How Cryptocurrency ACTUALLY works.

Summary

This 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

00:00

🚀 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.

05:02

🌐 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.

10:02

💡 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.

Keywords

💡Cryptocurrency

Cryptocurrency is a digital or virtual form of currency that uses cryptography for security. It is primarily exchanged through a decentralized system, such as blockchain technology. In the video, cryptocurrencies are presented as the next evolution in the history of money, moving from physical forms like gold and paper to digital assets. Examples mentioned include Bitcoin, Ethereum, and Dogecoin, each with unique properties and investment potential.

💡Blockchain

Blockchain is a type of distributed ledger technology that records transactions across multiple computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks. It is integral to the security and operation of cryptocurrencies like Bitcoin. The script explains that each transaction creates a 'block' that is linked to the previous one, ensuring the integrity and transparency of the transaction history.

💡Decentralization

Decentralization refers to the distribution of authority and decision-making away from a central location. In the context of cryptocurrencies, it means that the transaction ledger is not controlled by a single entity but is instead maintained across a network of computers. The video emphasizes the benefits of decentralization, such as increased security and the elimination of the need for traditional banking systems.

💡Bitcoin

Bitcoin is the first and most well-known cryptocurrency, created in 2009. It operates on a peer-to-peer network and does not require a central authority like a bank. The script introduces Bitcoin as a type of cryptocurrency and discusses its role in the broader ecosystem, including its use in transactions and its appeal to investors.

💡Ethereum

Ethereum is a decentralized, open-source blockchain system that features smart contract functionality. It is the second most invested-in cryptocurrency after Bitcoin. The video mentions Ethereum as an example of a cryptocurrency that can process transactions faster than Bitcoin, highlighting its technological capabilities and investment potential.

💡Investment

In the context of the video, investment refers to the act of putting money into cryptocurrencies with the hope that their value will increase over time. The script discusses the speculative nature of cryptocurrency investments and the potential for significant gains, as well as the risks involved.

💡Volatility

Volatility in financial terms refers to the degree of variation of a trading price series over time. The video script points out that cryptocurrencies are highly volatile, with their prices being heavily influenced by news cycles and public sentiment, which can lead to rapid and significant fluctuations in value.

💡NFT (Non-Fungible Token)

An NFT is a unique digital asset that represents ownership of a specific item or piece of content, often used in the context of digital art and collectibles. The script describes NFTs as a novel concept where people can pay to have digital ownership over something, such as a digital artwork or a tweet, even though others can still view or use the item.

💡Dogecoin

Dogecoin is a cryptocurrency that was initially created as a joke, based on the popular internet meme featuring the Shiba Inu dog breed. The video script highlights Dogecoin's origin story and its surprising rise in value, which has led to some individuals becoming millionaires from early investments.

💡Cryptography

Cryptography is the practice and study of techniques for secure communication in the presence of third parties. In the context of cryptocurrencies, cryptography is used to secure transactions and control the creation of new units. The script explains that the security of cryptocurrencies like Bitcoin is due to cryptographic techniques that make the system tamper-evident.

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

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