some say it's the way of the future some say it's just a scale others call it magic internet money oh but what is it exactly what the hell is cryptocurrency and why is it taking the world by storm well at its most basic definition cryptocurrencies are just mediums of exchange they are a means of carrying out a transaction digitally they are virtual currencies completely independent of government control or any central authority and to the server you name it they are completely of their own thing which means you don't have to go through a bank in order to process a transaction now this is an important aspect that I'll get back to later and you might be saying to yourself well wait if there's no central authority to run the system how it transactions maintained and verified how is this crypto stuff even valuable where does the supply of it even come from well now let's go to what cryptocurrencies are at their most basic technological level and in my explanation of cryptocurrency I'll be using Bitcoin as the main example hopefully you've all at least heard of Bitcoin by now I can't imagine anyone not hearing about Bitcoin after its recent public craze everyone's talking about Bitcoin my grandpa's talking about Bitcoin so we start with this thing called the blockchain the blockchain is a public ledger of all transactions that have ever occurred on the Bitcoin peer-to-peer network it's just one long record book dating all the way back to when the first bitcoins were created in January 2009 and so longest transactions continued to be made with Bitcoin the ledger will continue to grow and build on itself hence the reason why we call it a chain since this ledger is made public to everyone and will continue to have its information distributed and digitally synchronized all across the world it will always share the same information on it so me sending one Bitcoin to my friend is a transaction that is publicly recorded on this blockchain ledger and when that transaction takes place everyone who does have a copy of the ledger will be notified of an incoming transaction taking place on the Bitcoin network and will then work to verify that the transactions taking place are valid and real these people who keep track of the ledger are also known as miners why well we need to get deeper into what the process of verifying transactions looks like in order for a transaction to even occur in the first place you need to have a digital wallet on the Bitcoin network this wallet will include two things a private key and the public key the very existence of these two keys is crucial - the whole cryptographic nature of cryptocurrencies in order for your transactions to be securely encrypted and be authentic they need to have these two keys involved so say you want to send a transaction to someone that says I send 20 bitcoins - Jimmy well in order for that message to be true it needs to be digitally signed by my private key which basically functions as your own personal identifier or your digital signature so only your own private key is able to create a new message now once you've signed your message and are ready to send it off to Jimmy it gets sent to the Bitcoin network with your public key the public key acts as a verifying mechanism which essentially confirms that your specific message was indeed marked by your digital signature or your private key and that it is associated with the public key that you have sent off along with your transaction now here's where we get into the whole mining aspect of this process once your transaction is sent off into the Bitcoin network and is subsequently announced to all the people who are maintaining the blockchain ledger these miners are now tasked with the fun job of having to use computational algorithms in order to verify the validity of each individual transaction this process basically ensures that no fraudulent transactions are taking place and is done through a process called a cryptographic hash function more specifically the sha-256 hash function now I will not be going into the details of what that looks like because look at this but this process essentially means that your computer will be trying to guess and check to to the 256 computational algorithms in order to get the right answer the probability of being able to guess the correct input is one in a hundred and fifteen quarter Bergin Tilian one in 115 Quatro frog convention in tune yeah there's a reason why these cryptographic hash functions are trusted in so many of our modern security systems the system of solving cryptographic hash functions is what helps to prevent what's called double spending where someone tries to spend the same Bitcoin twice but through this process of essentially solving math problems the miners are able to confirm a transaction which will then be added on to the blockchain ledger now this process of verifying is by no means an easy task nor is it a cheap one people will spend hundreds of thousands of dollars creating these mining and jacking up their electric bills to enormous heights just so they can be the first ones to verify that transaction and add on to the blockchain but why why buy all these graphics cards and blow out your electric bills for this well for your work and adding on to the blockchain and successfully verifying the transactions that occur on the Bitcoin network you get rewarded in receiving some brand-new bitcoins straight into your digital wallet and as of today for successfully adding on to the blockchain you will be rewarded with 12.5 bitcoins you know how much one bitcoin is worth at the time of recording this video eight thousand six hundred and twenty six dollars hell yeah this is why the entire blockchain confirmation process is called mining the analogy being that your mining for new bitcoins and that mining takes work computational work so this is where we get our gold mining analogy from and here's why people are spending thousands of dollars on this kind of machinery because it's not just a matter of you solving a hash function you need to be the first to solve that hash function and create the new block because that's how you get paid and that's why there's this race to build the biggest and most powerful mining rig out there so you can be the first to solve those damn algorithms and get your hands on some of that sweet digital gold but that 12.5 reward number won't stay like that forever see the Bitcoin network is built to have its reward rate about every four years this is to keep up with inflation rates throughout time and to limit the total number of bitcoins that can ever be created so this also means that the total number of bitcoins that can ever be in circulation is 21 million now one of the main arguments made about this is that it will lower the revenue that miners receive as time goes by however if the supply of new bitcoins created decreases every four years or so then theoretically the demand for Bitcoin will also increase which should keep the reward for receiving bitcoins at a good cost-benefit ratio but that's Bitcoin for you but why is it even valuable where does it get its intrinsic value from well an easy answer to that is just the basic rules of supply and demand the market gives its value and others will also say that it's because of the promising technology and cryptographic features that crypto currencies offer and that's true as well though there are objectively much better crypto currencies out there than bit like litecoin which can process transactions much faster than Bitcoin or Manero which is even faster than that or ripple which is even faster right now though there's just a lot of hype surrounding crypto currencies which is kind of influencing the price of these coins I mean honestly most people I know and most people on the internet just like the spout about how this is gonna be the next Bitcoin bye-bye-bye Wow and I think it'd be better if a lot of that would just die down because it creates the impression of crypto bingston kind of get-rich-quick scheme now that's not to say that these coins are all useless or anything but you'll want to make sure to see which coins actually have the best opportunity at being widely adopted and that holds some genuine utility I'd recommend reading the white papers of any new coin you look at that's generally where you'll get the fundamentals on any coins and if you're really serious about getting into the whole crypto trading business and want to know more about certain functions of the crypto world and how to get started in all of it there are plenty of youtubers and news articles out there that are doing their best to inform people on this topic now aside from all the rabbit hype surrounding crypto currencies in general there are those out there that really do believe in the potential of this technology and what it could mean for the future of financial exchange and worldwide commerce what are the basic underlying premises of crypto currencies are that they'll do away with banks completely that's huge personally I'm not so sure that that'll be the case but that idea has definitely made some banks keep an eye on crypto but beyond banks crypto currencies also mean while a universal currency and this can be very good for those living in underdeveloped nations or shithole dictatorships whose currencies are either inflated to all hell or made completely worthless and the inhabitants of such countries have no other way of going about basic commerce but to use that worthless currency and this already seems to be taking place in underdeveloped African nations like Zimbabwe Nigeria and South Africa whose local traders have started to open up to the idea of crypto currencies and this will especially be interesting to see how it turns out in these kinds of countries because this could very well mean real potential growth and economic success it's not like it can get any worse in some of these places than it is now even a place like Venezuela is adopting cryptocurrency and that place seriously needs it that'll be one hell of a way to go around your socialist dictator economic boot hang in there people and at the end of the day despite it's still current and volatile and certain nature cryptocurrencies do have some serious worldwide political implications and I'm down with that so now some of you might be asking hey juice boy did you invest in crypto currencies and the answer to that is you bet your ass I do I'm into all this Bitcoin litecoin all coins you name it except not the mean coins or coins as they're commonly called yeah well let's all go out and buy some of that pot coin or dope coin yeah sure it's more than just a currency it's an experience not a side note I am NOT a financial adviser nor am i purporting to be one so don't listen to any investment advice for me seriously that's it for this episode this has been
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