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Bitcoin represents a way to
transfer money anonymously
and at almost no cost.
And since it's an arbitrary
currency with no nationality
attached to it, you're
free to exchange it
with anyone in the world.
What is money?
Resources are limited, and they
hold explicit value to people.
Most resources are
physical and such,
needed to be traded
in a physical form--
diamonds, gold coins,
chickens, or bikes.
At some point, it becomes
too difficult to physically
transact those objects.
And it's easier to
agree, collectively,
on the value of cash
instead of gold.
As we know today, this
has many advantages.
Credit cards and
the modern banking
basically gave us
another abstraction layer
on top of cash.
There is a centralized
system which
defines who own what resources.
All of these trades
are made virtually.
This is the backbone of why
Bitcoin is a valid idea.
What is bitcoin?
Bitcoin is decentralized,
anonymous, digital-only
currency that recently
received public attention.
Bitcoin was originally
developed in 2008.
Like in any good mystery,
someone using the alias Satoshi
Nakamoto published
a paper describing
how Bitcoin could work.
There's a very interesting
story about this guy too.
He must be very
smart, but he never
came forward to claim ownership
or any part of the revenue.
Just one year later, in 2009,
Bitcoin started being traded.
Where do they come from?
Think about gold.
You could buy it or mine it.
And it's the same
concept with Bitcoin.
You do this by
using your computer
to hunt for 64-digit numbers.
By having your
computer repeatedly
solve complex
mathematical puzzles,
you're competing
with other miners
to generate the number that the
Bitcoin network is looking for.
If your computer generates it
first, you receive bitcoins.
The Bitcoin system is
programed to generate
a fixed number of bitcoins
by unit of computing time.
It is also self-sustaining,
coded to prevent inflation,
and encrypted to prevent anyone
from disrupting its code.
In the year 2140,
the total number
of bitcoins in circulation
will be capped at 21 million.
So how much is a
bitcoin worth today?
You'll need to google it.
Just type, Bitcoin in
US dollars, for example.
You could also check
it out at preev.com.
Why are they anonymous?
Bitcoin are
[INAUDIBLE] anonymous,
because they are built
upon decentralized system.
The bitcoins themselves
are anonymous.
The wallets are not.
Here's why.
The base algorithm
creates anonymity.
But as the recent
court cases show,
if your Bitcoin Wallet is
identified and attached
to a person, then someone
can go through and track
every transaction you've made.
Bitcoins exist
entirely on their own,
because there's no central
infrastructure to shut down.
You are identified by nothing
more than your Bitcoin Wallet
address, a string of
randomized letters and numbers.
There are absolutely no
identifying characteristics
beyond it.
For the paranoid
dude, you can simply
create a new wallet
for each transaction.
Here are some interesting
start-ups that
pushed the technology forward.
We are still in the
initial phase of bitcoins.
And there are many
challenges and opportunities
ahead-- exchanges, wallets,
merchant services, security,
and more.
But this is something
for another episode.
Until next time,
eat your vegetables
and listen to your partners.
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