Results for Crytocrrency

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What does it mean to have a bitcoin? Many people have now heard of bitcoin, that’s it’s a fully digital currency, with no government to issue it and no banks needed to manage accounts and verify transactions. That no one actually knows who invented it. Yet many people don’t know the answer to this question, at least not in full. To get there, and to make sure the technical details underlying this answer feel motivated, we’re going to walk through step-by-step how you might have invented your own version of Bitcoin. We’ll start with you keeping track of payments with your friends using a communal ledger. Then, as you trust your friends and the world less and less, and if you’re clever enough to bring in a few tools of cryptography to help circumvent the need for trust, what you end up with what’s called a “cryptocurrency”. Bitcoin is just the first implemented example of a cryptocurrency, and there are now thousands more on exchanges with traditional currencies. Walking the path of inventing your own can help set the foundation for understanding some of the more recent players in the game, and recognizing where there’s room for different design choices. In fact, one of the reasons I chose this topic is in response to the unprecedented leap in attention, investment and...well.. hype directed at these currencies in just the last year. I won’t comment or speculate on the current or future exchange rates, but I think we’d all agree that anyone looking to buy a cryptocurrency should really know what it is. Not just in terms of analogies with vague connections to gold-mining, I mean an actual direct description of what computers are doing when sending, receiving and creating cryptocurrencies. One thing worth stressing, by the way, is that even though you and I will dig into the underlying details here, which takes some meaningful time, you don’t actually need to know those details to use a cryptocurrency, just like you don’t need to know the details of what happens under the hood when you swipe a credit card. Like any other digital payments, there are plenty of user-friendly applications that let you send and receive these currencies very easily. The difference is that the backbone underlying this is not a bank verifying transactions, but a clever system of decentralized trustless verification based on some of the math born in cryptography. To start, set aside the thought of cryptocurrencies for a few minutes. We’re going to start the story with something more down to earth: Ledgers, and digital signatures. If you and your friends exchange money pretty frequently, paying your share of the dinner bill and such, it can be inconvenient to exchange cash all the time. So you might keep a communal ledger that records payments you intend to make in the future. Alice pays Bob $20, Bob pays Charlie $40, things like that. This ledger will be something public and accessible to everyone, like a website where anyone can go and just add new lines. At the end of every month, you all look through the list of transactions and tally everything up. If you’ve spent more than you received, you put that money into the pot, and if you’ve received more than you spent, you take that much money out. So the protocol for being part of this system looks something like this: Anyone can add lines to the ledger, and at the end of every month everyone gets together to settles up with real money. One problem with a public ledger like this is that when anyone can add a line, what’s to prevent Bob from going in and writing “Alice pays Bob $100” without Alice approving? How are we supposed to trust that all these transactions are what the sender meant for them to be? This is where the first bit of cryptography comes in: Digital signatures. Like a handwritten signature, the idea here is that Alice should be able to add something next to a transaction that proves that she has seen it, and approved of it. And it should be infeasible for anyone else to forge her signature. At first it might seem like digital signatures shouldn’t even be possible, since whatever data makes up the signature can just be read and copied by any computer, so how do you prevent forgeries? The way this works is that everyone generates what’s called a public key/private key pair, each of which looks like some string of bits. The private key is sometimes also called the “secret” key, so that we can abbreviate it to sk while abbreviating the public key as pk. As the names suggest, the secret key is something you should keep to yourself. In the real world, your handwritten signature looks the same no matter what document you’re signing. A digital signatures is much stronger, because it changes for different messages. It looks like a string of 1’s and 0’s, commonly something like 256 bits, and altering the message even slightly completely changes what your signature on that message should look like. Formally, producing a signature involves some function that depends both on the message itself, and on your private key. The private key ensures that only you can produce the signature, and the fact that it depends on the message means no one can just copy one of your signatures to forge it on another message. Hand-in-hand with this is a function to verify that a signature is valid, and this is where the public key comes into play. All it does it output true or false to indicate if this was a signature created by the private key associated with the public key you use for the verification. I won’t go into the details how how exactly these functions work, but the idea is that it should be completely infeasible to find a valid signature if you don’t know the secret key. Specifically there is no strategy better than just guessing and checking if random signatures are valid using the public key until you hit one that works. There are 2^{256} possible signatures with 256 bits, and you’d need to find the one that work. This is a stupidly large number. To call it astronomically large would be giving way to much credit to astronomy. In fact, I made a supplemental video devoted just to illustrating what a huge number this is. Let’s just say that when you verify a signature against a given message and public key, you can feel extremely confident that the only way someone could have produced it is if they knew the secret key associated with the public key. There’s one slight problem here: If Alice signs a transaction like “Alice pays Bob $100”, even though Bob can’t forge Alice’s signature on new messages, he could just copy that same line as many times as he wants, since the message/signature combination is valid. To get around that, we make it so that when you sign a transaction, the message has to include some unique id associated with that transaction. That way, if Alice pays Bob $100 multiple times, each transaction requires a completely new signature. Alright, great, digital signatures remove a huge aspect of trust in our initial protocol. But even still, this relies on an honors system of sorts. Namely, you’re trusting that everyone will actually follow through and settle up in cash at the end of each month. But what if, for example, Charlie racked up thousands of dollars in debt, and just refuses to show up? The only real reason to revert to cash to settle up is if some people, I’m looking at you Charlie, owe a lot of money. So maybe you have the clever idea that you never actually have to settle up in cash as long as you have some way to prevent people from spending too much more than they take in. What you might do is start by having everyone pay $100 into the pot, and have the first few lines of the ledger will read “Alice gets $100, Bob gets $100, etc. Now, just don’t accept transactions when someone is spending more than they have on the ledger. For example, after starting everyone off with $100, if the first two transaction are “Charlie pays Alice $50” and “Charlie pay Bob $50”, if he were to try to add “Charlie pays You $20”, that would be invalid, as invalid as if he never signed it. Notice, this means you need to know the full history of transactions to verify that a new one is valid. And this is, more or less, going to be true for cryptocurrencies as well, though there is a little room for optimization. What’s interesting here is that this step somewhat removes the connection between the Ledger and physical cash. In theory, if everyone in the world used this Ledger, you could live your whole life just sending and receiving money on this ledger without ever converting to real US. To emphasize this point, let’s start referring to quantities on the ledger as “LedgerDollars”, or LD for short. You’re of course free to exchange LedgerDollars for real US dollars, for example maybe Alice gives Bob a $10 bill in the real world in exchange for him adding and signing the transaction “Bob pays Alice 10 LedgerDollars” to the communal ledger. But exchanges like this are not guaranteed in the protocol. It’s now more analogous to how you might exchange Dollars for Euros or any other currency on the open market, it’s just its own independent thing. This is the first important thing to understand about Bitcoin, or any other cryptocurrency: What it is is a ledger; the history of transactions is the currency. Of course, with Bitcoin money doesn’t enter the Ledger with people buying into using cash, I’ll get to how new money enters the ledger in just a few minutes. Before that, there’s an even more significant difference between our current system of LedgerDollars how cryptocurrencies works. So far, I’ve said that this ledger is some public place, like a website where anyone can add new lines. But this requires trusting a central location. Namely, who hosts that website? Who controls the rules of adding new lines? To remove that bit of trust, we’ll have everyone keep their own copy of the ledger. Then to make a transaction, like “Alice pays Bob 100 LedgerDollars”, you broadcast into the world for people to hear and record on their own private Ledgers. But unless we do something more, this system would absurdly bad. How can you get everyone to agree on what the right ledger is? When Bob receives the transaction “Alice pays Bob 10 LedgerDollars”, how can he be sure that everyone else received and believes that same transaction? That he’ll be able to later use those 10 LedgerDollars to make a trade with Charlie. Really, imagine yourself just listening to transactions being broadcast. How can you be sure that everyone else is recording the same transactions in the same order? Now we’ve hit on an interesting puzzle: Can you come up with a protocol for how to accept or reject transactions and in what order so that you can feel confident that anyone else in the world following the same protocol has a personal ledger that looks the same as yours? This is the problem addressed in the original Bitcoin paper. At a high level, the solution Bitcoin offers to trust whichever ledger has the most computational work put into it. I’ll take a moment to explain what exactly that means, which involves this thing called a “Cryptographic hash function”. The general idea we’ll build to is that if you use computational work as a basis for what to trust, you can make it so that fraudulent transactions and conflicting ledgers would require an infeasible amount of computation. Again, this is getting well into the weeds beyond what anyone would need to know just to use a currency like this. But it’s a really cool idea, and if you understand it, you understand the heart of bitcoin and other cryptocurrencies. A hash function takes in any kind of message or file, and outputs a string of bits with a fixed length, like 256 bits. This output is called the “hash” or “digest” of the message, and it’s meant to look random. It’s not random; it always gives the same output for a given input. But the idea is that when you slightly change the input, maybe editing just one character, the resulting hash changes completely. In fact, for the hash function I’m showing here, called SHA256, the way that output changes as you slightly change the input is entirely unpredictable. You see, this is not just any hash function, it’s a cryptographic hash function. That means it’s infeasible to compute in the reverse direction. If I show you some specific string of 1’s and 0’s and ask you to find an input message so that the SHA256 hash of that message gives this exact string of bits, you will have no better method than to guess and check. Again, if you want a feel for just how much computation would be needed to go through 2256 guesses, take a look at the supplement video. I actually had way too much fun writing that thing. You might think you could reverse engineer the desired input by really digging through the details of how the function works, but no one has ever found a way to do that. Interestingly, there’s no proof that it’s hard to compute in the reverse direction, yet a huge amount of modern security depends on cryptographic hash functions. If you were to take a look at what algorithms underlie the secure connection that your browser is making with YouTube right now, or that it makes with a bank, you will likely see a name like SHA256 in there. For right now, our focus will just be on how such a function can prove that a particular list of transactions is associated with a large amount of computational effort. Imagine someone shows you a list of transactions, and they say “I found a special number so that when you put this number at the end of list of transactions, and apply SHA256 the entire thing, the first 30 bits of the output are zeros”. How hard do you think it was for them to find that number? For a random message, the probability that the hash happens to start with 30 successive zeros is 1 in 230, which is about 1 in a billion. Because SHA256 is a cryptographic hash function, the only way to find a special number like this just guessing and checking. So this person almost certainly had to go through about a billion different numbers before finding this special one. And once you know the number, you can quickly verify that this hash really does start with 30 zeros. In other words, you can verify they they went through a large amount of work without having to go through that same effort yourself. This is called a “proof of work”. And importantly, all this work is intrinsically tied to that list of transactions. If you change one of the transactions, even slightly, it would completely change the hash, so you’d have to go through another billion guesses to find a new proof of work, a new number that makes it so that the hash of the altered list together with this new number starts with 30 zeros. So now think back to our distributed ledger situation. Everyone is broadcasting transactions, and we want a way for everyone to agree on what the correct ledger really is. As I said, the core idea behind the original bitcoin paper is to have everybody trust whichever ledger has the most work put into it. The this works is to first organize a given ledger into blocks, where each block consists of a list of transactions, together with a proof of work. That is, a special number so that the hash of the whole block starts with a bunch of zeros. For the moment let’s say it has to start with 60 zeros, but later I’ll return back to how you might choose that number. In the same way that a transaction is only considered valid if it is signed by the sender, a block is only considered valid if it has a proof of work. Also, to make sure there is a standard way to order of these blocks, we’ll make it so that a block has to contain the hash of the previous block. That way, if you change any block, or try to swap the order of two blocks, it would change the block after it, which changes that block’s hash, which changes the next block, and so on. That would require redoing all the work, finding a new special number for each of these blocks that makes their hashes start with 60 zeros. Because blocks are chained together like this, instead of calling it a ledger, this is commonly called a “Blockchain”. As part of our updated protocol, we’ll now allow anyone in the world to be a “block creator”. What this means is that they’ll listen for the transactions being broadcast, collect them into a block, then do a whole bunch of work to find the special number that makes the hash of this block start with 60 zeros, and broadcast out the block they found. To reward a block creator for all this work, when she puts together a block, we’ll allow her to include a special transaction at the top in which she gets, say, 10 LedgerDollars out of thin air. This is called the block reward. It’s a special exception to our usual rules about whether or not to accept transactions; it doesn’t come from anyone, so it doesn’t have to be signed. It also means that the total number of LedgerDollars in our economy increases with each new block. Creating blocks is often called “mining”, since it requires a lot of work, and it introduces new bits of currency into the economy. But when you hear or read about miners, keep in mind that what they’re really doing is creating blocks, broadcasting those blocks, and getting rewarded with new money for doing so. From the miners perspective, each block is like a miniature lottery, where everyone is guessing numbers as fast as they can until one lucky individual finds one that makes the hash of the block start with many zeros, and gets rewarded for doing so. The way our protocol will now work for someone using this system is that instead of listening for transactions, you listen for new blocks being broadcast by miners, updating your own personal copy of the blockchain. The key addition is that if you hear of two distinct blockchains with conflicting transaction histories, you defer to the longest one, the one with the most work put into it. If there’s a tie, wait until you hear of an additional block that makes one longer. So even though there is no central authority, and everyone is maintaining their own copy of the blockchain, if everyone agrees to give preference to whichever blockchain has the most work put into it, we have a way to arrive at decentralized consensus. To see why this makes for a trustworthy system, and to understand at what point you should trust that a payment is legitimate, it’s helpful to walk through what it would take to fool someone in this system. If Alice wants to fool Bob with a fraudulent block, she might try to send him one that includes a her paying him 100 LedgerDollars, but without broadcasting that block to the rest of the network. That way everyone else thinks she still has those 100 LedgerDollars. To do this, she’d have to find a valid proof of work before all other miners, each working on their own block. And that could happen! Maybe Alice wins this miniature lottery before anyone else. But Bob will still be hearing broadcasts made by other miners, so to keep him believing the fraudulent block Alice would have to do all the work herself to keep adding blocks to this special fork in Bob’s blockchain that’s different from what he’s hearing from the rest of the miners. Remember, as per the protocol Bob always trusts the longest chain he knows about. Alice might be able to keep this up for a few blocks if just by chance she happens to find blocks more quickly than all of the rest of the miners on the network combined. But unless Alice has close to 50% of the computing resources among all miners, the probability becomes overwhelming that the blockchain that all the other miners are working on grows faster than the single fraudulent blockchain that Alice is feeding Bob. So in time Bob will reject what he’s hearing from Alice in favor of the longer chain that everyone else is working on. Notice that means you shouldn’t necessarily trust a new block that you hear immediately. Instead, you should wait for several new blocks to be added on top of it. If you still haven’t heard of any longer blockchains, you can trust that this block is part of the same chain everyone else is using. And with that, we’ve hit all the main ideas. This distributed ledger system based on a proof of work is more or less how the Bitcoin protocol works, and how many other cryptocurrencies work. There’s just a few details to clear up. Earlier I said that the proof of work might be to find a special number so that the hash of the block starts with 60 zeros. The way the actual bitcoin protocol works is to periodically change that number of zeros so that it should take, on average, 10 minutes to find a block. So as there are more and more miners on the network, the challenge gets harder and harder in such a way that this miniature lottery only has about one winner every 10 minutes. Many newer cryptocurrencies have much shorter block times. All of the money in Bitcoin ultimately comes from some block reward. These rewards 50 Bitcoin per block. There’s a great site called “block explorer” where you can look through the bitcoin blockchain, and if you look at the very first few blocks on the chain, they contain no transactions other than the 50 Bitcoin reward to the miner. Every 210,000 blocks, which is about every 4 years, that reward gets cut in half. So right now, the reward is at 12.5 Bitcoin per block, and because this reward decreases geometrically over time, there will never be more than 21 million bitcoin in existence. However, this doesn’t mean miners will stop earning money. In addition to the block reward, miners can also pick up transactions fees. The way this works is that whenever you make a payment, you can optionally include a small transaction fee with it that will go to the miner of whatever block includes that payment. The reason you might do this is to incentivize miners to actually include the transaction you broadcast into the next block. You see, in Bitcoin, each block is limited to about 2,400 transactions, which many critics argue is unnecessarily restrictive. For comparison, Visa processes an average of around 1,700 transactions per second, and they’re capable of handling more than 24,000 per second.Slower processing on Bitcoin means higher transactions fees, since that’s what determines which transactions miners choose to include in new blocks. This is far from a comprehensive coverage of cryptocurrencies. There are many nuances and alternate design choices I haven’t touched here, but hopefully this can provide a stable Wait-but-Why-style tree trunk of understanding for anyone looking to add a few more branches with further reading. Like I said at the start, one of the motivations behind this video is that a lot of money has started flowing towards cryptocurrencies, and even though I don’t want to make any claims about whether that’s a good or bad investment, I do think it’d be healthy for people getting into this game to at least know the fundamentals of the technology. As always, my sincerest thanks those of you making this channel possible on Patreon. I understand not everyone is in a position to contribute, but if you’re still interested in helping out, one the best ways to do that is simply to share videos that you think might be interesting or helpful to others. I know you know that, but it really does help. I also want to thank Protocol Labs for their support of this video. This is an organization that runs a number of research and development projects, and if you follow the links I’ve left in the description to read into the details of these projects, you’ll notice some strong parallels with the concepts covered in this video. The challenges and benefits of decentralization are by no means limited to currency and transaction histories, and the usefulness of tools from cryptography like hash functions and digital signatures are likewise much more general. For example, a couple of Protocol Lab’s projects, such as IPFS and Filecoin, center on distributed filestorage, which opens a whole field of interesting challenges and possibilities. For any developers out there, Protocol labs places a high value on open source, so if you’re interested you can join what’s already a very strong community of contributors. They’re also looking to hire more full-time developers, so if you think you might be a good fit for some of these projects, definitely apply.

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Say there’s a coin that’s currently worth hundreds of U.S. dollars, but it’s not made of gold, or platinum, or any precious metal. In fact, it’s not the kind of coin you can hold in your hand or stick in a piggy bank. It’s a digital currency, which means it only exists electronically. I’m talking about bitcoin. Bitcoin doesn’t work like most money. It isn’t attached to a state or government, so it doesn’t have a central issuing authority or regulatory body. Basically, that means there’s no organization deciding when to make more bitcoins, figuring out how many to produce, keeping track of where they are, or investigating fraud. So how does bitcoin work as a currency, or have any value at all? Well, bitcoin wouldn’t exist without a whole network of people and a little thing called cryptography. In fact, it’s sometimes described as the world’s first cryptocurrency. And here’s how it works. Bitcoin is a fully digital currency, and you can exchange bitcoins between computers in a worldwide peer-to-peer network. The whole point of most peer-to-peer networks is sharing stuff, like letting people make copies of super legal music or movies to download. If bitcoin is a digital currency, what’s stopping you from making a bunch of counterfeit copies and becoming fabulously wealthy? Well, unlike a mp3 or a video file, a bitcoin isn’t a string of data that can be duplicated. A bitcoin is actually an entry on a huge, global ledger called the blockchain, for reasons we’ll get to in a minute. The blockchain records every bitcoin transaction that has ever happened. And, as of late 2016, the complete ledger is about 107 gigabytes of data. So when you send someone bitcoins, it’s not like you’re sending them a bunch of files. Instead, you’re basically writing the exchange down on that big ledger – something like, “Michael sends Hank 5 bitcoins.” Now, maybe you’re thinking, “But, wait. You said bitcoin doesn’t have a central authority to keep track of everything!” Even though the blockchain is a central record, there’s no official group of people who update the ledger and keep track of everybody’s money like a bank does – it’s decentralized. In fact, anybody can volunteer to keep the blockchain up to date with all the new transactions. And a ton of people do. It all works because there are lots of people keeping track of the same thing, to make sure all transactions are accurate. Like, imagine you’re playing a game of poker with some pals, but none of you have poker chips, and you left your cash at home. There’s no money on the table, so a few of you get out some notebooks, and start writing down who bets how much, who wins, and who loses. You don’t completely trust anyone else, so everyone keeps their ledgers separately. And at the end of every hand, you all compare what you’ve written down. That way, if someone makes a mistake, or tries to cheat and snag some extra money for themselves, that discrepancy is caught. After a couple hands, you might fill up a page of your notebook with notes about the money movement. You can think of each page as a “block of transactions.” Eventually, your notebook will have pages and pages of information – a chain of those blocks. Hence: blockchain. Now, if thousands of people are separately maintaining the bitcoin blockchain, how are all the ledgers kept in sync? To stick with our poker analogy: think of the entire bitcoin peer-to-peer network as a really huge poker table with millions of people. Some are just exchanging money, but lots of volunteers are keeping ledgers. So when you want to send or receive money, you have to announce it to everyone at the table, so the people keeping track can update their ledgers. So for every transaction, you’re announcing a couple of things to the bitcoin network: your account number, the account number of the person you’re sending bitcoins to, and how many bitcoins you want to send. And all of the users who are keeping copies of the blockchain will add your transaction to the current block. Having a bunch of people keep track of transactions seems like a pretty good security measure. But if all it takes to send bitcoins is a couple of account numbers, that seems like it might be a security problem. It’s a huge problem with regular money – just think about all the ways criminals try to steal other people’s credit card information. And with bitcoin, there’s no central bank to notice anything weird going on to shut down fraud, like if it looked like suddenly you spent your entire life savings on beef jerky. So what’s stopping Hank from pretending he’s me and just sending himself all of my bitcoins? Bitcoins are kept pretty safe thanks to cryptography, which is why it’s considered a cryptocurrency. Specifically, bitcoin stays secure because of keys, which are basically chunks of information that can be used to make mathematical guarantees about messages, like “hey, this is really from me!” When you create an account on the bitcoin network, which you might have heard called a “wallet,” that account is linked to two unique keys: a private key, and a public key. In this case, the private key can take some data and basically mark it, also known as signing it, so that other people can verify those signatures later if they want. So let’s say I want to send a message to the network that says, “Michael sends 3 bitcoins to Olivia.” I sign that message using my private key, which only I have access to, and nobody else can replicate. Then, I send that signed message out to the bitcoin network, and everyone can use my public key to make sure my signature checks out. That way, everyone keeping track of all the bitcoin trading knows to add my transaction to their copy of the blockchain. In other words, if the public key works, that’s proof that the message was signed by my private key and is something I wanted to send. Unlike a handwritten signature, or a credit card number, this proof of identity isn’t something that can be faked by a scam artist. The “who” part of each transaction is obviously important, to make sure the right people are swapping bitcoins. But the “when” matters, as well. If you had a thousand dollars in your bank account, for example, and tried to buy two things for a thousand dollars each, the bank would honor the first purchase and deny the second one. If the bank didn’t do that, you’d be able to spend the same money multiple times. Which … might sound awesome, but it’s also terrible. A financial system can’t work like that, because no one would get paid. So if I only have enough money to pay Olivia or Hank, but I try to pay them both, there’s a check built into the bitcoin system. Both the bitcoin network and your wallet automatically check your previous transactions to make sure you have enough bitcoins to send in the first place. But there’s another problem that might happen with timing: Because lots of people are keeping copies of the blockchain all over the world, network delays mean that you won’t always receive the transaction requests in the same order. So now you’ve got a bunch of people with a bunch of slightly different blocks to pick from, but none of them are necessarily wrong. Okay, bitcoin. How do you solve that problem? Turns out, it’s by actually solving problems. Math problems. To add a block of transactions to the chain, each person maintaining a ledger has to solve a special kind of math problem created by a cryptographic hash function. A hash function is an algorithm that takes an input of any size, and turns it into an output with a fixed size. For example, let’s say you had this string of numbers as your input And our example hash function says to add all of the numbers together. So, in this case, the output would be 10. What makes hash functions really good for cryptography is that when you’re given an input, it’s really easy to find the output. But it’s really hard to take an output and figure out the original input. Even in this super simple example, there are lots of strings of numbers that add up to 10. The only way to figure out that the input was ‘1-2-3-4’ is to just guess until you get it right. Now, the hash function that bitcoin uses is called SHA256, which stands for Secure Hash Algorithm 256-bit. And it was originally developed by the United States National Security Agency. Computers that were specifically designed to solve SHA256 hash problems take, on average, about ten minutes to guess the solution to each one. That means they’re churning through billions and billions of guesses before they get it right. Whoever solves the hash first gets to add the next block of transactions to the blockchain, which then generates a new math problem that needs to be solved. If multiple people make blocks at roughly the same time, then the network picks one to keep building upon, which becomes the longest, and most trusted chain. And any transactions in those alternate branches of the chain get put back into a pool to be added onto later blocks. These volunteers spend thousands of dollars on special computers built to solve SHA256 problems, and run their electricity bills up sky high to keep those machines running. But why? What do they get out of maintaining the blockchain? Is it just community service? Well, bitcoin actually has a built-in system to reward them. Today, every time you win the race to add a block to the blockchain, 12 and a half new bitcoins are created out of thin air, and awarded to your account. In fact, you might know the bitcoin ledger-keepers by another name: miners. That’s because keeping the blockchain updated is like swinging a proverbial pickaxe at those hash problems, hoping to strike it rich. When bitcoins were first created in 2009, they didn’t really have any perceived value. Tens of bitcoins would have been worth the same as a bunch of pennies. As of November 10th, 2016, though, one bitcoin is worth 708 US dollars. So 12 and a half bitcoins are worth 8,850 dollars. That’s a nice chunk of change! Every single bitcoin that exists was created to reward a bitcoin miner. Besides the big payout when they add a new block of transactions, miners are also essentially tipped a very small amount for each transaction they add to the ledger. It’s also worth noting that every 210,000 blocks, the number of coins generated when a new block is added goes down by half. So what started as a reward of 50 bitcoins decreased to 25, then 12 and a half. It’ll only be around 6 bitcoins in a couple more years, and keep decreasing. Eventually, there will be so many transactions in a block, that it’ll still be worthwhile for miners to mostly be paid in tips. According to current projections, the last bitcoin – probably around the 21 millionth coin – will be mined in the year 2140. This decreasing number of bitcoins is actually modelled off the rate at which things like gold are dug out of the earth. And the idea is that keeping the supply of bitcoins limited will raise their value over time. So, is investing in bitcoin a good idea? Now that’s... not really a SciShow kind of question. Bitcoin is still volatile, and experimental. A lot of people love it, and a lot of people think it’s doomed to fail. We just think it’s an interesting idea, and it makes us wonder what cryptography might do for us next. Thanks for watching this episode of SciShow, brought to you by our patrons on Patreon. If you want to help support this show, just go to patreon.com/scishow. And don’t forget to go to youtube.com/scishow and subscribe!

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listen part of why i own a small piece of  bitcoin is i do think there are more people   that are going to enter that fray over time we  have a very moderate position in our portfolio   i like assets that quite frankly are  volatile that have upside convexity   and i could see bitcoin like it's done  i could see it go up significantly   welcome back everybody to altcoin daily where  you subscribe because you're interested in making   money with cryptocurrency and this channel keeps  you informed my name's austin join us on our road   to 1 million we are so close and let's jump in  in today's video i'm going to share with you the   latest news involving bitcoin involving chain link  decentraland xrp and much more like always check   the timestamps down below in the video description  starting with our top story blackrock the largest   asset manager in the world is reaffirming their  bullish stance on bitcoin rick rider is skeptical   yet bullish saying that while he doesn't see  bitcoin as an uncorrelated asset it's too volatile   he is still a btc hodler because he still sees  tremendous upside watch this rick you have been   a proponent of crypto uh i think within the firm  probably more so than than many others where do   you see that now we talked about what el salvador  did this week but it speaks to all the issues   that you're dealing with here which is which is  what are real rates what's the value of money so so you know that's a tricky subject so first of  all i'll say the first thing i will say on crypto   you know people describe it as a hedge  or an alternative i'm not sure it's a   really great hedge i mean the correlation  to equities the correlation to risk assets   i'm not sure it's a great hedge by the way  so when an asset moves 10 to 15 percent a day   really hard to hedge big organic asset pools  with that as a hedge is it you know is it an   alternative currency listen i've said and i've  said you know i've said it with you andrew   listen part of why i own a small piece of  bitcoin is i do think there are more people   that are going to enter that fray over time we  have a very moderate position in our portfolio   i like assets that quite frankly are volatile that  have upside convexity and i could see bitcoin like   it's done i could see it go up significantly but  listen i think it's volatile i don't think it's   a core asset class like like bonds are or like  stocks are but i think it's you know to have a   bit as more of a speculative tool in a portfolio  yeah i think i think there's some value to that   so rick is saying that yes it's risky to hold  bitcoin but at this point from his point of view   it's much riskier not to be hodling  and he sees a lot of potential upside   let's keep going second piece of news out of five  chain link has just reached a milestone with 777   integrations so here are the details convergence  finance which is a decentralized interchangeable   assets protocol converging the world chain link  has just hit this historic milestone of their   777th integration and chain link has announced  over half of these 408 of these during 2021   alone so the most growth has happened this  year and to view all 777 link integrations   we can see the chain link ecosystem basically  every single partnership right here pretty   cool chain link coddlers are loving this  congratulations to you but let's keep moving   before we talk about xrp i want to share with  you the latest hype with nfts on ethereum   loot creators experimental ethereum pet like a  tamagotchi dies shortly after launch wag magachi   is an on-chain pet that needs plenty of fuel to  survive so despite being launched by the loot   creator which was a very successful nft drop loot  despite that this little guy is dead let me share   with you why a virtual on-chain pet died moments  after its birth when speculators on crypto twitter   spammed it with care only to discover that its  smart contracts were riddled with bugs the botched   launch of the project wag magachi shows how its  creator dom hoffman the creator of runaway nft   hits loot and blitmap is so popular that people  will ape into his experiments to avoid missing   out on the next big thing even if it doesn't  quite work so take this as a cautionary tale   be very careful before you put money into projects  and just to be very clear on what wag magachi   is wag magachi is a single on-chain virtual pet  that is kept alive by anyone who sends gas to   its smart contract and if you send him a little  eath you can then clean him feed him play with   him put him to sleep in a nice way and you can  spend gas to boost the pet's stats and keep it   alive if needs are unmet it can die so this is  just like a tamagotchi only you have to spend   real eath if you want to keep these guys alive and  although the first iteration of wag magachi failed   a lot of bugs after the pet died hoffman quickly  released a second iteration of wag magachi v2   which is still alive in just over 3 000  transactions people have spent over 52   thousand dollars in gas fees to tend to the pet  hoffman did clarify when launching the project   that caretakers received nothing in return  besides love tokens but anyway this is the   latest hype in nfts let me know if any of you  are owning or feeding or sleeping a wag magachi   but i'll keep you updated and next up fourth  piece of news in today's video out of five   binance u.s hires uber's brian schroeder  as president ahead of their potential ipo   so indirectly this is some bullish news for  bnb the token as announced by businesswire   schroeder will oversee the exchange's corporate  development fundraising strategy product functions   and more in his role as president and what's his  background who is this guy now running binance u.s   well he most recently spent three years as the  head of business development at ant group the   owners of china's largest digital payment platform  alipay where he focused on expanding the company's   global partnerships before that he served a  similar role as head of strategy and business   development at uber in asia and now working at  binance schroeder believes that the firm has   everything it takes to become the biggest exchange  in the u.s in a direct quote in under two years   binance u.s has established itself as a regulatory  compliant profitable enterprise that serves   millions of customers across the country it is  clear to me that binance us has all the right   ingredients to become the largest most successful  cryptocurrency and digital assets exchange   in the us so a bit of light at the end of the  tunnel for binance us's at least regulatory woes   we will have to see how this plays out let's keep  moving next up very quick update for decentraland   order a domino's pizza in the metaverse  decentraland and get it delivered straight to your   door see more on united metaverse so this is some  of the building going on in decentraland right now   and apparently we can look at openc and somebody  does affirm that their first pizza food order   from the virtual world was delivered in the real  world crazy to think about the type of like i said   building going on in these metaverses would you  do this have you done this let me know down below   and next up we have a quick update on ripple  this is a continuation from our coverage in   yesterday's video the sec versus ripple case  takes another turn making investors bullish on xrp   so here are the highlights here are why some  are bullish japanese financial services giant   sbi holdings is launching a crypto asset fund  which invests in xrp obviously a huge deal   we've mentioned this before number two there was a  spike in address activity noted on september 10th   which did rescue the altcoin's price from  plunging further so a bit of stability and number   three the xrp army prepares to represent their  interests in the sec's lawsuit against ripple   so the case is between two parties the sec  and ripple but the xrp holders are prepared to   represent their own interests as well and this  comes after both ripple and the sec admitting   that ripple owes no fiduciary duty no financial  responsibility to xrp hodlers in the ongoing case   therefore the xrp army is ready to represent  their own interests in this case on their own   very very interesting situation how this  is progressing with ripple versus the sec   but i'll keep you updated that is the video my  name's austin and we will be at a dodgers game   tomorrow so i'm not sure if we'll be able to  get the video out but either way see you monday