Private Key

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