How Cryptocurrency ACTUALLY works.
Summary
TLDRThis video script offers a comprehensive guide to cryptocurrencies, explaining their evolution from bartering to digital assets. It clarifies the concept of cryptocurrencies as decentralized digital ledgers, highlighting their advantages like security, speed, and low transaction fees. The script also delves into the technology behind cryptocurrencies, particularly blockchain, and discusses the potential for investment while addressing the volatility, limited acceptance, environmental concerns, and regulatory challenges. Additionally, it touches on the peculiar phenomenon of NFTs and the surprising success of Dogecoin, providing a balanced view of the crypto world.
Takeaways
- 🌐 Cryptocurrency is seen as the most convenient era of exchange, known as stage five, where digital assets are transferred without the need for physical coins or paper money.
- 📈 Cryptocurrencies like Bitcoin operate on a decentralized ledger system, which records every transaction made with the currency, enhancing transparency and security.
- 💡 The advantage of cryptocurrencies includes the elimination of banks from transactions, enabling instant international payments with minimal fees and no exchange rate concerns.
- 🔒 Cryptography secures cryptocurrencies through blockchain technology, creating an immutable record of transactions that is resistant to tampering.
- 🚀 The term 'mooning' is used to describe cryptocurrencies that experience a significant increase in value, indicating optimism about their potential.
- 🤔 There are over 4,000 different cryptocurrencies, each with unique properties, which can make choosing an investment a complex decision.
- 📉 The volatility of cryptocurrencies is a significant issue, with prices often influenced by speculation and news cycles, leading to unpredictable value fluctuations.
- 🛒 Limited acceptance as a form of payment is a drawback for cryptocurrencies, as many businesses and institutions have not yet adopted them for transactions.
- ⚡ The environmental impact of cryptocurrencies is a concern due to the high energy consumption required for transaction verification processes.
- 🕵️♂️ While cryptocurrencies are often associated with criminal activity, data suggests that traditional cash transactions have a higher rate of criminal involvement.
- 🎨 NFTs, or non-fungible tokens, represent a novel aspect of blockchain technology, allowing digital ownership of unique assets, even if the physical item is not exclusive.
Q & A
What are the five stages of currency evolution mentioned in the script?
-The five stages are: 1) Bartering (trading goods directly), 2) Introduction of coins made of precious materials like gold and silver, 3) Paper money issued by governments and banks, 4) Online transactions and credit cards, and 5) Cryptocurrency as a decentralized digital asset.
What is a ledger in the context of cryptocurrency?
-A ledger in the context of cryptocurrency is a digital record-keeping system that contains all transactions made using a particular currency. It is essentially a large, shared spreadsheet that is updated and maintained by a network of computers.
How does the decentralization of cryptocurrency work?
-Decentralization in cryptocurrency means that instead of a single entity controlling the transaction records, there are many copies of the ledger distributed across a network of computers. Each participant in the network has a copy of the ledger, which is updated independently and collectively verified.
What is the purpose of cryptocurrency mining?
-Cryptocurrency mining is the process of using computational power to verify and record transactions on the blockchain ledger. Miners who dedicate their computer resources to this process are rewarded with cryptocurrency as compensation.
Why is blockchain technology considered secure?
-Blockchain technology is secure because it organizes transaction data into blocks, each containing a unique identifier (hash) and the hash of the previous block. Any attempt to alter a block's data would invalidate the hashes of all subsequent blocks, making it nearly impossible to fraudulently change the ledger without altering it on the majority of the network's computers.
What are some advantages of using cryptocurrency over traditional banking?
-Advantages of using cryptocurrency include faster international payments, no need for banks, no exchange rate concerns, no interest rates, and minimal transaction fees for some cryptocurrencies.
What is the term used to describe cryptocurrencies that experience a rapid increase in value?
-The term used to describe cryptocurrencies that experience a rapid increase in value is 'mooning' or 'going to the moon'.
How does the script describe the concept of NFTs (Non-Fungible Tokens)?
-NFTs are described as a way to have digital ownership over something, like a JPEG image or a tweet, without stopping others from using or sharing it. They represent a unique identifier on the blockchain that proves ownership of the original asset.
What is the environmental concern associated with cryptocurrency?
-The environmental concern is that the process of verifying transactions through mining requires a significant amount of computing power, which in turn consumes a lot of electricity. Critics argue that this creates an inefficiency and a high carbon footprint.
How does the script address the misconception that cryptocurrencies are used primarily for criminal activities?
-The script clarifies that cryptocurrencies are not anonymous but pseudonymous, meaning that transactions are recorded on a public ledger with unique identifiers. It also cites data showing that a very small percentage of crypto transactions are criminal, compared to a higher percentage of cash transactions.
What is the script's stance on the future of cryptocurrency?
-The script does not explicitly state a stance on the future of cryptocurrency but presents both the advantages and the challenges associated with it. It acknowledges the excitement and potential of cryptocurrencies while also discussing their volatility, acceptance, environmental impact, and regulatory concerns.
Outlines
🚀 Introduction to Cryptocurrency
This paragraph introduces the complex world of cryptocurrencies, explaining their significance and potential impact. The speaker embarks on a journey to demystify cryptocurrencies for viewers, starting from the early stages of trade and the evolution of money through to the modern digital age. The explanation covers the transition from barter systems, to coins made of precious metals, and then to paper money backed by government trust. The paragraph culminates in the introduction of cryptocurrencies as a decentralized digital asset, emphasizing their convenience and the innovative technology behind them, such as blockchain, which ensures secure and transparent transactions.
🌐 The Advantages and Investment in Cryptocurrency
The speaker delves into the advantages of cryptocurrencies, highlighting their decentralized nature and the elimination of traditional banking systems. Cryptocurrencies enable fast, borderless transactions without the need for intermediaries like banks. The speaker also touches on the concept of cryptocurrency mining, where individuals are rewarded for verifying transactions. Investments in cryptocurrencies are discussed, with the speaker sharing their personal investment choices across various digital currencies. The paragraph underscores the volatile nature of the crypto market, with prices influenced by speculation and news cycles, and the challenges of widespread acceptance as a form of payment.
💡 The Dark Side of Cryptocurrency and the Rise of NFTs
This paragraph addresses the darker aspects of cryptocurrency, including its environmental impact due to the high energy consumption required for mining and transaction verification. It also discusses the lack of regulation, which some perceive as a boon for criminal activities, although data suggests that traditional cash transactions have a higher rate of criminal involvement. The speaker introduces the concept of non-fungible tokens (NFTs), which allow digital ownership of unique assets like art or collectibles, despite the questionable value and the novelty of owning a digital original. The paragraph also mentions Dogecoin, which started as a joke but gained significant value, leading to unexpected wealth for some investors.
Mindmap
Keywords
💡Cryptocurrency
💡Blockchain
💡Decentralization
💡Bitcoin
💡Ethereum
💡Investment
💡Volatility
💡NFT (Non-Fungible Token)
💡Dogecoin
💡Cryptography
Highlights
Introduction to the concept of cryptocurrencies and their significance in modern society.
Explanation of the evolution of money from bartering to the use of precious metals and paper currency.
Description of the transition to digital transactions and the role of banks and governments in the process.
Introduction of cryptocurrency as the fifth stage of exchange, focusing on its convenience and digital nature.
Discussion on the decentralized nature of cryptocurrencies and the concept of a ledger.
Explanation of cryptocurrency mining and its role in the verification of transactions.
Advantages of cryptocurrencies, including decentralization, elimination of banks, and low transaction fees.
Introduction to blockchain technology as a secure ledger system for cryptocurrencies.
The security of blockchain due to its structure, making fraudulent transactions extremely difficult.
Personal investment anecdotes and a disclaimer about the speculative nature of cryptocurrencies.
Different types of cryptocurrencies and their unique properties, such as Ethereum, Cardano, and Litecoin.
The volatility of cryptocurrency prices and their dependence on speculation and market news.
Challenges with the acceptance of cryptocurrencies as a form of payment in most places.
Environmental concerns related to the energy consumption of cryptocurrency mining.
Misconceptions about the anonymity of cryptocurrencies and their traceability through blockchain.
Discussion on the potential criminal use of cryptocurrencies compared to traditional cash.
Introduction to NFTs (Non-Fungible Tokens) and their role in digital ownership.
Examples of high-value NFT sales and the concept of digital art ownership.
The phenomenon of Dogecoin, starting as a joke and evolving into a significant cryptocurrency.
Transcripts
all right bitcoin blockchain dogecoin
ethereum nfts
everyone is talking about
cryptocurrencies right now but
good lord what does all of it mean so
welcome to the one video that will take
you from crypto noob
to cryptogenius i'm going to tell you
what it is why it keeps becoming more
important
what i've actually invested in myself
and the dark side of it
okay so when society was in its early
stages there was no such thing as money
we'll call this stage one the only way
to buy something off someone
was to go up to them and be like oh i
really like your horse
i'll trade you my cat for it sorry milo
i never trade you but the issue with a
system like that is that
even though you might be perfectly happy
to give up your horse you just
might not want a cat so that trade will
never happen but that's where currency
came in
stage two coins which because they were
made of precious materials like gold and
silver
everyone just accepted that they were
worth something you've heard of the
british pound right
well the reason they're called pounds is
because one pound literally just used to
be
one pound of silver and so all of a
sudden in a trade
it doesn't matter if you don't want my
cat as long as i have coins
we can still trade for your horse even
if you have no use at all for the silver
because it's a precious material you
have that reassurance that
you can take that coin give it to
someone else and trade for something
that you do want
convenient right but then this evolved
to stage three as banks became
established and governments had control
we realized that as long as there was
trust in the system we could move away
from needing to carry blocks of precious
metal
towards something even more convenient
paper money
it does the same thing but now the money
doesn't have value because it's made of
pure silver
it just has value because the government
says it has value
like this 10 pound note here in the uk
the note itself is just made of
well it's actually made of plastic they
changed it recently because it's more
durable but if you look closely you can
see that all this actually is is the
bank of england promising that they will
pay the bearer of this note 10 pounds
really this is just a receipt a kind of
proof that you own a certain amount of
money
but as technologies improved even
further we found even more convenient
ways of storing and trading our stuff
we're now in what i would call stage
four where more people than ever are
buying things online and using credit
cards and really when you're at that
stage
we don't see our money anymore it's not
about coins or notes or
cats it's just entries on a spreadsheet
like when i buy a music album from
amazon all that's happening is that my
bank adds an entry in my spreadsheet
that says aaron now has ten dollars less
and then amazon's bank adds an entry
that says
they have ten dollars more so the reason
i've given you this entire intro
is to give you context on where
cryptocurrency sits it's seen by many
people
as the most convenient era of exchange
ever
stage five the way to think about a
cryptocurrency is that
it's 100 virtual i know the logo for
bitcoin kind of looks like a physical
coin
it really is a bit coin now but with
crypto there is no gold there is no
silver there is no paper
it really is just the transfer of
digital assets
the core concept is exactly the same
think of them as literally just running
spreadsheets of who's paid what to who
but instead of multiple banks keeping
their own separate records with crypto
there is just one
enormous spreadsheet of every
transaction made using that currency
and this is called a ledger okay we all
have a good spreadsheet but
what's all the fuss about why is
everyone going crypto crazy
well there are some distinct advantages
to a currency system like this
one it's decentralized which means that
while every transaction of a given
cryptocurrency is
all recorded on the same ledger there
are many many copies of that ledger
and anyone who is a part of the network
has one you might have heard of
cryptocurrency mining
or bitcoin mining well all that is is
someone who set up a computer to crunch
through transactions
on their copy of this ledger or
spreadsheet there are already about a
million bitcoin miners around the world
and bitcoin is just one type of
cryptocurrency
the reason they're doing it well if you
dedicate your computer's power to mining
say bitcoin then you will earn some
bitcoin as compensation
so the result of this is that if i go
into a store and spend five bitcoins on
something
then instead of just checking with one
bank's records the shop instead checks
with every single computer on this
network if i have enough
and assuming i do each computer will
give the go-ahead
and then every single one will update
their records independently
so because you end up having this many
copies of exactly the same ledger
it becomes very easy to tell if anyone's
trying anything fishy
did you who bought this
like if i try to hack into someone's
computer that's on the network and
give myself more money by adjusting
figures on their copy of the ledger
it's not going to get through the system
will realize that 99.9
of the copies on the ledger are saying
one thing but one of them is saying
something else
so must have been tampered with there's
very clear organization to the system
and i think people believe in it because
they see the future as
open traceable transactions much more so
than having like some bits of the record
over here and
other bits over there and i know it
seems complex at this point but
as we go through this i think you'll
realize that for a lot of people in a
way
it's simpler there are plenty of areas
in the world that have internet access
which is
all you'd need for crypto but don't have
access to traditional banks which
require a lot of paperwork
and documentation well two and i've kind
of implied this already but
the main perk of crypto is that you
don't need banks anymore
because everything is stored by the
people on this ledger
you can make international payments
almost instantly instead of it taking
half a day
with no spending limits plus you don't
need to worry about exchange rates you
don't need to worry about interest rates
and
even transaction fees are close to zero
for
some cryptocurrencies that is but this
is where the real fun begins
i'm fine at parties i promise the reason
that cryptocurrencies are called
crypto currencies is because they're
secured by cryptography
and one example of this which a lot of
the major cryptocurrencies like bitcoin
use
is blockchain now people often get
confused by this blockchain is not
bitcoin blockchain is not a currency
itself
blockchain is just a secure type of
ledger so you know that big spreadsheet
that everyone has that's recording
transactions
blockchain is just a way of organizing
it funnily enough
into blocks so every time i pay for
something with bitcoin
that transaction is recorded as a block
each block contains transaction data
like who was paid and how much a hash
which is a unique identifier
and the hash of the previous block in
the sequence or the last transaction
that was recorded
and the pivot on which this system rests
is that if something in a block is
changed
then that block's hash will change you
might be starting to see where this is
going because each block
also contains the data of the previous
block if the hash of the block here
changes
then the next block will no longer have
a matching hash with it and so every
subsequent block after that one
becomes invalid so if you combine this
with what we talked about earlier
this whole idea of a million different
users all having their own copy of the
blockchain ledger
then if i wanted to fraudulently create
a transaction that say paid me money
i'd have to not just tamper with a block
and every single block after it
but i'd also have to do this on at least
half a million computers around the
world
so that the majority of computers in the
system are also consistent with the one
i've tampered with
probably not gonna happen whereas just
hacking into someone's dollar account
and sending myself money
that does happen and it's sometimes as
simple as just literally guessing
someone's six-digit pin
but there's a massive jump between that
and trying to hack into 500
000 uncorrelated computers at once okay
so
cryptocurrencies have their issues i'm
literally going to get to them in a
minute
but hopefully you can see why some
people are excited about them
and that brings me on to investments
you've probably heard of people
putting money into cryptocurrencies and
all that means is that they're
exchanging normal currencies like
dollars
for cryptos like bitcoin they're hoping
that those cryptocurrencies become the
next big thing
and therefore suddenly shoot up in value
at which point they can then
either spend them or just exchange them
back for more dollars than they bought
them for
there's actually a term for
cryptocurrencies that skyrocket like
this
going to the moon or mooning
but that can mean something very
different depending on who you talk to
but the one decision that someone would
have to make at this point is
which cryptocurrency because we've
talked about bitcoin but bitcoin is just
one of over 4 000 different cryptos
already and each of them have different
properties
for example ethereum which is the second
most invested in
can process transactions even faster
than bitcoin there's one called cardano
which is considered to be
technologically superior
there's one called litecoin which has a
newer algorithm and if you are enjoying
this video then a sub to the channel
would be
delightful so let me show you what i've
done
and disclaimer this is not in any way at
all
financial advice i'm not recommending
this i've literally only put in a small
amount of money that i am comfortable
losing
and to be honest the way i'm seeing it
is more as an optimistic gamble
as opposed to a strategic investment the
only thing that you absolutely should
buy is
one of these hats best purchase i've
ever made
that is financial advice so i've put 40
in ethereum 20
to polygon 20 in cardano 10 in cartesi
and 10 in litecoin and this portfolio
has basically gone up and then down and
then up and then down and then
honestly you probably get more
consistency from wish.com so
crypto is in a pretty weird place right
now and this brings me onto its problems
the dark side one of the main ones is
exactly this
the reason i think a lot of people don't
take crypto seriously
is its volatility because these
currencies are so new
and they're completely digital unlike
say the market for gold
no one really knows what they should be
worth and so you find that crypto prices
are quite heavily speculative
they're tied to the news cycle like when
a glowing article comes out about them
prices spiral upwards but then when elon
musk posts a tweet that puts them down
they go way down two is the fact that
they're not really accepted as a form of
payment in
well most places like yes i can now book
holidays with crypto
i can donate to wikipedia with crypto
but there's been a lot of companies who
are pretty back and forth with it
microsoft tesla even burger king are
examples of companies who said they were
going to accept bitcoin
and then they said they weren't going to
accept bitcoin three
there can be an environmental concern
see the whole reason why a lot of these
cryptos are so secure
is because of this concept of
transactions being verified many many
times
by many many computers so i think it's a
fair criticism that that in itself
creates a fundamental inefficiency
that much computing power requires a lot
of electricity
but at the same time you could counter
this by saying that traditional banking
uses more electricity that there are
newer coins with better technology
that are more efficient and that one day
we'll be able to get that electricity
from renewable sources
depends who you ask and four there's
also a pretty strong sentiment that
because there's no real policing or
regulation on crypto right now
it's like the perfect currency for
criminals but to be honest i think the
data speaks for itself on that one
according to chain analysis 0.34 percent
of crypto transactions are criminal
up to 5 of normal cash transactions are
criminal and
i think that's because it's a bit of a
misconception that currencies like
bitcoin
are anonymous they're actually
pseudonymous which means that even
though your actual details aren't
visible to everyone
your public key your unique identifier
will be
permanently baked into the blockchain
upon making transactions with it
so cash is just a better currency for
most types of criminal activity
because by its very nature it's
untraceable
don't ask me how i know that but as well
as the negatives there are also just
some straight up odd things that have
come about
because of crypto for example you might
have heard of an nft
a non-fungible token if you haven't
you might want to take a seat for this
one
i don't want to call it stupid but uh
this one's a head scratcher
so you know how now you can go into an
art gallery and you can pay to own a
painting
well now thanks to the blockchain you
can pay
just to have digital ownership over
something so it doesn't stop anyone from
using or sharing that thing
but all it means is that you'd
effectively be the owner of the original
and they'd all be sharing copies of it
even if for most intents and purposes
they look and behave identically
like a lot of these nfts are literally
just jpeg images
i think the reason some people find this
stupid and kind of funny
is that there's a distinct difference
between buying an nft and buying the
rights over something
so if you buy the right service
something that's a very legitimate
purchase because you can create merch or
sell licenses
with an nft you can't the original owner
still has
all the reproduction rights over that
piece all it is
is that you're using the blockchain to
prove that you have some
ownership over that asset but clearly
just being able to say that has some
value because
an nft of this gucci ghost sold for 3
600
the ceo of twitter jack dorsey he sold
the first tweet he ever made
as an nft for 2.9 million dollars
five words i could do that any takers
and this one just blows my mind this
photo which is basically an overview of
one guy's pieces of art
sold for 69 million dollars very
nice to clarify this literally just
gives the buyer some
digital ownership over a jpeg image
and finally you might have heard of
dogecoin dirt coin is based on the same
tech as litecoin
but it was created as a joke people
started sharing it and putting a bit of
money into it because they thought it
was funny
but that propelled its value to the
point where now we have people who have
actually become millionaires
just because they bought dogecoin when
it was cheap it's an interesting world
out there
if you did find this useful then do
consider sharing it with a friend or
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my name is aaron this is mr who's the
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