Paper Wallet
Categories: Banking
A paper wallet wouldn't keep your cash very safe. If it fell out of your pocket and into the toilet, the money would get wet. If your pants caught fire, it would burn up. If you threw it at a squirrel who was stealing your car keys, the wallet would just break apart in the breeze.
It's flimsy and of poor quality, and a bad security decision. But we're not talking actual paper wallets here. Instead, we're referring to a place to hold your virtual currencies.
The term "paper wallet" refers to an unsafe method of storing cryptocurrencies like Bitcoin. The security precautions for these digital money-holders are easily breached, making it possible for hackers to pull the online equivalent of a heist.
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Finance: What is Bitcoin?4 Views
and finance Allah shmoop What is Bitcoin shmoop All right
people Well for starters it's virtual currency What is that
like Monopoly money Well kind of Okay but wait So
wh what's not virtual currency This stuff really Bills coins
gold A check with your validated signature on it when
you actually have cash in the bank Money in the
old world is pretty much anything that everyone agrees is
valuable Like over the history of civilization People have used
all sorts of weird items to pay for things like
shells and cattle heads in whiskey and stuff like that
Credit cards apple pay in Venmo Yeah way easier to
buy a lot with then 182 seashells All the above
are Fiat currency which means they're not backed by any
specific commodity or thing of value Instead they're backed by
the government that issues them a handshake and a promise
and that's pretty much it Well in the old days
if you had a dollar meant there was a dollars
worth of gold out there with your name on it
you could walk into a bank and demand your little
chunk of the yellow metal in return for that paper
$20 bill The dollar was worth a dollar because well
you could change it into that much worth of gold
What we pretty much gave up on the gold standard
in America anyway for good around the time of the
Great Depression and now dollars worth a dollar Because why
Well we say it is or more precisely because the
government says it is Yeah the United States right to
tax its hard working citizens is what backs up that
promise Well Fiat currencies air printed by a government and
have value in part Or mostly because while the citizens
trust in the government and in part well we all
agree that paper bill has value Okay so now to
the virtual part of virtual currencies have moved on from
government participation They have value because well the users of
them say they have value That's it Not much else
to it The idea of virtual currencies isn't really all
that new Ask your parents about these things Yes original
Disney dollars You'd buy a book of them for like
20 bucks or so in the A ticket on Lee
got you into like the garden tour of carefully manicured
roses is by Carnation Plaza Then you have the e
ticket at the other end the best one that got
you into the parts of the Caribbean in the haunted
house You know when it came out well the Disney
dollars were a virtual currency on Lee They were on
paper and well really low tech Yeah And then they
got wet after you landed through the Matterhorn that get
all pulped out you have to throw him out Was
very sad All right Zip forward 1/2 century Nowadays the
virtual part means the same thing It means when we
say virtual reality Basically it means that exists in a
computer It's not riel It's an algorithm somewhere Well some
clever entrepreneurs decided that the U S greenback didn't offer
enough flexibility or rough you know anonymity You know if
you wanted to buy nuclear secrets or child porn or
illicit drugs or any other ill miserable and awful purchase
that buyers didn't want anyone around them to know that
you were buying while then here was your ticket Bitcoin
is security It comprises a complex system of quote log
in rappers unquote whereby a user must wrap around content
all kinds of security codes which protect the valued financial
nut inside the hard shell Initially the market was seated
with a kind of financial Easter egg hunt where the
controller's a Bitcoin buried value nuts all over the web
Nut hunters had to answer extremely complex math questions in
order to win their prizes But if they won they
were worth real cash money Bitcoin is the most famous
virtual currency but it's far from the on ly one
e Syria is a big one You've also got light
Klein Dodge a Coin and Manero There are lots and
lots of competitors and there's a whole market of people
looking to make new ones all the time They have
conventions and workshops and organizations Yeah it's a thing And
why not If you can get your virtual currency Tio
take hold while you have an instant fortune literally printing
your own money but not counterfeit like actually your own
money like you were the central bank or treasury of
your own country The trick of course is getting other
people to come on board and trust you You need
other people to agree that your virtual currency is actually
worth something Well a big part of the sell job
has to do with how the new currency is propagated
How are more of them made How are they traded
How do they work You know because it doesn't take
much to make more virtual currency Like almost literally nothing
at all Hear it Shmoop Central We started making shmoop
points Doesn't take much input to make a 10 more
shmoop points or 1,000,000 or a trillion more shmoop lines
It all takes the same virtually Neil computing power But
when people used gold for money well they knew that
gold supply was limited There was gold mining that brought
new gold to the surface but the total amount of
gold was finite and it was really hard to get
while sometimes it just showed up in a river in
California or South Dakota or something And people would rush
there with hands and pick axes But generally speaking globally
someone couldn't just announced that they now had another 1,000,000
ounces of gold in their computer deal with it Well
virtual currencies try to follow this model in their own
virtual way to the extent that while the process usually
used to produce more virtual currency is called mining Yes
from the gold concept new supplies of the currency appear
using harder and harder math problems done by computers Convincing
users that this process of making the currency is on
the up and up is part of the challenge of
founding a new currency But national currencies have a head
start in this area right You trust the United States
more than some kid who was born in 1989 by
virtue of being sovereign states while recognized by other sovereign
states at least geographic countries have some credibility but same
forces come into play Gold needed to be mined and
there was a finite amount of that on Earth Countries
could just print all the currency they wanted using higher
and higher denominations like you know with virtual currencies Well
there was no practical limit no real cost of production
But there is a consequence to producing tons of the
stuff If a country starts printing more and more currency
it sparks inflation devaluing its own individual currency unit eventually
maybe getting into hyper inflation territory and people running around
with wheelbarrows full of cash to buy a carton of
milk The same supply demand dynamics of basic EQ on
work for regular currencies and for virtual currencies Think of
the competing virtual currencies like the different national currencies we
have in the non virtual world We've got U S
dollars in British pounds and euros and again in Swedish
krona and a whole bunch Other stuff right Well these
currencies worked perfectly in their home countries but out of
context there value gets a little shaky Try to use
some Swedish krona to buy a hot dog from a
New York street cart vendor guy or offer again to
buy meatballs off a meatball cart in Stockholm That's kind
of funny but it doesn't work We'll Bitcoin and the
other Cryptocurrencies have similar problems If you want to buy
a rocket launcher on the dark Web Bitcoin works great
But if you want to buy a box of cookies
from the Girl Scouts standing in front of the grocery
store well it's not gonna work You'll need some good
old fashioned US dollars In that way the relationship of
crypto currencies to the general market is similar to how
we treat stocks that trade on the stock exchange Their
recognised to have value sure but the value is often
tracked by an outside currency like the dollar Well Bitcoins
and other virtual currencies trade on markets You Khun swap
them out for real dollars and use those dollars to
buy Girl Scout cookies or street hot dogs or whatever
Just like stocks you might hold 100 shares of Google
but if you want to spend some of their value
you have to turn them into dollars right like a
stock or any kind of market Traded anything Bitcoin and
other virtual currencies or subject to bubbles and bus The
bubble part happened for Bitcoin in 2017 At start of
the year one Bitcoin was valued about 900 bucks Then
it took off sky rocketing through the year it peaked
in December of that year it just under $20,000 Then
the bubble burst At the end of well January 2018
it had fallen back to around 11,000 was below 10,000
by February and within a year of its peak it
was in the $3000 range Yeah about 80% off its
highest value well even off its highest levels The market
for Bitcoin remains big because of its shifting value The
size of the Bitcoin market changes is the dollar denominated
value of the currency moves But as of late 2018
early 2019 the market cap for Bitcoin has bounced around
$100,000,000,000 Well the idea behind Bitcoin maybe great get the
government out of currencies Borderless money for the future But
their issues One is security Like governments have to fight
counterfeiters The more valuable of virtual currency becomes well duff
The more likely there are hackers out there looking to
crack the code and they don't have to be sinister
creep working in secret in their mommy's basement Countries can
fight counterfeiters because they can pass laws making counterfeiting illegal
Bitcoin can't do that meaning that if Google wanted to
put its sizable brainpower to work making Bitcoins free for
anyone well there'd be nothing to stop them along the
same lines Virtual currencies could end up trading one authority
like governments for another like corporations like if Google or
Apple or Disney decided to make their own currencies and
squeeze out Bitcoin Any theory Um and the others Well
that happens We're looking at the future when the Girl
Scout is at the door knocking away and all she
takes is ah Google coin And you only have Disney
dollars Three point Oh and your virtual wallet Yeah No 00:08:56.744 --> [endTime] cookies for you Morning