- [Michael] This video is brought to you by Seed.
(light upbeat music)
- [Narrator] You're reluctantly mingling
at your cousin's gender reveal party
when suddenly, her mimosa-drunk husband,
Doug, starts smacking his lips
about the "glorious rise of crypto currency."
Only slightly slurring his words,
Doug vows that he will support
his rapidly-growing family
by buying low, selling high,
and generally growing rich as (beep) off crypto.
Color you suspicious, intrigued,
and totally desperate to avoid
Doug's next salvo of saliva.
So, you grab an aggressively-pink cupcake
and prepare yourself for another
40-minute "deep-dive"
into investing that would make
any sober, clear-eyed financial advisor weep.
Then you think, "Hell no."
After the nosebleed incident
at Cassidy's karaoke party,
you swore you would rather
be sent out to sea
in a burning ship with no map
than be lectured by another crypto bro.
Hey.
Mellow out, buddy.
We're here for you.
Here's how to sound smart about cryptocurrency.
♪ With your friends ♪
♪ Or on a date ♪
♪ Arguing online with someone you hate ♪
♪ Conversation is an art ♪
♪ So we'll tell you ♪
♪ How to sound smart ♪
- OK, Michael here to interrupt
for just a second.
I want you to get back to learning about crypto,
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And now, back to you becoming a crypto genius.
- [Narrator] Here's a basic breakdown
before you have a breakdown.
Elon-Musk-style
hype-beasting aside,
cryptocurrency is, simply put,
digital money that can be used
to pay for goods and services
or just hold onto.
The big daddy of crypto, Bitcoin,
was, like swine flu,
born in 2009
and it proved equally infectious.
These days, there are thousands
of coins to flirt with,
including fan-favorite Doge Coin.
The term "crypto" is also, confusingly,
used to refer to scores
of different digital tokens,
products, services, and technologies.
Like most currencies,
crypto is traded on exchanges
by buyers and sellers.
But unlike a crisp $5 bill
from granny on your birthday,
your crypto coins live in a digital wallet,
and they have the potential to surprise you.
For one thing, that's because
crypto's currently unregulated
by a central monetary authority,
like a bank or a government agency.
This, along with the anonymity,
is a big reason for crypto fans' enthusiasm.
The way they see it,
if a bank's not involved,
cryptocurrency can't be devalued
by pesky indignities like inflation.
And so far, that plan seems to be working.
By the end of 2021,
crypto's value hit an all-time high
of $2.9 trillion.
So maybe, despite his choice
to match plaid with stripes,
Doug is on to something?
Not so fast, buckaroo.
Before you take a reverse mortgage
out on your daughter's kidney
to buy some Doge, know this.
Plenty of money-smart folks
like Warren Buffett
and even the Federal Reserve
think crypto's a market bubble.
They argue that it's based on money
as imaginary as Doug's cheerleader girlfriend
from junior high who, quote,
"went to another school."
At this point, you may be wondering,
what the hell is crypto,
and does it even exist?
Though crypto can feel fake to the uninitiated,
every piece of crypto does
take up a tiny bit of real estate in cyberspace.
Because they're built on blockchains.
Think of a blockchain
like a very long puzzle
made out of pieces of data grouped sequentially.
Each pieces of data is "hashed,"
aka turned into a unique
short string of characters
which link together into a giant chain.
But where do these hashes come from?
Bitcoin miners, aka folks with super-nerdy
computer systems known as "nodes."
These nodes basically go around
solving math problems
like a gifted fourth-grader
who just drank their first Frappuccino.
When they've solved
for a specific hash pattern
by guessing the correct
random string of characters,
called a "nonce,"
that solved hash gets approved
by the other nodes in the network
and added as the next block.
And so, behold!
As a reward to the miner,
a new Bitcoin is born, circumcised,
and burdened with a bunch of adults' expectations
for how it'll grow up.
It's basically the one and only time
doing math problems leads to procreation.
Like snowflakes holding hands,
each block is unique,
yet inextricably linked,
because they include the hash
that precedes them.
If the data in any one block
is ever altered,
the block hashes would change,
signaling the chain
has been tampered with.
But that's okay.
The other nodes that haven't been messed with
are able to cross-reference
and restore order.
This is actually a pretty cool security feature
to keep bad actors at bay.
Imagine those hand-holding snowflakes
playing a life-or-death game of Red Rover.
While a lot of crypto blockchains
hold security data,
they can also hold other stuff,
especially sensitive things
like property deeds and medical histories.
But, barring some really sinister shenanigans,
access to Doug's colonoscopy records
isn't going to make you rich.
Cryptocurrency, however, arguably could,
which is why Doug is still spitting in your face.
They Say, You Say.
They say, "Crypto is the revolution!
"It's gonna change the world.
"When I die, bury me in crypto."
You say, I mean, anything's possible.
My shoes are made out
of recycled tampon applicators!
Crypto, and its currencies,
offer a lot of technological possibilities
that could indeed totally change money.
But also, rein it in, babe.
We have no idea how governments
are going to deal with crypto long-term.
Like your friend's
natural-deodorant-wearing boyfriend,
crypto is polarizing.
Some governments love it,
some hate it,
but all are going to have to figure out
how to address it.
Also, put down that hammer and sickle
because crypto's not
some "Marxist revolution."
It's less "spreading the wealth,"
more "putting a few extra bucks
"in your richest friend's
"alligator skin wallet."
Most people trading crypto
aren't seeing huge profits,
and those who are
were generally pretty loaded to begin with.
In fact, wealth concentration
is even more pronounced
in crypto than in regular currency.
They say, "This new coin is going to the moon!
"Buy now, thank me later
"with a plate of imported, fair-trade escargot."
You say, all crypto coins are speculative investments.
That kind of means literally anything can happen.
Crypto's made some folks into millionaires,
and made some tech princes
slightly less princely.
Investing in crypto
is all well, and good and hip,
but you should consider it
part of a rounded and balanced portfolio.
You know, along with your 401K,
your stock in Applebee's,
and the bin of well-preserved
American Girl dolls in your parents' basement.
They say, "Crypto's just for buying drugs.
"Speaking of, can I get a bump?"
You say, well, block chains are anonymous,
which makes them better
for buying drugs than,
say, a credit card or even Venmo.
But crypto can also be used
for totally normal fun stuff,
like paying off your college loans,
or paying off interest on your college loans.
Besides, if I use my allowance
to buy the occasional acid tab,
does that mean we should discontinue all cash?
They say, "Crypto is a total scam."
You say, like anything having to do with money,
there are plenty of (beep) in crypto's orbit.
The best defense against crypto grifting
is knowledge and a generous dose of skepticism.
What's more, as the crypto space matures
and becomes more integral to the economy,
it's likely that governments
will start paying more attention to it.
That's why more and more regulations
are cropping up every year
to help protect consumers.
Unfortunately, the government
can't protect you
from Doug's Psychobilly party playlist.
By now, Doug is totally dumbstruck
at meeting somebody smart enough
to call his bluff.
It's time to go in for the kill
and blow his mind straight out
of its backwards Gamestonk baseball cap.
Here's how.
You say, cryptocurrency is "fire,"
as the kids would say.
But it also causes fires.
You see, Bitcoin mining software is elaborate,
and requires a butt-ton of electricity.
In fact, current energy use estimates
find that Bitcoin mining
consumes as much electricity annually
as entire countries,
like Finland or the Netherlands.
And, of course, America,
patron saint of pollution,
is responsible for some
35% of Bitcoin energy emissions.
But it's not all doom and gloom,
and wildfires and freak hurricanes,
and raining radioactive fish yet.
About 39% of the energy
used for Bitcoin
actually comes from renewable resources.
And the crypto powers
that be are currently developing new ways
to validate Bitcoin
without requiring so much energy.
TLDR, Bitcoin couldn't hang
at a Greenpeace party yet,
but it's at least starting
to learn what recycling is.
So, a few brain cramps later
and you can now converse charmingly
about Bitcoin with even
its most devoted disciples.
That doesn't mean you have
to keep talking to Doug, though.
Swipe that mimosa refill
right out of his hand,
down it in celebration,
and get the (beep) out of that party
of adults who have gathered
to celebrate the societal implications
of an unborn child's genitals.
See you next time
on How to Sound Smart.
(light upbeat music)