:55,120 --> 00:45:59,640
Speaker 1: don't see this cycle of escalation, and thus you don't

724
00:45:59,680 --> 00:46:04,279
Speaker 1: see the need for increased amounts of processing power being

725
00:46:04,320 --> 00:46:07,319
Speaker 1: thrown at the system. Now, does this mean that a

726
00:46:07,360 --> 00:46:10,120
Speaker 1: proof of stake system will always be less resource hungry

727
00:46:10,160 --> 00:46:13,680
Speaker 1: than a proof of work Not exactly, because it actually depends.

728
00:46:13,800 --> 00:46:16,360
Speaker 1: Like if you have a proof of work cryptocurrency, but

729
00:46:16,400 --> 00:46:20,239
Speaker 1: the cryptocurrency is practically worthless, like it's fractions of a

730
00:46:20,239 --> 00:46:24,120
Speaker 1: penny per unit, chances are there won't actually be that

731
00:46:24,160 --> 00:46:28,680
Speaker 1: many people who are bothering to mine that cryptocurrency, because

732
00:46:28,800 --> 00:46:31,359
Speaker 1: it means they'd spend more on the electricity they were

733
00:46:31,480 --> 00:46:36,000
Speaker 1: using than they were making as a minor. So that

734
00:46:36,080 --> 00:46:39,360
Speaker 1: leads to fewer people participating, and the resource demand for

735
00:46:39,400 --> 00:46:43,239
Speaker 1: that particular system remains relatively low. If you have a

736
00:46:43,280 --> 00:46:46,640
Speaker 1: really healthy proof of stake system, you might have lots

737
00:46:46,640 --> 00:46:49,839
Speaker 1: of validators who are actively participating in that system, and

738
00:46:49,880 --> 00:46:53,560
Speaker 1: so the resource demand could be greater. So really, like

739
00:46:53,600 --> 00:46:56,759
Speaker 1: I said, it just depends upon the situation. But it's

740
00:46:56,800 --> 00:46:59,640
Speaker 1: pretty safe to say that if you had two more

741
00:46:59,680 --> 00:47:03,279
Speaker 1: or us equal systems, like the cryptocurrency was more or

742
00:47:03,400 --> 00:47:06,560
Speaker 1: less the same value, and one of them was running

743
00:47:06,560 --> 00:47:08,680
Speaker 1: on a proof of work system and the other one

744
00:47:08,719 --> 00:47:10,879
Speaker 1: was running on a proof of steak system. The proof

745
00:47:10,920 --> 00:47:15,080
Speaker 1: of steak one would likely require less processing power and

746
00:47:15,160 --> 00:47:20,360
Speaker 1: fewer resources to run. So proof of steak is arguably

747
00:47:20,400 --> 00:47:23,960
Speaker 1: the best known alternative to proof of work cryptocurrency systems.

748
00:47:24,520 --> 00:47:28,680
Speaker 1: But there are others. For example, there's proof of burn.

749
00:47:29,440 --> 00:47:31,680
Speaker 1: And it sounds like I'm making that up, but I'm

750
00:47:31,719 --> 00:47:36,200
Speaker 1: not so. Proof of burn was proposed as a way

751
00:47:36,239 --> 00:47:39,600
Speaker 1: of achieving the same thing as proof of work, but

752
00:47:39,760 --> 00:47:44,480
Speaker 1: without the escalating increase of resources and energy requirements. But

753
00:47:44,760 --> 00:47:48,960
Speaker 1: this one makes my head hurt, and it makes me

754
00:47:49,040 --> 00:47:54,480
Speaker 1: realize that I'm never truly going to understand cryptocurrency, blockchain,

755
00:47:54,640 --> 00:47:58,000
Speaker 1: or for that matter, finance. All right, So, in a

756
00:47:58,080 --> 00:48:01,799
Speaker 1: proof of burn system are diticipants who wish to have

757
00:48:01,880 --> 00:48:06,040
Speaker 1: the opportunity to verify the next block. In other words,

758
00:48:06,440 --> 00:48:09,360
Speaker 1: they want to be the one to mine the next

759
00:48:09,360 --> 00:48:12,680
Speaker 1: block and get the reward for it. They must first

760
00:48:13,160 --> 00:48:17,840
Speaker 1: burn virtual currency. That virtual currency might be the native

761
00:48:17,880 --> 00:48:21,919
Speaker 1: cryptocurrency of the system itself, or it might be some

762
00:48:22,120 --> 00:48:26,120
Speaker 1: other virtual currency, depending on the system. Some systems allow

763
00:48:26,480 --> 00:48:30,359
Speaker 1: for either. So what does burning actually mean? I mean,

764
00:48:30,480 --> 00:48:34,160
Speaker 1: these are all bits of digital information. What is there

765
00:48:34,239 --> 00:48:38,400
Speaker 1: to burn? Well, in this case, burning means sending virtual

766
00:48:38,440 --> 00:48:41,880
Speaker 1: currency to an address that is verified to be an

767
00:48:41,960 --> 00:48:47,200
Speaker 1: unspindable account. In other words, it can accept currency, but

768
00:48:47,280 --> 00:48:50,960
Speaker 1: currency is never gonna leave it. It will never release

769
00:48:51,000 --> 00:48:53,759
Speaker 1: that currency again. So it's kind of like walking up

770
00:48:53,760 --> 00:48:57,279
Speaker 1: to a bottomless pit and just chucking some cash into

771
00:48:57,360 --> 00:49:00,719
Speaker 1: that bottomless pit, and in return for doing that, the

772
00:49:00,760 --> 00:49:04,680
Speaker 1: system says, all right, you will be considered for the

773
00:49:04,760 --> 00:49:07,120
Speaker 1: job of writing the next block on the block chain

774
00:49:07,600 --> 00:49:11,000
Speaker 1: and thus getting a reward. The more money you chuck

775
00:49:11,040 --> 00:49:14,400
Speaker 1: into the bottomless pit, the greater the chance that the

776
00:49:14,440 --> 00:49:17,520
Speaker 1: system is going to choose you. You could. You know,

777
00:49:17,640 --> 00:49:20,000
Speaker 1: system is saying, hey, look how dedicated this person is.

778
00:49:20,400 --> 00:49:23,399
Speaker 1: They're dumping their entire life savings into a bottomless pit.

779
00:49:23,840 --> 00:49:26,880
Speaker 1: Let's pick them now. Obviously, you would never want to

780
00:49:26,880 --> 00:49:30,319
Speaker 1: spend more money than you would potentially earn back by

781
00:49:30,360 --> 00:49:33,480
Speaker 1: writing more blocks to the chain. But you could be

782
00:49:33,520 --> 00:49:36,160
Speaker 1: playing the long game. You could be making a big

783
00:49:36,200 --> 00:49:40,719
Speaker 1: investment in thus burning a lot of virtual currency early on,

784
00:49:41,560 --> 00:49:44,799
Speaker 1: hoping that this will eventually pay out over the long run,

785
00:49:44,920 --> 00:49:48,239
Speaker 1: assuming that the currency continues to hold its value or

786
00:49:48,280 --> 00:49:51,440
Speaker 1: increase its value, and that you you get picked multiple

787
00:49:51,480 --> 00:49:55,080
Speaker 1: times to build the next block in the blockchain. But

788
00:49:55,160 --> 00:49:57,400
Speaker 1: when I read up on how the proof of burned

789
00:49:57,400 --> 00:50:02,400
Speaker 1: concept creates a system that's more agile, that just confuses me.

790
00:50:02,440 --> 00:50:05,879
Speaker 1: I had a wall that represents the limit of my understanding,

791
00:50:06,520 --> 00:50:12,080
Speaker 1: and trust me, guys, despite having read multiple articles, I

792
00:50:12,160 --> 00:50:15,240
Speaker 1: have not found a crack in that wall of ignorance.

793
00:50:15,360 --> 00:50:18,680
Speaker 1: Yet my ignorance has more than met the challenge of

794
00:50:18,719 --> 00:50:22,560
Speaker 1: my research. I've got a couple more alternatives to proof

795
00:50:22,560 --> 00:50:25,040
Speaker 1: of work and proof of steak to talk about. Before

796
00:50:25,040 --> 00:50:35,560
Speaker 1: I get to those, let's take one last break. All right,

797
00:50:36,400 --> 00:50:38,719
Speaker 1: We've talked about proof of work, proof of steak, and

798
00:50:38,760 --> 00:50:42,319
Speaker 1: proof of burn but there's also proof of capacity. Now.

799
00:50:42,360 --> 00:50:45,360
Speaker 1: In this system, participants vie to be the ones to

800
00:50:45,480 --> 00:50:49,200
Speaker 1: mind the next block by providing hard drive space to

801
00:50:49,320 --> 00:50:52,480
Speaker 1: the system. So the more hard drive space you provide,

802
00:50:52,920 --> 00:50:54,759
Speaker 1: the better the chances are that you're going to be

803
00:50:54,880 --> 00:50:58,040
Speaker 1: the one picked to mind the next block and thus

804
00:50:58,120 --> 00:51:02,920
Speaker 1: get the reward. This system stores data in bunches called plots,

805
00:51:03,640 --> 00:51:07,200
Speaker 1: which get deposited on the hard drive space that participants

806
00:51:07,360 --> 00:51:11,560
Speaker 1: are volunteering to the system. So the more plots that

807
00:51:12,080 --> 00:51:15,000
Speaker 1: you have on your hard drive, the better the chances

808
00:51:15,080 --> 00:51:18,480
Speaker 1: you'll get selected to mine the next block. So again,

809
00:51:18,840 --> 00:51:22,440
Speaker 1: providing more hard drive space gives you more opportunity to

810
00:51:22,560 --> 00:51:26,040
Speaker 1: house plots. The more plots you have, the better chance

811
00:51:26,080 --> 00:51:29,000
Speaker 1: you have to get the next round of rewards. But

812
00:51:29,440 --> 00:51:32,520
Speaker 1: this approach kind of does with hard drive space what

813
00:51:32,680 --> 00:51:35,960
Speaker 1: bitcoin used to do with graphics cards. You know, back

814
00:51:35,960 --> 00:51:41,160
Speaker 1: in the day, graphics cards were seen as being absolutely

815
00:51:41,200 --> 00:51:44,919
Speaker 1: instrumental to a successful bitcoin mining operation, and it made

816
00:51:44,920 --> 00:51:48,680
Speaker 1: it really hard to get hold of graphics cards as

817
00:51:48,680 --> 00:51:51,200
Speaker 1: they came out because bitcoin miners were buying them up

818
00:51:51,200 --> 00:51:54,680
Speaker 1: and driving the prices way way way up. These days,

819
00:51:55,040 --> 00:51:58,760
Speaker 1: graphics cards don't measure up to the requirements of bitcoin

820
00:51:59,200 --> 00:52:03,200
Speaker 1: miners really, at least not serious bitcoin miners. They've moved

821
00:52:03,200 --> 00:52:06,239
Speaker 1: on to other systems. Uh. Graphics cards can still be

822
00:52:06,280 --> 00:52:08,719
Speaker 1: hard to get sometimes though, and occasionally you do have

823
00:52:08,800 --> 00:52:11,520
Speaker 1: some bitcoin miners who are still depending on them. They

824
00:52:11,600 --> 00:52:14,200
Speaker 1: just have very little chance of winning in a proof

825
00:52:14,239 --> 00:52:18,920
Speaker 1: of work system. All right, then we've got proof of

826
00:52:19,000 --> 00:52:23,440
Speaker 1: elapsed time. This one comes courtesy of Intel, as the

827
00:52:23,440 --> 00:52:28,160
Speaker 1: company known for making processors and such that Intel like

828
00:52:28,280 --> 00:52:33,600
Speaker 1: Intel inside Intel, well, they created this algorithm which uses

829
00:52:33,640 --> 00:52:37,800
Speaker 1: kind of a lottery based system. So all participating nodes

830
00:52:38,160 --> 00:52:42,480
Speaker 1: within this blockchain system have an equal chance of winning.

831
00:52:43,040 --> 00:52:46,560
Speaker 1: So the more nodes that participate, the lower your odds

832
00:52:46,600 --> 00:52:50,279
Speaker 1: are that you will win. Right Like, it's like one

833
00:52:50,320 --> 00:52:52,200
Speaker 1: of those sweepstakes where they say, what are the odds

834
00:52:52,239 --> 00:52:54,560
Speaker 1: of winning? Well, the odds of winning depend upon how

835
00:52:54,560 --> 00:52:58,120
Speaker 1: many entries we get. If we get two entries, your

836
00:52:58,120 --> 00:53:02,680
Speaker 1: odds of winning. But if we get a billion entries,

837
00:53:02,800 --> 00:53:05,080
Speaker 1: it's going to be a different story, kind of similar.

838
00:53:05,480 --> 00:53:09,080
Speaker 1: So the algorithm in this case creates a random amount

839
00:53:09,200 --> 00:53:12,839
Speaker 1: of time for each node in the system. So each

840
00:53:12,880 --> 00:53:16,640
Speaker 1: node is assigned a random amount of time to quote

841
00:53:16,719 --> 00:53:21,239
Speaker 1: unquote go to sleep. Essentially, it's saying, this is how

842
00:53:21,320 --> 00:53:24,560
Speaker 1: long you have to wait before you indicate that you're

843
00:53:24,560 --> 00:53:28,560
Speaker 1: ready to validate a block of transactions. And like I said,

844
00:53:28,600 --> 00:53:32,880
Speaker 1: it's randomly generated for every single node. So one node

845
00:53:33,000 --> 00:53:36,120
Speaker 1: might get the equivalent of you have to wait five minutes,

846
00:53:36,520 --> 00:53:38,839
Speaker 1: and another node might be told you have to wait

847
00:53:38,840 --> 00:53:40,960
Speaker 1: ten minutes, and the next node might be told you

848
00:53:41,000 --> 00:53:44,760
Speaker 1: need to wait two minutes, and then all the nodes

849
00:53:45,080 --> 00:53:48,359
Speaker 1: go to sleep, and then the first node that wakes up,

850
00:53:49,160 --> 00:53:51,600
Speaker 1: So essentially the first node that gets the node that

851
00:53:51,640 --> 00:53:55,640
Speaker 1: gets the shortest amount of time to wait wins. But

852
00:53:55,719 --> 00:53:59,080
Speaker 1: this is again randomly generated, so it is like a lottery.

853
00:53:59,360 --> 00:54:02,680
Speaker 1: It's essentially the same thing as being given a random

854
00:54:02,800 --> 00:54:06,279
Speaker 1: number and then you have a drawing from a bunch

855
00:54:06,320 --> 00:54:09,640
Speaker 1: of random numbers and if yours matches, then you win.

856
00:54:10,640 --> 00:54:14,319
Speaker 1: Our processors go into sleep mode, so that means that

857
00:54:14,360 --> 00:54:19,560
Speaker 1: they're not actually actively processing on behalf of this system,

858
00:54:20,800 --> 00:54:25,280
Speaker 1: and that means that they're actually consuming slightly less power

859
00:54:25,320 --> 00:54:27,280
Speaker 1: than a proof of work system. That was the whole

860
00:54:28,719 --> 00:54:32,440
Speaker 1: reason behind the creation of proof of elapsed time algorithms.

861
00:54:32,480 --> 00:54:35,440
Speaker 1: It's that it does something similar to proof of work,

862
00:54:36,040 --> 00:54:39,480
Speaker 1: but you don't actually have all these processors dedicating all

863
00:54:39,640 --> 00:54:45,680
Speaker 1: their their resources towards solving difficult math problems. So it

864
00:54:45,760 --> 00:54:49,760
Speaker 1: does have a lower energy requirement than proof of work systems.

865
00:54:50,560 --> 00:54:53,560
Speaker 1: And um, yeah, I'm just giving you an overview of

866
00:54:53,600 --> 00:54:57,280
Speaker 1: all these concepts. Like I'm not diving into super deep detail.

867
00:54:57,440 --> 00:55:00,080
Speaker 1: Even as long as this episode is and I get it,

868
00:55:00,160 --> 00:55:03,759
Speaker 1: it's a long one. This is still scratching just the

869
00:55:04,760 --> 00:55:08,719
Speaker 1: barest of surfaces as far as these algorithms and UH

870
00:55:08,760 --> 00:55:13,720
Speaker 1: and financial systems go. And again, like once I started

871
00:55:13,840 --> 00:55:17,400
Speaker 1: diving down a little bit further, I get well beyond

872
00:55:17,400 --> 00:55:21,560
Speaker 1: my understanding, including how different approaches handle stuff like if

873
00:55:21,560 --> 00:55:23,799
Speaker 1: a bad actor is determined to try and leverage the

874
00:55:23,840 --> 00:55:26,600
Speaker 1: system for their own financial gain. So, for example, on

875
00:55:26,680 --> 00:55:29,600
Speaker 1: that with proof of work, you can have something called

876
00:55:29,600 --> 00:55:34,440
Speaker 1: at attack. This is when you get a group of

877
00:55:34,440 --> 00:55:38,560
Speaker 1: cryptocurrency investors who represent more than fifty of all hash

878
00:55:38,640 --> 00:55:41,480
Speaker 1: mining capability. You can think of it as more than

879
00:55:42,120 --> 00:55:46,480
Speaker 1: of all computational power dedicated to mining. If you were

880
00:55:46,480 --> 00:55:52,320
Speaker 1: to get or more of the mining capability in bitcoin

881
00:55:52,440 --> 00:55:56,640
Speaker 1: to coordinate, you could potentially manipulate the system. You could

882
00:55:56,880 --> 00:56:03,480
Speaker 1: potentially create verifications of trans actions that break that that

883
00:56:03,600 --> 00:56:06,040
Speaker 1: last block. You couldn't go back in time and change

884
00:56:06,080 --> 00:56:10,959
Speaker 1: stuff that's still immutable, but for a current block of transactions,

885
00:56:10,960 --> 00:56:14,479
Speaker 1: you could erase a transaction that you did so that

886
00:56:14,800 --> 00:56:17,680
Speaker 1: you would once again have the bitcoin that you've already spent.

887
00:56:18,480 --> 00:56:23,520
Speaker 1: You could also monopolize the mining of the blocks, like

888
00:56:23,600 --> 00:56:28,560
Speaker 1: you could prevent anyone who's outside of that from successfully

889
00:56:28,560 --> 00:56:32,160
Speaker 1: mining a block and thus end up getting all of

890
00:56:32,200 --> 00:56:37,280
Speaker 1: the reward bitcoin for your group. This is a threat

891
00:56:37,360 --> 00:56:40,640
Speaker 1: that has happened, like we've actually seen these play out

892
00:56:40,719 --> 00:56:44,759
Speaker 1: in some smaller cryptocurrency markets. Uh. Once it gets to

893
00:56:44,800 --> 00:56:47,799
Speaker 1: a certain size, It's very hard to coordinate on that

894
00:56:47,920 --> 00:56:50,240
Speaker 1: kind of level. There's just there are too many players

895
00:56:50,280 --> 00:56:53,680
Speaker 1: that are too too involved in their own self interests

896
00:56:53,719 --> 00:56:56,600
Speaker 1: to be able to do that. But it has happened

897
00:56:56,600 --> 00:56:59,759
Speaker 1: before with some of the smaller cryptocurrency markets, you know.

898
00:56:59,880 --> 00:57:03,120
Speaker 1: It's It's also something that's even harder to do if

899
00:57:03,160 --> 00:57:06,720
Speaker 1: you've got a proof of steak model, because in order

900
00:57:06,760 --> 00:57:09,280
Speaker 1: to have that kind of level of influence with proof

901
00:57:09,280 --> 00:57:12,360
Speaker 1: of steak, you have to put forward an even larger steak.

902
00:57:12,440 --> 00:57:15,840
Speaker 1: Same with like the proof of burn model, right, it

903
00:57:15,920 --> 00:57:21,160
Speaker 1: means that your initial expense in order to have that

904
00:57:21,520 --> 00:57:25,200
Speaker 1: leverage is so high that it's not worth the payout.

905
00:57:26,040 --> 00:57:28,960
Speaker 1: So there are different ways to go about trying to

906
00:57:29,120 --> 00:57:35,320
Speaker 1: stop bad actors from tipping the system. But again, once

907
00:57:35,360 --> 00:57:39,360
Speaker 1: you get beyond these early explanations, it starts to get

908
00:57:39,400 --> 00:57:42,280
Speaker 1: to a level where I'm like scratching my head and

909
00:57:42,400 --> 00:57:46,240
Speaker 1: left wondering what's for dinner because it's the only thought

910
00:57:46,280 --> 00:57:49,160
Speaker 1: I can even manage to deal with at that point.

911
00:57:50,280 --> 00:57:53,520
Speaker 1: I hope you've found this interesting and that you learned

912
00:57:53,560 --> 00:57:56,840
Speaker 1: a bit about proof of steak, the big alternative to

913
00:57:56,920 --> 00:58:00,680
Speaker 1: proof of work. We will have to see how these

914
00:58:00,760 --> 00:58:03,920
Speaker 1: various philosophies play out over time and whether or not

915
00:58:03,960 --> 00:58:08,720
Speaker 1: they are successful. It's still early days. Honestly, I'm still

916
00:58:08,760 --> 00:58:11,440
Speaker 1: really curious what happens in the long term with bitcoin,

917
00:58:11,560 --> 00:58:14,440
Speaker 1: Like we might see the value of bitcoin continue to

918
00:58:14,480 --> 00:58:17,280
Speaker 1: go up. There are those who argue that it might

919
00:58:17,360 --> 00:58:24,120
Speaker 1: be you know, two dollars per bitcoin before too long. Um,

920
00:58:24,200 --> 00:58:28,640
Speaker 1: maybe that will happen. It would be scary to see

921
00:58:28,720 --> 00:58:32,920
Speaker 1: in many ways, because again, that volatility is something that

922
00:58:33,440 --> 00:58:35,960
Speaker 1: worries me in the long run. Also, I should point

923
00:58:35,960 --> 00:58:39,120
Speaker 1: out that a lot of people who are real evangelists

924
00:58:39,120 --> 00:58:43,160
Speaker 1: for cryptocurrency, I get the sense, and maybe this isn't

925
00:58:43,160 --> 00:58:46,040
Speaker 1: even conscious, but I get the sense that part of

926
00:58:46,080 --> 00:58:49,480
Speaker 1: their enthusiasm, or a great deal of their enthusiasm, is

927
00:58:49,480 --> 00:58:54,080
Speaker 1: that if they get more people on board with cryptocurrency,

928
00:58:54,680 --> 00:59:00,560
Speaker 1: cryptocurrency values generally start to increase. They're they're becomes this

929
00:59:00,600 --> 00:59:04,200
Speaker 1: sort of speculation where more people start to invest and

930
00:59:04,240 --> 00:59:08,400
Speaker 1: that drives the value of the cryptocurrency up. So if

931
00:59:08,440 --> 00:59:12,240
Speaker 1: you already have a steak in cryptocurrency, it looks like

932
00:59:12,320 --> 00:59:15,720
Speaker 1: there's kind of an incentive to get more people on board,

933
00:59:16,280 --> 00:59:21,120
Speaker 1: and that feeds into this sort of evangelical approach to

934
00:59:21,760 --> 00:59:24,919
Speaker 1: talking about cryptocurrency, and that strikes me as a bit

935
00:59:25,600 --> 00:59:29,440
Speaker 1: i key, because when I look at the proof of

936
00:59:29,440 --> 00:59:33,400
Speaker 1: steak approach, for example, I know I am never going

937
00:59:33,440 --> 00:59:37,880
Speaker 1: to have a sufficient number of cryptocurrency units in whatever

938
00:59:37,920 --> 00:59:41,320
Speaker 1: system to be able to participate in proof of steak.

939
00:59:42,200 --> 00:59:45,000
Speaker 1: But what I might be doing is by getting involved

940
00:59:45,080 --> 00:59:47,320
Speaker 1: in one of these I might help drive the value

941
00:59:47,360 --> 00:59:49,920
Speaker 1: of the currency up, and so someone who already has

942
00:59:49,960 --> 00:59:55,520
Speaker 1: a significant investment sees that investment increase. I'm essentially helping

943
00:59:55,520 --> 00:59:58,720
Speaker 1: someone else get even more wealthy. And while I don't

944
00:59:58,960 --> 01:00:02,720
Speaker 1: mind helping other p bowld um, I'd rather help the

945
01:00:02,760 --> 01:00:05,800
Speaker 1: people who aren't wealthy at all rather than help people

946
01:00:05,800 --> 01:00:10,000
Speaker 1: who are wealthy get wealthier. I I would just like

947
01:00:10,080 --> 01:00:14,960
Speaker 1: to direct that that sort of humanitarian impulse towards folks

948
01:00:15,000 --> 01:00:17,800
Speaker 1: where it would make a bigger difference in their lives.

949
01:00:18,640 --> 01:00:21,960
Speaker 1: But that's just me. If you have suggestions for topics

950
01:00:22,000 --> 01:00:24,600
Speaker 1: I should cover in future episodes of tech Stuff, I

951
01:00:24,720 --> 01:00:27,120
Speaker 1: welcome you to reach out to me on Twitter and

952
01:00:27,200 --> 01:00:29,680
Speaker 1: let me know about them. The handle we use there

953
01:00:29,840 --> 01:00:33,600
Speaker 1: is text stuff h s W and I'll talk to

954
01:00:33,640 --> 01:00:42,800
Speaker 1: you again really soon. Tex Stuff is an I heart

955
01:00:42,920 --> 01:00:46,680
Speaker 1: radio production. For more podcasts from My heart Radio, visit

956
01:00:46,720 --> 01:00:49,800
Speaker 1: the I heart Radio app, Apple podcasts, or wherever you

957
01:00:49,840 --> 01:00:51,200
Speaker 1: listen to your favorite shows.