(classical music)
- Hi, I'm Jonathan, this is Brain Stuff
and I've got some bad news for you.
Money is imaginary.
Now I don't mean that this
printed piece of paper
is make believe.
I can feel its texture and
the ink even smudges off
on my fingers, but when you
compare it to this other
piece of paper, what's
really the difference?
Well one is a recognized currency
and the other isn't.
And the reason why?
Well people agree that this
piece of paper is a dollar
and has value.
That's where money's worth comes from.
We all pretend it's a currency.
This is one reason why the
digital currency Bitcoin
appeals to some people.
See it's not tied to any political system
or government so it's
not vulnerable to any of
their failings like the
economic collapse in 2008.
All it needs is for
people to believe in it,
but lately well, some
people are having a crisis
of faith.
That's why today on
Brain Stuff we're going
to quickly establish
some facts about Bitcoin
to better inform your beliefs about it.
Now basically it's
virtual money you can use
to buy and sell things online
and it mimics real world
limited resources like gold for instance.
It's also a cryptocurrency
meaning that it's encrypted
in a way that prevents
it from being copied.
See every Bitcoin transaction is recorded
using a block chain.
Now that information acts like a ledger
that is encoded onto the Bitcoin itself.
This prevents people from
spending the same Bitcoin
more than once since everyone
else on the currency's
peer to peer network knows
that it just was spent.
It's essentially just a number associated
with an internet address.
You can store it on your phone
or a hard drive until it's used again.
Now, here's some ways you
could acquire Bitcoins.
Accept them as payment
for goods and services,
exchange them for a more
traditional form of currency,
or you can mine them.
That's right, like gold
Bitcoins are mined.
Not by old timing, grizzled prospectors,
but by powerful computers and like gold
the more people mine
Bitcoins, the less there are
to be found, so they
become harder to find.
So instead of physically
mining with a pick ax
you can attempt to solve math problems
with a computer.
Imagine the problem is
something like x + y = 15.
Now if you can figure out what
x and y are, congratulations,
you get a bitcoin.
With little competition the
problems are easier to solve
but when more people join
the search you've got a race
and the problems get way more difficult,
but as Bitcoin miners dwindle,
the math problems will
get easier again to
ensure the flow is steady,
their value is boosted, and
they remain inflation proof.
Not all have been mined yet
and we expect they won't be
until around 2140.
So let's say you heard
all this and thought
you know I want to grow up
to be a professional Bitcoin
miner and trader.
Well there are a few risks
you should probably know
about first.
For instance, because
there's no regulatory agency
setting Bitcoin's value it
tends to fluctuate wildly.
Another Bitcoin problem is security.
Now actually the format itself is fine,
but that doesn't protect
it from hackers who target
the banks and exchanges
that deal in Bitcoins.
Again, this isn't the
fault of the currency.
If a bank were robbed, you
wouldn't blame the dollar bill
for getting stolen right?
So Bitcoin has its slumps
and for it to become
widely used its volatility
needs to settle down
quite a bit.
It's currently a high risk currency
that's totally unpredictable
and we didn't even
get into the mysterious
identity of Bitcoin's founder
Satoshi Nakamoto.
Now personally I think the
biggest drawback to Bitcoin
is that you just can't make it rain..
If you have experiences with Bitcoin,
let us know in the comments below.
And let us know if there
are any topics you'd like us
to cover.
I actually have another pile
of them right over there.
Really, I mean it's just offscreen.
So, the best part about
this is I don't even have
to pick it up.
We have interns to do that.
See you guys later.
