WEBVTT - A Whale of a Bitcoin Tale

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<v Speaker 1>Got a whale of a tale to tell you, lad,

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<v Speaker 1>a whale of a tale about bitcoin. I'm Jonathan Strickland,

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<v Speaker 1>and this is tech stuff Daily Seen. Has been a

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<v Speaker 1>pretty phenomenal year for the cryptocurrency bitcoin. For those unfamiliar

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<v Speaker 1>with the concept, bitcoin was created to be a decentralized

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<v Speaker 1>digital currency that doesn't depend upon any governmental authority to

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<v Speaker 1>regulate it. Bitcoin are released in chunks through a process

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<v Speaker 1>called mining, which involves computers working on what amounts to

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<v Speaker 1>complicated math problems. There's a finite number of bitcoins twenty

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<v Speaker 1>one million in fact, that will ever be released to

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<v Speaker 1>the world. Once that last fraction of a bitcoin pops

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<v Speaker 1>out in a chunk, the supply stops. At the beginning

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<v Speaker 1>of twenty seventeen, the value of a bitcoin in US

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<v Speaker 1>currency was just shy of one thousand dollars. In November,

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<v Speaker 1>the currency's value shot up to ten thousand dollars per bitcoin,

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<v Speaker 1>and it didn't stop there. The value continue to rise

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<v Speaker 1>above seventeen thousand dollars before experiencing a dip in December.

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<v Speaker 1>Bloomberg Business Week reported in December that of all the

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<v Speaker 1>bitcoins in circulation belong to just one thousand people. Bitcoin

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<v Speaker 1>communities call these people whales. Whales have the potential to

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<v Speaker 1>really upset the bitcoin apple cart. If a whale starts

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<v Speaker 1>to sell off bitcoin, others might take this as an

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<v Speaker 1>indication that the value of the currency will decline, and

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<v Speaker 1>it could lead to a digital equivalent of a run

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<v Speaker 1>on the banks. To make matters more complicated, bitcoin is

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<v Speaker 1>considered a currency, not a security or commodity. Because of that,

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<v Speaker 1>there are few rules in place to prevent these whales

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<v Speaker 1>from colluding with one another. Nothing is stopping them from

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<v Speaker 1>agreeing to buy up bitcoins to drive up the value

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<v Speaker 1>before dumping a ton of them on the market to

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<v Speaker 1>make a profit. The value of the currency could plummet

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<v Speaker 1>as a result, but that would happen after the whales

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<v Speaker 1>had cashed in. This so far hypothetical scenario is another

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<v Speaker 1>argument against calling bitcoin a currency in the first place.

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<v Speaker 1>For a currency to really be useful, it needs to

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<v Speaker 1>have a steady value. It's impossible to have a practical

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<v Speaker 1>currency if the value fluctuates frequently and in large amounts.

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<v Speaker 1>Imagine this situation. You walk into a candy shop. You

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<v Speaker 1>want to buy a candy bar. The price is one dollar,

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<v Speaker 1>so you pull out a crisp dollar bill, PLoP it

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<v Speaker 1>on the counter, take your candy bar, and wish the

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<v Speaker 1>proprietor a jolly good day. The next day, you find

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<v Speaker 1>out the value of a dollar has increased tenfold. The

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<v Speaker 1>dollar you spent yesterday on one candy bar could buy

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<v Speaker 1>you ten candy bars today. Worse yet, you find out

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<v Speaker 1>the following day the value has increased again. Now you

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<v Speaker 1>could have bought one hundred candy bars with that one dollar.

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<v Speaker 1>You'd be terrified to spend any money. Your dollars wouldn't

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<v Speaker 1>really be currency. They'd be a security or a commodity,

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<v Speaker 1>something you'd hold onto as the value increases before you

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<v Speaker 1>got rid of it for something else. That's how bitcoin behaves,

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<v Speaker 1>and while in the early days people would use bitcoins

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<v Speaker 1>to buy stuff like pizza, today such an idea seems insane.

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<v Speaker 1>You might pay the equivalent of twenty u s dollars

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<v Speaker 1>and fractions of bitcoin today and find out the next

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<v Speaker 1>day the amount of bitcoin you paid meant that Saint

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<v Speaker 1>Pizza would have cost you two thousand dollars. This volatility

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<v Speaker 1>has led some vendors to stop supporting bitcoin transactions entirely.

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<v Speaker 1>One of those vendors is Steam the online computer game

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<v Speaker 1>store and community Steam is run by a company called Valve.

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<v Speaker 1>Valve recently pulled support for bitcoin transactions off of the

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<v Speaker 1>Steam platform. Valve representatives said that the currencies value changes

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<v Speaker 1>so quickly that you couldn't even complete an online transaction

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<v Speaker 1>without the values changing first. Even if you have a

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<v Speaker 1>dynamic system that matches price to currency value as it changes.

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<v Speaker 1>That's an enormous headache, and it doesn't do anything for

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<v Speaker 1>buyer's remorse once you've spent it. If whale illusion and

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<v Speaker 1>value fluctuations aren't worrisome enough, there have also been some

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<v Speaker 1>recent examples of mismanagement and criminal activity around bitcoin. On

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<v Speaker 1>December seven, two thousand seventeen, Digital Trends reported that a

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<v Speaker 1>website called nice hash was the virtual site of a

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<v Speaker 1>digital bank heist. The company posted a statement acknowledging that

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<v Speaker 1>it had been the target of an attack. That attack

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<v Speaker 1>was a successful security breach that resulted in four thousand,

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<v Speaker 1>seven hundred bitcoins being stolen. At the time of the story,

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<v Speaker 1>that amounted to about sixty four million dollars worth of

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<v Speaker 1>the digital currency. At the time I'm writing this, Due

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<v Speaker 1>to the fluctuations in bitcoin value, it was more like

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<v Speaker 1>seventy two point four million dollars. Both the revelation that

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<v Speaker 1>so much money was stolen in a single heist and

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<v Speaker 1>that the value of that heist changed by nearly ten

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<v Speaker 1>million dollars over just two days are additional arguments against

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<v Speaker 1>bitcoin being called a currency. As the value of bitcoin

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<v Speaker 1>changes more than a few people have warned about an

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<v Speaker 1>oncoming wreck ng in which the value quote unquote corrects itself.

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<v Speaker 1>That's financial speak to say the currency itself is inside

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<v Speaker 1>a bubble that will eventually burst and as a result,

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<v Speaker 1>will see the market value for bitcoins drop. That may

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<v Speaker 1>or may not be true. At the end of the day,

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<v Speaker 1>we have to acknowledge that bitcoins have value because people

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<v Speaker 1>want them. As long as people do want them and

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<v Speaker 1>are willing to pay for them, bitcoins will have that value.

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<v Speaker 1>Should people stop wanting them or stop paying for them,

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<v Speaker 1>the value will diminish. Ultimately. This is true about any currency,

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<v Speaker 1>though most state sponsored ones are backed by some other

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<v Speaker 1>promise of value that gives the currencies more stability under

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<v Speaker 1>normal circumstances. To learn more about bitcoins, cryptocurrency, and some

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<v Speaker 1>of the craziest heights and tech, subscribe to the tech

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<v Speaker 1>Stuff podcast. We publish on Wednesdays and Fridays, and take

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<v Speaker 1>a longer, in depth look at technology. I'll see you

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<v Speaker 1>again soon, won