WEBVTT - Proof of Stake vs Proof of Work 0:00:04.400 --> 0:00:07.800 Welcome to Tech Stuff, a production from I Heart Radio. 0:00:12.160 --> 0:00:15.000 Hey there, and welcome to tech Stuff. I'm your host, 0:00:15.080 --> 0:00:18.320 John than Strickland. I'm an executive producer with I Heart Radio, 0:00:18.360 --> 0:00:21.160 and I love all things tech. And one thing that 0:00:21.239 --> 0:00:23.479 I have covered in the past on this show is 0:00:23.560 --> 0:00:28.360 cryptocurrency and blockchain. But I pretty much always talk about 0:00:28.400 --> 0:00:33.080 blockchain in terms of proof of work. Cryptocurrencies and proof 0:00:33.080 --> 0:00:37.080 of work blockchains and there are other types. So I 0:00:37.159 --> 0:00:39.280 thought we could go over some of this and talk 0:00:39.320 --> 0:00:42.400 about what all of this means and what the differences are. 0:00:43.000 --> 0:00:45.400 And to start off, we need to talk about proof 0:00:45.440 --> 0:00:47.680 of work. Even though I've done it before, We've got 0:00:47.680 --> 0:00:51.120 to establish that first. So when you've heard me talk 0:00:51.159 --> 0:00:57.200 about how bitcoin mining, you know, is really equivalent to 0:00:58.360 --> 0:01:02.200 a computer solving a really hard math problem, or that 0:01:02.240 --> 0:01:05.720 your computer is essentially making the first accurate guests for 0:01:05.760 --> 0:01:09.399 a particularly large unknown number, you know, I've I've often 0:01:09.560 --> 0:01:15.120 kind of made that analogy. Proof of work is related 0:01:15.160 --> 0:01:18.800 to that. However, the actual concept of proof of work 0:01:19.000 --> 0:01:23.520 predates that of blockchain, or at least of blockchain in 0:01:23.520 --> 0:01:30.120 the term of cryptocurrencies. Blockchain itself also predates cryptocurrency. In fact, 0:01:30.360 --> 0:01:33.680 one could argue that the brilliance of bitcoin was bringing 0:01:33.720 --> 0:01:39.440 these different ideas together into a a new format. So 0:01:39.920 --> 0:01:43.319 the proof of work concept was first described in a 0:01:43.360 --> 0:01:48.720 paper that Cynthia Dwark and Mony Nyor wrote back in 0:01:48.760 --> 0:01:52.160 the early nineties. They did not coin the phrase proof 0:01:52.200 --> 0:01:55.880 of work, but what they described effectively is proof of work. 0:01:56.400 --> 0:02:00.000 They were looking to solve a different problem from cryptocurrencies, 0:02:00.440 --> 0:02:02.480 you know, how do we create a system of which 0:02:02.520 --> 0:02:07.560 people can mine a digital currency and validate transactions. They 0:02:07.600 --> 0:02:12.040 were looking at ways to discourage spam email. Their paper 0:02:12.160 --> 0:02:17.040 is titled Pricing via Processing or Combating Junk Mail. So 0:02:18.040 --> 0:02:22.119 one of the reasons that spam even exists is that 0:02:22.240 --> 0:02:25.480 it doesn't cost very much to send it out at 0:02:25.520 --> 0:02:29.000 a massive scale. If you had to hire people to 0:02:29.280 --> 0:02:33.160 manually type out spam messages or even just fill in 0:02:33.200 --> 0:02:37.440 the address bar in the email, that would be cost 0:02:37.480 --> 0:02:41.760 prohibitive because the return would be way too low. It's 0:02:41.800 --> 0:02:45.200 actually kind of hard to cite statistics on this because 0:02:45.280 --> 0:02:47.280 there are a lot of different metrics that are used 0:02:47.320 --> 0:02:50.640 in a lot of different time periods we can look at. 0:02:51.000 --> 0:02:54.720 But generally speaking, the response rate on spam, that is 0:02:55.160 --> 0:02:58.560 the percentage of people who actually not only open up 0:02:58.560 --> 0:03:01.160 a spam message, but they on it in some way. 0:03:01.760 --> 0:03:05.639 That response rate is abysmally low. According to a study 0:03:05.639 --> 0:03:08.760 from the University of California, Berkeley, and you see San 0:03:08.800 --> 0:03:11.800 Diego back in two thousand and eight, only one in 0:03:11.960 --> 0:03:19.720 twelve point five million messages gets a response. That's way low. 0:03:19.880 --> 0:03:23.160 Right now, I'm not sure if the rate was much 0:03:23.240 --> 0:03:26.000 higher or if it was even lower back in the 0:03:26.080 --> 0:03:30.640 early nineties when the researchers were working on this concept 0:03:30.720 --> 0:03:34.440 to discourage spam. But when you've got a success rate 0:03:34.520 --> 0:03:37.640 that is that small, the question arises, how the heck 0:03:38.040 --> 0:03:40.320 can it be worthwhile? I mean, how can it be 0:03:40.400 --> 0:03:44.280 worth the time and effort of operating a business that 0:03:44.320 --> 0:03:47.400 sends out spam emails if you have a success rate 0:03:47.480 --> 0:03:51.280 that is that low. Well, the secret is to operate 0:03:51.680 --> 0:03:55.120 on an enormous scale. So, yeah, you're only getting one 0:03:55.200 --> 0:03:57.360 hit out of twelve and a half million people, but 0:03:57.440 --> 0:04:01.200 you're sending out emails two hundreds of millions of people. 0:04:01.840 --> 0:04:04.240 You also have to have a very low cost of operation. 0:04:04.520 --> 0:04:07.640 You know, it can't cost much to actually do your business, 0:04:07.760 --> 0:04:11.080 and you have to have a pretty enormous return when 0:04:11.120 --> 0:04:14.520 you do have a success, like when you get a hit, 0:04:15.280 --> 0:04:19.120 it's significant, and preferably you have all of these at 0:04:19.120 --> 0:04:22.920 the same time. Keeping costs low is a huge part 0:04:22.960 --> 0:04:27.040 of this. With database is full of email addresses, automated 0:04:27.080 --> 0:04:31.120 systems that use boilerplate copy, and you know, an automated 0:04:31.200 --> 0:04:35.719 robocolor style email program that can plug addresses in and 0:04:35.720 --> 0:04:39.000 and attach it to this boiler plate, you can really 0:04:39.320 --> 0:04:42.960 churn those suckers out. If you get a bit over zealous, 0:04:43.400 --> 0:04:47.080 then you might make authorities upset and they might come 0:04:47.120 --> 0:04:50.279 at you and wants you to answer some questions. That 0:04:50.360 --> 0:04:53.200 can be a problem. We've seen that happen where spam 0:04:53.240 --> 0:04:57.039 operations got shut down because you know, local politicians got 0:04:57.080 --> 0:05:00.280 fed up with it and started looking into it. But 0:05:00.720 --> 0:05:04.200 you know, you can make a profit working this way. 0:05:04.720 --> 0:05:09.040 You just again, you have to be brutal with cost 0:05:09.080 --> 0:05:12.120 control in order to make this work at scale. So 0:05:12.320 --> 0:05:14.839 the researchers wanted to find ways to make the cost 0:05:14.880 --> 0:05:18.000 of operation go up. Even if it only went up 0:05:18.400 --> 0:05:21.200 by a tiny little bit, that could be enough to 0:05:21.240 --> 0:05:25.240 wipe out the return on investment for spam operators and 0:05:25.360 --> 0:05:29.279 they would likely abandon the practice. If there's no money 0:05:29.320 --> 0:05:32.479 to be made, then there's no reason to send out spam, right, 0:05:33.600 --> 0:05:35.880 if you could actually make it expensive enough, then it 0:05:35.880 --> 0:05:39.440 would cost more money to send out spam. Then you 0:05:39.440 --> 0:05:44.600 would recoup whenever you got those rare successful responses, and 0:05:44.640 --> 0:05:47.599 that would definitely bring the practice to an end. So 0:05:47.839 --> 0:05:50.120 let's say you're looking at folks who are sending spam 0:05:50.120 --> 0:05:52.279 out and you're trying to discourage them. You're trying to 0:05:52.279 --> 0:05:55.479 find a way so that the spammers give up on 0:05:55.520 --> 0:05:58.640 what they're doing. Now, if you could just put a 0:05:58.680 --> 0:06:03.240 price on sending an email, that would probably do it. Right. 0:06:03.279 --> 0:06:07.240 There is a price on sending email because operating a 0:06:07.279 --> 0:06:11.080 computational device has energy requirements, and that means you have 0:06:11.080 --> 0:06:13.760 to pay an energy bill at some point. But you 0:06:13.800 --> 0:06:15.560 want that price to be even higher. You want to 0:06:15.680 --> 0:06:19.400 just attach it straight to an email specifically, not just 0:06:19.520 --> 0:06:23.359 operating a computer. So let's say that you decide that 0:06:23.480 --> 0:06:26.640 all emails will cost a fraction of a cent to 0:06:26.760 --> 0:06:30.039 spend to to send one. So if you're gonna send 0:06:30.080 --> 0:06:33.400 an email, you're gonna get charged, you know, a fraction 0:06:33.480 --> 0:06:37.080 of one penny for normal folks just sending on emails. 0:06:37.640 --> 0:06:39.760 It would be such a small charge that you probably 0:06:40.200 --> 0:06:42.600 wouldn't notice. I mean, you wouldn't be happy about it, 0:06:43.200 --> 0:06:45.760 But it's not like it would amount too much. If 0:06:45.760 --> 0:06:48.480 you're sending out maybe ten emails a day, maybe you're 0:06:48.520 --> 0:06:51.640 getting close to spending half a penny. That would not 0:06:51.839 --> 0:06:55.080 be a big deal, right, But for organizations that are 0:06:55.080 --> 0:06:58.479 trying to blast out hundreds of millions of messages, it 0:06:58.560 --> 0:07:03.000 quickly becomes cost for hipative. But this approach comes with 0:07:03.040 --> 0:07:06.719 all sorts of problems because normal folks wouldn't be thrilled 0:07:06.720 --> 0:07:08.600 at having to pay even a fraction of a cent 0:07:09.120 --> 0:07:12.160 to send email. Like even if you framed it that way, 0:07:12.400 --> 0:07:15.920 people would object. They'd say, why are you making it 0:07:16.000 --> 0:07:19.640 cost me anything to send something electronically? There are no 0:07:20.000 --> 0:07:25.160 physical components to to be handled in this. Plus you'd 0:07:25.160 --> 0:07:26.800 have to set up some sort of payment system in 0:07:26.800 --> 0:07:29.320 the first place, and and whom are you paying? To 0:07:29.440 --> 0:07:33.680 whom does the money go? This This makes it a 0:07:33.800 --> 0:07:37.280 difficult and thus unworkable solution. So the authors of the 0:07:37.280 --> 0:07:42.280 paper suggested an alternative. Instead of charging money outright to 0:07:42.400 --> 0:07:46.280 send an email, why not build into email systems a 0:07:46.560 --> 0:07:50.560 processing requirement, as in a computer process or requirement. Each 0:07:50.600 --> 0:07:54.119 time someone wants to send an email, their computer must 0:07:54.200 --> 0:07:58.240 first solve a mathematical problem. Uh. And in order to 0:07:58.240 --> 0:08:02.840 solve a mathematical problem, the eater must expend resources it's 0:08:02.880 --> 0:08:06.520 got to send spend some of its processing capability on 0:08:06.840 --> 0:08:10.320 solving this problem, and also some of its time. The 0:08:10.400 --> 0:08:14.960 difficulty of the problem would require some amount of computational 0:08:15.000 --> 0:08:18.720 output that's equivalent to a fraction of assent. In other words, 0:08:19.200 --> 0:08:23.960 you technically you're still charging folks to use email, but 0:08:24.080 --> 0:08:29.280 the cost is in effort and time, not directly in money, 0:08:29.400 --> 0:08:32.360 and that is something that people would probably be a 0:08:32.400 --> 0:08:35.400 little more receptive to. And again, for the average person, 0:08:35.520 --> 0:08:38.640 they probably wouldn't even notice sending an email might take 0:08:38.679 --> 0:08:41.839 a little longer than it did before, but not by 0:08:41.880 --> 0:08:44.280 so much that they would make that big of a difference. 0:08:44.679 --> 0:08:46.920 So their computer would have to solve some sort of 0:08:47.000 --> 0:08:50.480 mathematical problem, and the proof of the solution would need 0:08:50.520 --> 0:08:54.320 to be you know, signed into the email itself. The 0:08:54.360 --> 0:08:57.440 problem would need to be difficult to solve but easy 0:08:57.480 --> 0:09:00.440 to verify. So in other words, you you can send 0:09:00.480 --> 0:09:06.000 this email until whatever system is handling it verifies that 0:09:06.080 --> 0:09:09.000 you did solve the problem. It's kind of like they're 0:09:09.040 --> 0:09:11.480 not allowed to go to bed without your parents checking 0:09:11.520 --> 0:09:14.520 to make sure you did your homework first. Same kind 0:09:14.520 --> 0:09:17.240 of idea, So it needed to be the kind of 0:09:17.280 --> 0:09:21.000 problem where you have to work out an answer, and 0:09:21.120 --> 0:09:23.800 that part is hard, but once you have the answer, 0:09:24.240 --> 0:09:27.000 it's very easy to plug that answer into the original 0:09:27.000 --> 0:09:29.959 problem and see that it works. So you can think 0:09:29.960 --> 0:09:33.000 of something like an algebraic equation and it has an 0:09:33.080 --> 0:09:35.760 unknown value in it that you represent as a variable, 0:09:35.960 --> 0:09:39.400 the classic being the letter X. Well, once you solve 0:09:39.480 --> 0:09:43.640 this equation, and you solve for x, you can then 0:09:43.679 --> 0:09:49.000 plug that solution that x value back into the original 0:09:49.040 --> 0:09:52.680 equation and prove that it works well. Their approach was 0:09:52.840 --> 0:09:57.480 sort of the same thing, only much more complicated than that. Moreover, 0:09:57.679 --> 0:10:01.080 they pointed out that if after you limited the solution, 0:10:01.280 --> 0:10:04.520 you saw spammers trying to, you know, power through it 0:10:04.920 --> 0:10:07.679 and just continue to spam despite the fact that you've 0:10:07.760 --> 0:10:12.880 put this computational requirement in the way, well, you can 0:10:12.960 --> 0:10:15.960 just adjust the difficulty of the problems that they have 0:10:16.080 --> 0:10:18.920 to solve before they can send out more emails. You 0:10:18.920 --> 0:10:23.480 make the problem tougher. Then it takes the computers more 0:10:23.559 --> 0:10:27.720 resources to solve the problems. So the harder the problem 0:10:27.760 --> 0:10:32.079 gets the more quote unquote expensive it is to send 0:10:32.080 --> 0:10:36.160 an email. And once you get to that tipping point, 0:10:36.559 --> 0:10:40.120 then spammers will see that the amount of time and 0:10:40.280 --> 0:10:42.520 energy that they're using in order to just send out 0:10:42.520 --> 0:10:46.959 the spam emails is not offset by the amount they're 0:10:47.040 --> 0:10:51.800 making when the spam finally starts hitting responses. This was 0:10:51.840 --> 0:10:55.880 a really interesting proposal. Now let's skip ahead to the 0:10:55.920 --> 0:10:58.760 two thousand's, like two thousand seven, two thousand eight. It 0:10:58.800 --> 0:11:00.600 was in two thousand eight that we first got a 0:11:00.600 --> 0:11:03.960 white paper written by someone using or someone or some 0:11:03.960 --> 0:11:09.719 some people potentially using the pseudonym Satoshi Nakamoto, and this 0:11:09.840 --> 0:11:14.400 was the famous white paper describing bitcoin. Now, in this piece, 0:11:14.840 --> 0:11:19.240 the author or authors combined the proof of work concept 0:11:19.640 --> 0:11:23.720 with another one that again predated bitcoin, and that was blockchain. 0:11:24.440 --> 0:11:29.080 What blockchain does is establish a timeline of events of 0:11:29.160 --> 0:11:33.000 some sort. So in the case of bitcoin, the events 0:11:33.080 --> 0:11:37.959 are transactions, so their bitcoin transactions when bitcoin changes hands 0:11:38.000 --> 0:11:42.640 from one entity to another. And let's think about timelines 0:11:42.800 --> 0:11:46.240 for a second. In our experience, there is no way 0:11:46.600 --> 0:11:49.280 to travel back in time. The only way to travel 0:11:49.320 --> 0:11:51.840 through time is the way we all do it normally, 0:11:52.360 --> 0:11:56.520 where time progresses forward for us there's no turning back. 0:11:56.960 --> 0:11:59.880 So that dumb thing you did when you were a kid, 0:12:00.520 --> 0:12:02.839 you know, you know which dumb thing I'm talking about. 0:12:02.880 --> 0:12:05.680 It's that dumb thing where sometimes when you're just trying 0:12:05.679 --> 0:12:09.240 to fall asleep, your brain digs up this dumb thing 0:12:09.320 --> 0:12:12.480 and says, hey, remember when you did that dumb thing, 0:12:12.840 --> 0:12:16.200 and do you remember how horrible you feel about it? Now? Well, 0:12:16.240 --> 0:12:18.520 that that dumb thing you did, there's no way for 0:12:18.559 --> 0:12:20.960 you to go back in time and to not do 0:12:21.040 --> 0:12:24.640 that dumb thing. You can't erase it. It's in the timeline. 0:12:25.040 --> 0:12:28.560 And really, everything that's happened to you afterward in your 0:12:28.600 --> 0:12:32.280 life has that dumb thing factored into it, at least 0:12:32.280 --> 0:12:35.880 on some level. Even if it's undetectable, it's there because 0:12:35.920 --> 0:12:41.160 it happened, you know, that dumb dumb thing. Well. Blockchain 0:12:41.280 --> 0:12:46.680 is a computational process that establishes something similar to a timeline. 0:12:47.160 --> 0:12:50.840 The idea is that with a blockchain, you have a 0:12:50.880 --> 0:12:55.800 timeline of processes, and this timeline is also unalterable. Someone 0:12:55.840 --> 0:13:00.240 cannot go back earlier into the timeline, travel back into 0:13:00.240 --> 0:13:03.720 the blockchain, and make a change, because if they did, 0:13:04.200 --> 0:13:06.640 it would mean that all the later blocks in the 0:13:06.760 --> 0:13:09.880 chain would also have to change, and folks would notice that. 0:13:10.400 --> 0:13:13.960 Because the chain preserves the timeline, everything is built on 0:13:14.080 --> 0:13:18.920 what has come before, So changing something from before would 0:13:19.000 --> 0:13:22.840 change everything that comes afterward, and and the the jig 0:13:22.880 --> 0:13:26.720 would be up. You would be found out immediately. So, 0:13:27.720 --> 0:13:31.199 for example, if you spent bitcoin and then you thought, 0:13:31.320 --> 0:13:34.280 I'm gonna get sneaky, and I'm gonna wait a while, 0:13:34.640 --> 0:13:36.160 and after a while, I'm going to go into the 0:13:36.200 --> 0:13:39.720 blockchain and alter that that record so that I didn't 0:13:40.040 --> 0:13:43.080 spend that bitcoin, and then I magically get the bitcoin back, 0:13:43.120 --> 0:13:46.400 it would be as if money were just magically appearing 0:13:46.440 --> 0:13:51.680 inside your wallet. Well, because all future transactions are built 0:13:51.880 --> 0:13:55.280 upon past ones, going in and trying to alter the 0:13:55.280 --> 0:13:58.680 blockchain would become visible all the way down and you 0:13:58.679 --> 0:14:02.160 would immediately be found out. So that's how the blockchain 0:14:02.400 --> 0:14:06.960 protects the order of processes that once you start to 0:14:07.080 --> 0:14:13.839 validate a block of transactions, it is cemented effectively. Now, 0:14:13.880 --> 0:14:17.880 occasionally the chain might fork, but at some point one 0:14:18.320 --> 0:14:22.000 branch of this chain is going to be longer than 0:14:22.040 --> 0:14:24.880 the others and it becomes the true chain. The other 0:14:25.000 --> 0:14:29.760 branches become orphaned blocks. Uh, So over time you will 0:14:29.800 --> 0:14:33.280 see things split off from the blockchain, but whichever one 0:14:33.360 --> 0:14:36.200 gets built on the most within a given amount of 0:14:36.200 --> 0:14:42.680 time becomes the true chain. Alright, So block chains this 0:14:42.760 --> 0:14:47.040 digital method of establishing a series of unalterable processes. Where 0:14:47.080 --> 0:14:51.080 does proof of work come in? All right? So one 0:14:51.120 --> 0:14:55.880 thing that's used a lot in computer science are hash functions. 0:14:56.320 --> 0:14:59.200 These are a little tricky to talk about, all right. 0:14:59.280 --> 0:15:02.840 So first let's talk about encryption. And I want to 0:15:02.880 --> 0:15:06.000 point out right away at the very beginning, encryption is 0:15:06.040 --> 0:15:10.520 not the same thing as a hash function. Encryption is 0:15:10.560 --> 0:15:14.040 where you have some data and you perform a mathematical 0:15:14.080 --> 0:15:18.920 process on that data, and you transform it into different data, 0:15:19.040 --> 0:15:22.440 something that looks absolutely meaningless. You've jumbled it up. No 0:15:22.520 --> 0:15:24.800 one can make head or tail of it just by 0:15:24.840 --> 0:15:28.520 looking at it. But someone with the correct decryption key 0:15:28.720 --> 0:15:32.960 can reverse that process and get at the original data 0:15:33.080 --> 0:15:37.360 and read whatever it was you wrote. That is reversible. 0:15:37.680 --> 0:15:42.640 That is encryption and decryption. Hashing is not reversible. You've 0:15:42.680 --> 0:15:45.280 got some data, all right, let's say it's even the 0:15:45.320 --> 0:15:47.120 same message. Is what we were just talking about with 0:15:47.200 --> 0:15:50.680 encryption and decryption, and you have an operation that is 0:15:50.800 --> 0:15:53.960 one way, which means you can perform this operation on 0:15:54.080 --> 0:15:57.000 the data, and you will get a result, but there's 0:15:57.040 --> 0:16:00.200 no reverse process where you can take that result and 0:16:00.280 --> 0:16:04.080 turn it back into the original data. Frequently, hash functions 0:16:04.080 --> 0:16:07.760 have a set number of characters that they will generate 0:16:07.840 --> 0:16:11.160 no matter what original value you plug in. So let's 0:16:11.200 --> 0:16:14.320 say that you've got a hash function that will generate 0:16:14.360 --> 0:16:19.360 an eighty character hash once you apply the function to 0:16:19.560 --> 0:16:24.040 the incoming data. That means your result will have eighty characters. 0:16:24.360 --> 0:16:28.240 Whether your incoming data is a one or if it's 0:16:28.240 --> 0:16:31.480 a one billion or any other number, you end up 0:16:31.520 --> 0:16:35.520 with an eighty character hash. Hashes can be collections of 0:16:35.600 --> 0:16:39.160 letters and numbers, and there are lots of different hash functions, 0:16:39.560 --> 0:16:43.560 which is what proof of work cryptocurrency kind of really 0:16:43.640 --> 0:16:46.840 depends upon. And and here's where we get to the 0:16:46.920 --> 0:16:50.760 key bit. The proof of work cryptocurrencies create a hash 0:16:50.960 --> 0:16:53.720 that is based off the block of transactions that need 0:16:53.760 --> 0:16:56.720 to be verified, as in the next block to join 0:16:56.800 --> 0:17:01.560 the chain. But it doesn't just involved the hash of 0:17:01.560 --> 0:17:05.600 that block or the hashing of that block. The hash 0:17:05.960 --> 0:17:11.480 also incorporates the hash from the previous block of verified transactions, 0:17:11.480 --> 0:17:14.159 the one that came right before. This is where we 0:17:14.200 --> 0:17:16.840 have that link that ultimately goes all the way back 0:17:16.840 --> 0:17:21.560 to the first block, right, because block two's hash incorporates 0:17:21.560 --> 0:17:25.520 the hash from block one. Block three's hash incorporates the 0:17:25.560 --> 0:17:29.040 hash from block two, which, as we just mentioned, incorporates 0:17:29.080 --> 0:17:33.040 the hash of block one. So this continues from block 0:17:33.160 --> 0:17:36.320 number one all the way down to the last block 0:17:36.320 --> 0:17:40.040 in the chain. All right, So the bitcoin system generates 0:17:40.160 --> 0:17:43.720 this hash. You've got this value in front of you. 0:17:44.160 --> 0:17:48.240 It's a hash value. You have no idea what information 0:17:48.320 --> 0:17:52.359 went into this to create this hash. Computers connected, you know, 0:17:52.440 --> 0:17:55.840 the nodes connected to the system are essentially all trying 0:17:55.840 --> 0:18:01.280 to figure out how the system generated this specific ific hash. 0:18:01.560 --> 0:18:04.280 And again, the process isn't reversible, so it's not like 0:18:04.320 --> 0:18:06.760 you can take the hash value that the system presents 0:18:06.880 --> 0:18:11.359 and then reverse engineer it. Instead, essentially you have to 0:18:11.480 --> 0:18:17.280 guess what value would have created this particular hash using 0:18:17.320 --> 0:18:20.720 the hash function of the algorithm. You're you're trying to 0:18:20.760 --> 0:18:25.119 figure out what number was it that made this happen essentially, 0:18:25.640 --> 0:18:28.359 and I'll give a really oversimplified kind of idea of 0:18:28.400 --> 0:18:30.840 how this works just in case you're having some trouble 0:18:30.880 --> 0:18:34.400 with it. So again this is an oversimplification, but Let's 0:18:34.400 --> 0:18:38.720 say I tell you the answer to this math problem 0:18:38.880 --> 0:18:43.320 is six? What was the math problem? So all I've 0:18:43.359 --> 0:18:45.080 done is given you the answer, and I'm asking you 0:18:45.119 --> 0:18:47.520 what math problem did I do that gave me the 0:18:47.560 --> 0:18:52.359 answer six? And you could say four plus two, you 0:18:52.359 --> 0:18:56.920 could say two times three, you could say sixteen minus ten, 0:18:57.119 --> 0:19:00.720 and so on. And the point is there's an infinite 0:19:00.800 --> 0:19:04.160 number of potential answers, right Like, you could say all 0:19:04.240 --> 0:19:07.120 sorts of different things that would be accurate in that 0:19:07.320 --> 0:19:11.120 it would it would create a six, but doesn't necessarily 0:19:11.160 --> 0:19:14.160 mean that that was the math problem I did, Right, 0:19:15.080 --> 0:19:19.280 You're just guessing until someone hits the right math problem. Well, 0:19:19.320 --> 0:19:22.520 in a way, that's what the computer nodes are doing 0:19:22.640 --> 0:19:29.040 within a proof of work blockchain system like Bitcoin, and 0:19:29.119 --> 0:19:33.640 the first computer to guess it correctly wins. Essentially, other 0:19:33.680 --> 0:19:37.840 computers in the system can verify that the guess is correct, 0:19:38.280 --> 0:19:41.879 because once you have a guess, then you can plug 0:19:41.920 --> 0:19:46.119 that into the hashing formula and find out if in fact, 0:19:46.240 --> 0:19:50.119 it generates the hash you were looking for. Then if 0:19:50.160 --> 0:19:53.480 it does, you got it right, and the winning computer 0:19:53.560 --> 0:19:56.920 system gets the reward of a certain amount of cryptocurrency 0:19:56.960 --> 0:20:00.800 units for bitcoin. Right now, that I'm out is six 0:20:00.880 --> 0:20:05.680 point to five bitcoins per block. Now, as I record 0:20:05.760 --> 0:20:10.639 this episode, the value bitcoin is almost fifty seven thousand dollars, 0:20:10.680 --> 0:20:13.879 so a six point to five reward is equal to 0:20:13.960 --> 0:20:17.400 nearly three hundred fifty five thousand bucks. And there are 0:20:17.480 --> 0:20:21.040 around one forty four blocks added to the chain per 0:20:21.160 --> 0:20:25.640 day at around three thousand dollars per block. So there 0:20:25.720 --> 0:20:30.720 is a huge financial incentive to run a computer system 0:20:31.000 --> 0:20:34.400 or network of systems that is the first to get 0:20:34.440 --> 0:20:36.840 to this right answer. Right. I mean, there's just an 0:20:36.920 --> 0:20:39.840 enormous amount of money to be made if you are 0:20:40.160 --> 0:20:43.560 number one, So there's a huge incentive to be number one. 0:20:44.040 --> 0:20:46.920 This is why you'll hear about bitcoin mining operations that 0:20:47.000 --> 0:20:50.800 have incredibly powerful machines just racing constantly to get the 0:20:50.880 --> 0:20:54.880 right answer. These machines need a lot of power. Thus 0:20:54.880 --> 0:20:57.760 they need a lot of electricity. This means a lot 0:20:57.760 --> 0:21:01.520 of power consumption for any sort of proof of work cryptocurrency, 0:21:02.280 --> 0:21:05.560 with Bitcoin obviously being the really big one, and that 0:21:05.680 --> 0:21:09.440 number can go through the roof as a currency's value increases, 0:21:09.920 --> 0:21:13.840 so bitcoin mining actually eats up more electricity than some 0:21:13.920 --> 0:21:16.760 countries do. I've got a lot more to say, both 0:21:16.760 --> 0:21:19.680 about proof of work and its alternatives. But first let's 0:21:19.680 --> 0:21:30.439 take a quick break. So I left off talking about 0:21:30.480 --> 0:21:35.440 how bitcoin mining leads to this sort of escalation um 0:21:35.480 --> 0:21:40.360 with people putting more and more powerful systems at play 0:21:40.520 --> 0:21:44.560 to compete against one another and try and mind each 0:21:44.560 --> 0:21:46.760 block in a blockchain in order to get more and 0:21:46.800 --> 0:21:50.040 more bitcoin. This becomes a kind of a vicious cycle, 0:21:50.280 --> 0:21:53.560 right because as long as the amount of bitcoin you're 0:21:53.560 --> 0:21:57.120 getting back is greater than the investment you've put forward 0:21:57.359 --> 0:22:01.560 to try and get the bitcoin, it's off it. Right. 0:22:01.600 --> 0:22:07.000 If I'm spending you know, five dollars on a computer 0:22:07.119 --> 0:22:10.600 system and power needs like I'm I'm paying you know 0:22:11.400 --> 0:22:14.800 these rates to get electricity to power all these computers. 0:22:15.800 --> 0:22:19.159 If I'm if I spend half a million on that, well, really, 0:22:19.200 --> 0:22:23.320 I just I just need to successfully mine two blocks 0:22:23.359 --> 0:22:27.480 a bitcoin to pay off that investment. Right, then, as 0:22:27.560 --> 0:22:33.359 long as I'm hitting more success in the future frequently enough, 0:22:33.800 --> 0:22:37.920 I can offset the costs of operation and just keep 0:22:37.960 --> 0:22:42.840 making profit. So that's why it's so um tempting to 0:22:42.880 --> 0:22:46.639 get into bitcoin mining, is that. Yeah, At this point, 0:22:47.520 --> 0:22:50.760 being a serious mining operation means you have to put 0:22:50.800 --> 0:22:53.639 in a huge amount of money because there are huge 0:22:53.680 --> 0:22:59.760 players out there already that are running ridiculously powerful computer networks, 0:22:59.800 --> 0:23:04.360 some times co located with power plants, like you've got 0:23:04.720 --> 0:23:07.280 old coal based power plants in different parts of the 0:23:07.359 --> 0:23:10.760 world where people have built out bitcoin mining operations in 0:23:10.920 --> 0:23:14.560 the power plant itself in order to have direct access 0:23:14.720 --> 0:23:18.520 to electricity at all at a cost that's as low 0:23:18.560 --> 0:23:21.479 as they can possibly get it. And again it's so 0:23:21.560 --> 0:23:24.040 that you can get that that maximum amount of profit 0:23:24.720 --> 0:23:27.320 um and even then it's not guaranteed because there's so 0:23:27.359 --> 0:23:31.600 many of these systems all around the world. So this 0:23:31.920 --> 0:23:36.880 has obviously led to some people to have some objections 0:23:36.880 --> 0:23:40.760 to bitcoin because it has this kind of runaway UH 0:23:40.920 --> 0:23:46.199 consumption associated to it. And it also means that you 0:23:46.240 --> 0:23:49.040 could argue that bitcoin can be connected to things like 0:23:49.160 --> 0:23:53.959 carbon emissions and climate change, because if the power that is, 0:23:54.560 --> 0:23:57.680 you know, allowing these systems to operate, if it's coming 0:23:57.760 --> 0:24:02.560 from a power plant that's using fossil fuels, then that 0:24:02.680 --> 0:24:06.359 power plant is having to to generate enough electricity to 0:24:06.480 --> 0:24:10.160 send to these systems and thus consuming more and more 0:24:10.200 --> 0:24:13.959 fossil fuels and generating more carbon emissions. Now, there are 0:24:14.000 --> 0:24:17.919 some bitcoin defenders who say that the vast majority of 0:24:17.960 --> 0:24:21.720 bitcoin are connected to systems that are running on renewables. 0:24:21.720 --> 0:24:24.440 But even if you look at it that way, you're saying, well, 0:24:24.440 --> 0:24:29.440 this is a significant drain on our energy resources. There's 0:24:29.480 --> 0:24:33.239 an enormous amount of energy that's having to go just 0:24:33.400 --> 0:24:36.840 towards bitcoin mining. And even if you argue that's coming 0:24:36.880 --> 0:24:42.120 from renewable sources, you could say, well, that that energy 0:24:42.160 --> 0:24:45.359 could be either stored so that we can use it 0:24:45.359 --> 0:24:48.240 for other stuff down the line when we aren't able 0:24:48.280 --> 0:24:52.240 to get at those renewable sources as easily, for example, 0:24:52.320 --> 0:24:56.119 solar at night, or that we can just direct that 0:24:56.240 --> 0:25:00.200 energy towards something else besides bitcoin mining. Anyway, I also 0:25:00.240 --> 0:25:02.760 have to add that the bitcoin approach has some built 0:25:02.800 --> 0:25:07.760 in adjustments that are kind of ingenious. So the goal 0:25:08.560 --> 0:25:12.000 is to keep this process more or less consistent with 0:25:12.080 --> 0:25:16.199 an ideal solution time of ten minutes per block in 0:25:16.240 --> 0:25:19.600 the chain, So a new block getting added to the 0:25:19.680 --> 0:25:25.080 chain approximately every ten minutes, that's the goal. Well, obviously, 0:25:25.119 --> 0:25:27.800 if you add more and more a computational power to 0:25:27.880 --> 0:25:32.199 the system, the time it would be needed to to 0:25:32.280 --> 0:25:34.800 reach the solution for any given block is going to 0:25:34.920 --> 0:25:40.200 come down. Right, for a given difficulty of mathematical problem. 0:25:40.240 --> 0:25:42.439