Hello world! Siraj here. Bitcoin is a currency just like the US Dollar or the Japenese Yen.
Except Bitcoin doesn't belong to anyone. No one owns it. No government, bank, company, or person.
It's just open source software that anyone can download and browse.
It's an invention that no one owns, but anyone can use. Kind of like Email.
It was created in 2007 by a mysterious person named Satoshi Nakamoto.
The search for Satoshi has been going on for years, but no one has ever found him before.
and since then the total value of the Bitcoin network has grown from nothing to over 5 billion
Once you join the Bitcoin network by opening a wallet it will generate you a 25 character public & private key
using cryptography. Hence why Bitcoin is called a cryptocurrency.
This is your Bitcoin address, think of it kind of like your bank account number.
You can give your public key to anyone. It's what they'll use to send money to you.
but your private key is for your eyes only. Anyone who has your private key can access all of your funds.
so keep it safely hidden. Everytime someone sends Bitcoin to another person, the Bitcoin network
is responsible for processing the transaction. The Bitcoin network is maintained by a bunch of computers
that verify all transactions to ensure that they are valid. This process is called 'Mining'.
and anyone can setup their computer to become a miner and get paid for maintaining the network.
All you have to do is download the Bitcoin client and start mining! Mining requires a lot of computing
power so you'll need a really really good GPU chip. And ASIC computer would work best.
when anyone gets the client, their computer will start downloading something called 'the Blockchain'.
The blockchain is a huge list of every single Bitcoin transaction that has ever happened in the network.
These transactions are bundled into units called blocks. These blocks are all chained together.
in order of timestamps. A chain of blocks. Blockchain! Get it?
When anyone makes a transaction, each miner will check to see if that transaction was ever made before
in its copy of the blockchain. If it was never made before, it will recognize it as a valid transaction.
if at least 51% of the network agrees that the transaction was valid. It clears and is added to the blockchain.
the blockchain is stored on every miners computer. There is no central computer whatsoever.
its completely 'decentralized'. That means no one can shut down Bitcoin. But what if a bad guy
decides he wants to try to generate fake Bitcoins. Couldn't he just create a bunch of mining accounts
and approve his own transactions as the new majority. Well yeah but Bitcoin has an incredible security
system designed to defend against that type of attack also known as a Sybil attack.
There's an extra step that every miner has to do once it says that a block is valid. It has to solve a bunch of
randomly generated mathematical problems using it's computing power. And once it's done solving them,
other miners can verify that it did indeed solve those problems. This is called the 'Proof of Work' algorithm.
Miners have to prove that they've done a certain amount of computational work before their vote is valid.
What this means is that in order for a bad guy to spend money twice or 'Double Spend', he has to control
more computational power than 51% of the Bitcoin network.
The total computational power of the Bitcoin network is currently 13,000 times greater than the 500 fastest
supercomputers in the world combined. As Kanye says 'No one man should have all that power'.
Thanks Kanye. No one person or entity has that much computing power. So the network has never been broken
before and it only gets stronger as more miners join by adding their computing power to it.
Only 21 million Bitcoins can ever be created and at the current rate of creation the last Bitcoin will be mined
in the year 2140. So when that happens, miners will be paid with just transaction fees. Instead of transaction
fees and generated coins.This makes Bitcoin a deflationary currency. Unlike the inflationary US Dollar
Deflationary means that there is a hard limit on the amount of currency that can be created
and inflationary means that more currency can be created, but one isn't inherently better or more natural
than the other. There is no natural state of money. It's natural state is neither inflationary nor deflationary.
Money is not a natural thing. It's a tool we use in our society to transfer debt amongst ourselves.
Turning the dials on the economic models for money in either direction has both pros and cons.
Bitcoin can plug into the existing system of money transfer and make it faster and more efficient
and more widely available. There are so many ways to get involved. Check out the links in the description
For more info and please subscribe for more technology videos. Thanks for watching!