December 29, 2024 • 18 mins
Is Bitcoin truly the future of finance, or is it just another speculative bubble waiting to burst? In this episode, we dive deep into the fundamental differences between Bitcoin and the traditional banking system, exploring how decentralized finance (DeFi) is challenging centuries-old financial institutions.đź’ˇ Key Topics Covered:
✔️ How Bitcoin’s decentralized model differs from traditional banks
✔️ The role of central banks in money creation vs. Bitcoin’s fixed supply
✔️ Can Bitcoin replace fiat currencies, or will governments resist?
✔️ Institutional adoption: Why are banks investing in blockchain?
✔️ Risks and rewards: Is Bitcoin a hedge against inflation or just speculation?Banks have controlled global finance for centuries—but is their dominance being threatened by a borderless, digital currency that operates without intermediaries? Join us as we analyze the power struggle between Bitcoin and the banking system, and what it means for the future of money.🔊 Tune in now to uncover the truth behind Bitcoin’s potential to disrupt global finance!
✔️ How Bitcoin’s decentralized model differs from traditional banks
✔️ The role of central banks in money creation vs. Bitcoin’s fixed supply
✔️ Can Bitcoin replace fiat currencies, or will governments resist?
✔️ Institutional adoption: Why are banks investing in blockchain?
✔️ Risks and rewards: Is Bitcoin a hedge against inflation or just speculation?Banks have controlled global finance for centuries—but is their dominance being threatened by a borderless, digital currency that operates without intermediaries? Join us as we analyze the power struggle between Bitcoin and the banking system, and what it means for the future of money.🔊 Tune in now to uncover the truth behind Bitcoin’s potential to disrupt global finance!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
[Music]
(00:20):
[Music]
(00:48):
Welcome to the Deep Dive. Today we're diving into something really fascinating.
The evolution of money and how we got to cryptocurrency.
That's good.
We've got a ton of sources, historical records, economic texts, technical papers,
all sorts of stuff. We're going to use them to kind of trace this whole journey
from like, you know, bartering to Bitcoin, the whole thing.
(01:13):
But before we get into all the details, I kind of want to start with a really basic question.
Sure.
What even makes money money?
That's a great question to start with. You know, money as we know it.
It's been evolving for a really long time. We could trace it way back to these ancient barter systems
where people just traded stuff directly.
Right.
(01:34):
Imagine trading account for some week.
Yeah.
Not super practical for everyday buying and selling.
No, not at all. It makes you appreciate just tapping your phone.
Right.
So, how do we get from trading cows?
You know, the contactless payments and all that.
Well, it was a gradual process driven by I think this need for a better system.
Something more efficient, more standardized for exchange.
(01:55):
Yeah.
Like around 2000 BC.
Societies started using things like metal as currency.
Right. Like gold and silver.
Exactly. That was a big step forward.
But it also introduced a new problem.
What's that?
Trust.
Oh, okay.
How could you be sure that piece of silver was actually pure and worth what they claimed?
So even back then, trust was like a key part of money working.
(02:19):
Absolutely. And that need for trust.
It led to some pretty amazing innovations.
Like what?
Well, between 70650 BC over in Lydia, King Gaijus, he introduced coinage.
He made these standardized coins out of a specific mix of gold and silver.
And that made trade way easier.
And it really helped build trust in the currency.
(02:41):
It must have been huge.
Like a physical thing you could actually rely on.
Exactly. And it wasn't just economics either.
Around 550 BC, King Darius of Persia, he put his face on coins.
Okay.
That was a power move.
It was about projecting authority and unifying his empire.
So money has always been tied up with power and symbolism.
It's interesting how a simple coin can do all that.
(03:02):
Be so important economically, A&D politically.
Right. And if we jump ahead to the Roman Republic,
we see even more progress with coinage.
They had these standardized bronze coins.
Mass-produced, dedicated facilities for making them.
It just shows how money systems were getting more complex as societies got more advanced.
(03:24):
It's like every invention builds on what came before, making things smoother and more sophisticated.
Exactly.
But that underlying question remained, how do you build and keep trust?
In a system that's basically about exchanging abstract value.
Right. Like it's not always tied to a physical thing anymore.
Right. And this leads us to the three phases of money's evolution.
Okay.
Commodity money, representative money, and fiat money.
(03:46):
So each phase is about trust, but in a different way.
Exactly. Like with commodity money, things like gold and silver.
Right. They have value on their own.
Exactly. Intrinsic value.
Then there's representative money.
Like gold backed paper money.
So there's something physical guaranteeing it.
Right. People trusted they could exchange that paper for actual gold.
And finally, we come to fiat money.
(04:08):
Which is what we use today.
Exactly.
$$0.00 all that.
Right. Fiat money.
Like the US dollar.
It gets its value from the government saying so.
So we trust the central bank to keep it stable.
Precisely.
But thinking about things like the 2008 crisis makes you wonder how strong that trust really is.
That's a very good point.
The 2008 crisis shook people's faith in those centralized financials.
(04:31):
It's like the whole foundation crumbled and that's exactly when Bitcoin appeared.
A system that doesn't need those institutions people lost faith in.
Exactly.
But before we get into Bitcoin and all that, let's just lay out the core functions of money.
Sure.
What makes it work? Regardless of what form it takes.
Okay.
So we've got medium of exchange,
unit of account and store value.
(04:53):
Those are essential for any monetary system.
Whether it's based on precious metals, paper, or even Bitcoin.
So medium of exchange.
That's what you use to buy things, right?
Exactly.
Like when you go to the store, the unit of account,
that gives us a way to measure value.
Exactly. Like the dollar or the euro.
And store of value.
Means you can hold on to wealth and use it later.
(05:15):
Precisely.
So Bitcoin, even though it's all digital and decentralized,
still does those basic things that money needs to do.
Exactly.
And the amount of trust needed in each system.
From bartering to Bitcoin.
It is really shaped how money is evolved.
And how we think about its future.
And speaking of the future of money.
That brings us to Bitcoin and this whole world of cryptocurrency.
(05:38):
We'll explore that more deeply after a quick break.
Stay with us.
So as we were saying before,
that 2008 crisis really shook things up.
Yeah, it really did.
People lost faith in those centralized systems.
It's like the whole idea of trust just vanished.
It's true.
And that's exactly when Bitcoin came onto the scene.
Yeah, it was like the perfect storm.
This need for something new.
(05:59):
It's right.
Something more resilient.
And then boom, there's Bitcoin.
Exactly.
Late 2008, this person or group we don't really know.
Right. The mysterious Satoshi Nakamoto.
Yeah, exactly.
They published this paper.
Bitcoin appeared appear electronic cash system.
Catchy title.
Right. And in it, they laid out this totally new way
(06:21):
to think about digital currency.
Okay, so instead of banks or governments being in control,
Bitcoin was doing things differently.
Completely differently.
How so?
Bitcoin transactions.
They're recorded on this public ledger called the blockchain.
Okay, I've heard of that, but I'm still a little fuzzy on the details.
So the blockchain.
(06:42):
It's maintained by a whole network of computers.
Okay.
But it's decentralized.
Yeah.
No single entity is in control.
So it's not like a bank where there's one main server or anything?
Oh, completely different.
It's kind of mind blowing that this thing,
which could change everything about finance.
Came from somewhere we don't even know.
Yeah, it's like a digital mystery.
It is.
(07:03):
Now, one of the big problems with digital currencies
is this risk of double spending.
Double spending.
Like, how do you stop someone from spending the same digital coins twice?
Right. That makes sense.
Traditional systems.
They use banks to pretend that.
But Bitcoin, it does things differently.
I'm sensing a theme here.
Bitcoin, doing things differently.
(07:25):
It's all about decentralization and trust.
So how does it stop double spending then?
That's where the blockchain comes in.
It's like this massive public record of every Bitcoin transaction ever made.
So you can't hide anything.
Exactly. It's tamper proof.
That's pretty clever.
So everyone can see where the coins have gone.
Exactly.
And that makes double spending impossible.
(07:46):
Precisely.
So we don't need a bank to check everything.
Exactly. This system itself prevents it.
So just to be clear, Bitcoin is solving the trust issue
by getting rid of centralized control
and using this transparent network everyone can see.
You got it.
It's like a digital ledger.
But way more secure.
Way more secure.
And what about privacy?
Good question.
(08:07):
Like, if it's all public, does that mean everyone knows what I'm buying?
Not exactly.
Okay.
So Bitcoin transactions.
They're public on the blockchain.
Yeah.
But users are identified by these pseudonymous addresses.
Pseudonymous.
Basically, it's like a nickname.
See not my real name.
Not your real name, no.
Yeah.
It gives you some level of privacy.
But it's not completely anonymous.
(08:29):
Right.
There are ways to potentially link those addresses back to real world identities.
And how do people worry about that saying it could be used for illegal stuff?
That's a valid concern.
There was this online black market Silk Road.
They definitely use Bitcoin for illegal activities.
But Bitcoin itself isn't bad.
Exactly.
It's just a tool.
Like cash.
(08:50):
Precisely.
It could be used for good or bad.
So the technology is neutral.
Absolutely.
It's how people use it that matters.
Okay.
So we've got this decentralized network and the blockchain as a record.
But how does it all actually work in practice?
Good question.
Like, how are transactions added to the blockchain?
That's where mining comes in.
Yeah.
It's like a digital gold rush.
Okay.
(09:11):
I'm intrigued.
Miners are these specialized computers.
They compete to solve really complex bath problems.
Math problems.
Yeah.
It's all about cryptography.
And the first miner to solve the problem gets to add the next block of transactions to the blockchain.
So it's like a race.
It is.
And what do they get if they win?
(09:32):
They get rewarded with Bitcoin.
Ah!
So that's how new Bitcoin is created.
Exactly.
It's called proof of work.
Proof of work.
Okay.
So it's like a real work running.
It incentivizes people to use their computing power to keep the blockchain secure.
Okay.
I'm starting to see how it all fits together.
But can you walk me through it again?
So it's like step by step.
How does a Bitcoin transaction end up on the blockchain?
(09:56):
Right.
So let's say you want to send some Bitcoin to a friend.
Okay.
You do that through your Bitcoin wallet.
Right.
I've got one of those.
So I send the Bitcoin.
And that transaction.
It gets broadcast to the whole network of miners.
And all those miners.
They start trying to solve this complex math problem that's specific to that block of transactions.
And whoever solves it first gets to add the block to the chain.
(10:19):
Exactly.
And they get some Bitcoin.
Right.
And this happens like all the time.
It does every 10 minutes.
A new block gets added.
So it's a chain of puzzles constantly being solved.
Precisely.
And each solution adds another link to the blockchain.
Exactly.
And each block, it's linked to the one before it.
Using cryptography.
Creating this tamper-proof record of every Bitcoin transaction.
(10:41):
It's brilliant, but I have to ask, doesn't all this mining use a ton of energy?
That's a valid concern.
The proof of work algorithm.
It is energy intensive.
And that's not great for the environment.
Right.
There's been a lot of debate about that.
But people are working on more efficient methods.
Like what?
Well, Ethereum, another big cryptocurrency.
They've switched to something called proof of stake.
(11:02):
Roof of stake.
It uses way less energy.
So there are alternatives.
There are.
To make it more sustainable.
That's good to know.
But going back to Bitcoin for a sec.
Sure.
If no one's in control, how do we know it's secure?
Yeah.
That gets to the heart of what makes blockchain so revolutionary.
Okay.
Tell me more.
Bitcoin's security.
(11:23):
It doesn't depend on a central authority.
It's all about this mix of things.
Like what?
Clever cryptography for one.
Decentralized consensus, meaning everyone agrees on the rules.
And this concept called unspent transaction outputs.
Unspent transaction outputs.
Or UTXOs for sure.
UTXOs, okay.
Think of them like digital receipts.
(11:44):
Receipts.
Yeah.
They prove you have the Bitcoin to spend.
So when I send Bitcoin to someone, I'm basically creating a UTXO for them.
Exactly.
And every time there's a new transaction, the network checks these UTXOs.
To make sure the sender actually has the coins.
And that they have an R-E-Spent though.
Exactly.
It's like a massive cross-checking system to prevent double spending in fraud.
Precisely.
And because it happens across so many computers, it's really hard for anyone to cheat.
(12:09):
Okay.
That makes sense.
But what about that 51% attack I keep hearing about?
Ah, yes.
The 51% attack.
Couldn't someone just get enough computing power and take control of the majority of the network?
Theoretically, yes.
But it's extremely unlikely.
Why is that?
The cost of doing that.
Getting and running all those computers.
(12:30):
It would be astronomical.
So it's not worth it.
Not really.
The potential gains.
Yeah.
Would be way less than the cost.
So the risk is there, but it's pretty much impossible.
Pretty much.
And besides all the technical stuff, there's also this concept of forks.
Forks.
Yeah, like a fork in the road.
Imagine the Bitcoin community wants to make a big change.
Okay.
(12:51):
Like the rules, the protocol.
Right.
To make transactions faster or add new features, that's where a fork comes in.
So it's like splitting the code.
Exactly.
Creating two different versions of Bitcoin.
You got it.
There are soft forks and hard forks.
Soft forks are backward compatible.
Meaning the old software still works.
Okay.
But hard forks, they create a whole new blockchain with its own rules.
(13:13):
Right.
Like Bitcoin cash.
But Bitcoin cash is a great example.
It came from a hard fork of Bitcoin.
So it's like a branch off the main path.
Exactly.
Creating a whole new cryptocurrency.
Precisely.
And because of that branching, the original Bitcoin stays safe.
Exactly.
And people disagree about changes.
Right.
It's like built-in evolution.
It is.
(13:34):
So we've covered Bitcoin pretty thoroughly, but it's just one piece of the puzzle.
It is.
The crypto universe is huge.
Yeah.
And constantly growing.
One of the cryptocurrencies are out there.
Oh, tons, thousands, actually.
Each with its own purpose and features.
And are there any other blockchain technologies that we should be paying attention to?
Well, one of the most prominent ones is Ethereum.
(13:57):
Okay.
I've heard of that.
But I don't really know what it is.
It's more than just a currency.
Ethereum lets you create smart contracts.
Yeah.
And decentralized applications.
Decentralized applications like apps on my phone.
Kind of, but they run on the blockchain.
Smart contracts and dApps, those sound like game changers.
They are.
Can you tell me more about those?
So smart contracts and dApps.
(14:18):
Yeah.
They sound pretty revolutionary.
They are.
Like, what makes them so special?
Imagine a vending machine.
Okay.
But instead of snacks, it dispenses these digital agreements.
Agreements.
Yeah. Agreements that execute automatically.
Oh, and a mat.
When certain conditions are met.
Okay.
I'm listening.
That's essentially a smart contract.
So it's not a contract on paper.
(14:40):
No.
It's code.
It's a self-executing agreement written in code.
And what's the advantage of that?
Well, you don't need those traditional middlemen lawyers, banks.
No.
Okay.
Transactions more efficient, transparent and secure.
So give me an example.
How would I use a smart contract?
Let's say you want to buy digital art.
(15:01):
Okay.
From an artist, you can use a smart contract for that.
How would that work?
The code would handle everything, transferring ownership of the artwork and the payment.
At the same time.
Simultaneously.
Without needing a third party to manage it.
So it's like a guaranteed instant transaction.
Exactly.
And what about these dApps?
Decentralize applications.
Yeah.
(15:22):
How are they different from regular apps?
They're built on blockchains like Ethereum.
Okay.
They use the blockchain security and transparency to create a whole new kind of software.
So instead of relying on a company's server.
Right.
DApps run on a decentralized network.
Exactly.
So they're harder to censor or shut down.
And less vulnerable to data breaches.
It's like a whole new way of thinking about software.
(15:43):
It is.
A paradigm shift.
Give me some examples.
Imagine social media.
Okay.
But controlled by users.
Not a corporation.
Interesting.
Or financial apps that don't need banks.
Giving people more control over their money.
Exactly.
The possibilities are huge.
This is all fascinating.
But I'm also curious about the real world impact.
Like, how is this stuff actually being used today?
(16:06):
One big area is decentralized finance.
Or DeFi.
DeFi.
Okay.
It's about creating a more open financial system.
Using blockchain.
And smart contracts.
To do what banks do.
But without the banks.
So like, I could get alone.
Without going to a bank.
You could use a DeFi platform.
To borrow money directly from other people.
Exactly.
And smart contracts would handle the terms and repayment.
(16:28):
Precisely.
That's pretty amazing.
DeFi is still young.
But it has huge potential.
To change how we think about finance.
And to make financial services more accessible.
For everyone.
For everyone.
So what else is coming?
What other cool blockchain applications are there?
Well, there's a lot of buzz around DAOs.
DAOs.
It's decentralized autonomous organizations.
(16:51):
That's a mouthful.
There are basically organizations run by smart contracts.
Without any bosses.
Without traditional hierarchies.
That sounds radical.
It is a different way of organizing.
What are the benefits of that?
Increased transparency.
More participation from members.
Less bureaucracy.
So how are decisions made in a DAO?
Through consensus mechanisms.
Everyone gets a say.
(17:12):
And the rules are all coded into smart contracts.
So it's like a digital democracy.
You could say that.
It's a new model for how we govern and collaborate.
Then beyond DAOs and DeFi.
Is blockchain being used in other areas?
Oh, definitely.
Like where?
Supply chains.
Healthcare.
Even voting system.
It seems like blockchain can be used for almost anything.
(17:34):
The potential applications are vast.
This has been a mind-blowing journey.
From bartering to Bitcoin.
The whole evolution of money.
It's a fascinating history.
We've covered so much, blockchain, smart contracts, DApps, new ways to think about finance and governance.
It's a lot to take in.
I feel like I've learned a ton.
But I also feel like we're just scratching the surface.
(17:56):
That's the exciting part.
We're seeing a new era of technology unfold.
It's hard to predict where it will lead.
But one thing's for sure.
The future of money, organizations, maybe even society.
It's all going to be shaped by these innovations.
I completely agree.
It's a truly transformative time.
And for our listeners, keep exploring this world.
Dive deeper, engage with the community.
(18:18):
Never stop learning.
The crypto world is full of possibilities.
And we're all in this journey together.
Thanks for joining us on this deep dive.
And until next time, keep exploring.
Until next time, keep exploring!
[Music]
(00:20):
[Music]
(00:48):
Welcome to the Deep Dive. Today we're diving into something really fascinating.
The evolution of money and how we got to cryptocurrency.
That's good.
We've got a ton of sources, historical records, economic texts, technical papers,
all sorts of stuff. We're going to use them to kind of trace this whole journey
from like, you know, bartering to Bitcoin, the whole thing.
(01:13):
But before we get into all the details, I kind of want to start with a really basic question.
Sure.
What even makes money money?
That's a great question to start with. You know, money as we know it.
It's been evolving for a really long time. We could trace it way back to these ancient barter systems
where people just traded stuff directly.
Right.
(01:34):
Imagine trading account for some week.
Yeah.
Not super practical for everyday buying and selling.
No, not at all. It makes you appreciate just tapping your phone.
Right.
So, how do we get from trading cows?
You know, the contactless payments and all that.
Well, it was a gradual process driven by I think this need for a better system.
Something more efficient, more standardized for exchange.
(01:55):
Yeah.
Like around 2000 BC.
Societies started using things like metal as currency.
Right. Like gold and silver.
Exactly. That was a big step forward.
But it also introduced a new problem.
What's that?
Trust.
Oh, okay.
How could you be sure that piece of silver was actually pure and worth what they claimed?
So even back then, trust was like a key part of money working.
(02:19):
Absolutely. And that need for trust.
It led to some pretty amazing innovations.
Like what?
Well, between 70650 BC over in Lydia, King Gaijus, he introduced coinage.
He made these standardized coins out of a specific mix of gold and silver.
And that made trade way easier.
And it really helped build trust in the currency.
(02:41):
It must have been huge.
Like a physical thing you could actually rely on.
Exactly. And it wasn't just economics either.
Around 550 BC, King Darius of Persia, he put his face on coins.
Okay.
That was a power move.
It was about projecting authority and unifying his empire.
So money has always been tied up with power and symbolism.
It's interesting how a simple coin can do all that.
(03:02):
Be so important economically, A&D politically.
Right. And if we jump ahead to the Roman Republic,
we see even more progress with coinage.
They had these standardized bronze coins.
Mass-produced, dedicated facilities for making them.
It just shows how money systems were getting more complex as societies got more advanced.
(03:24):
It's like every invention builds on what came before, making things smoother and more sophisticated.
Exactly.
But that underlying question remained, how do you build and keep trust?
In a system that's basically about exchanging abstract value.
Right. Like it's not always tied to a physical thing anymore.
Right. And this leads us to the three phases of money's evolution.
Okay.
Commodity money, representative money, and fiat money.
(03:46):
So each phase is about trust, but in a different way.
Exactly. Like with commodity money, things like gold and silver.
Right. They have value on their own.
Exactly. Intrinsic value.
Then there's representative money.
Like gold backed paper money.
So there's something physical guaranteeing it.
Right. People trusted they could exchange that paper for actual gold.
And finally, we come to fiat money.
(04:08):
Which is what we use today.
Exactly.
$$0.00 all that.
Right. Fiat money.
Like the US dollar.
It gets its value from the government saying so.
So we trust the central bank to keep it stable.
Precisely.
But thinking about things like the 2008 crisis makes you wonder how strong that trust really is.
That's a very good point.
The 2008 crisis shook people's faith in those centralized financials.
(04:31):
It's like the whole foundation crumbled and that's exactly when Bitcoin appeared.
A system that doesn't need those institutions people lost faith in.
Exactly.
But before we get into Bitcoin and all that, let's just lay out the core functions of money.
Sure.
What makes it work? Regardless of what form it takes.
Okay.
So we've got medium of exchange,
unit of account and store value.
(04:53):
Those are essential for any monetary system.
Whether it's based on precious metals, paper, or even Bitcoin.
So medium of exchange.
That's what you use to buy things, right?
Exactly.
Like when you go to the store, the unit of account,
that gives us a way to measure value.
Exactly. Like the dollar or the euro.
And store of value.
Means you can hold on to wealth and use it later.
(05:15):
Precisely.
So Bitcoin, even though it's all digital and decentralized,
still does those basic things that money needs to do.
Exactly.
And the amount of trust needed in each system.
From bartering to Bitcoin.
It is really shaped how money is evolved.
And how we think about its future.
And speaking of the future of money.
That brings us to Bitcoin and this whole world of cryptocurrency.
(05:38):
We'll explore that more deeply after a quick break.
Stay with us.
So as we were saying before,
that 2008 crisis really shook things up.
Yeah, it really did.
People lost faith in those centralized systems.
It's like the whole idea of trust just vanished.
It's true.
And that's exactly when Bitcoin came onto the scene.
Yeah, it was like the perfect storm.
This need for something new.
(05:59):
It's right.
Something more resilient.
And then boom, there's Bitcoin.
Exactly.
Late 2008, this person or group we don't really know.
Right. The mysterious Satoshi Nakamoto.
Yeah, exactly.
They published this paper.
Bitcoin appeared appear electronic cash system.
Catchy title.
Right. And in it, they laid out this totally new way
(06:21):
to think about digital currency.
Okay, so instead of banks or governments being in control,
Bitcoin was doing things differently.
Completely differently.
How so?
Bitcoin transactions.
They're recorded on this public ledger called the blockchain.
Okay, I've heard of that, but I'm still a little fuzzy on the details.
So the blockchain.
(06:42):
It's maintained by a whole network of computers.
Okay.
But it's decentralized.
Yeah.
No single entity is in control.
So it's not like a bank where there's one main server or anything?
Oh, completely different.
It's kind of mind blowing that this thing,
which could change everything about finance.
Came from somewhere we don't even know.
Yeah, it's like a digital mystery.
It is.
(07:03):
Now, one of the big problems with digital currencies
is this risk of double spending.
Double spending.
Like, how do you stop someone from spending the same digital coins twice?
Right. That makes sense.
Traditional systems.
They use banks to pretend that.
But Bitcoin, it does things differently.
I'm sensing a theme here.
Bitcoin, doing things differently.
(07:25):
It's all about decentralization and trust.
So how does it stop double spending then?
That's where the blockchain comes in.
It's like this massive public record of every Bitcoin transaction ever made.
So you can't hide anything.
Exactly. It's tamper proof.
That's pretty clever.
So everyone can see where the coins have gone.
Exactly.
And that makes double spending impossible.
(07:46):
Precisely.
So we don't need a bank to check everything.
Exactly. This system itself prevents it.
So just to be clear, Bitcoin is solving the trust issue
by getting rid of centralized control
and using this transparent network everyone can see.
You got it.
It's like a digital ledger.
But way more secure.
Way more secure.
And what about privacy?
Good question.
(08:07):
Like, if it's all public, does that mean everyone knows what I'm buying?
Not exactly.
Okay.
So Bitcoin transactions.
They're public on the blockchain.
Yeah.
But users are identified by these pseudonymous addresses.
Pseudonymous.
Basically, it's like a nickname.
See not my real name.
Not your real name, no.
Yeah.
It gives you some level of privacy.
But it's not completely anonymous.
(08:29):
Right.
There are ways to potentially link those addresses back to real world identities.
And how do people worry about that saying it could be used for illegal stuff?
That's a valid concern.
There was this online black market Silk Road.
They definitely use Bitcoin for illegal activities.
But Bitcoin itself isn't bad.
Exactly.
It's just a tool.
Like cash.
(08:50):
Precisely.
It could be used for good or bad.
So the technology is neutral.
Absolutely.
It's how people use it that matters.
Okay.
So we've got this decentralized network and the blockchain as a record.
But how does it all actually work in practice?
Good question.
Like, how are transactions added to the blockchain?
That's where mining comes in.
Yeah.
It's like a digital gold rush.
Okay.
(09:11):
I'm intrigued.
Miners are these specialized computers.
They compete to solve really complex bath problems.
Math problems.
Yeah.
It's all about cryptography.
And the first miner to solve the problem gets to add the next block of transactions to the blockchain.
So it's like a race.
It is.
And what do they get if they win?
(09:32):
They get rewarded with Bitcoin.
Ah!
So that's how new Bitcoin is created.
Exactly.
It's called proof of work.
Proof of work.
Okay.
So it's like a real work running.
It incentivizes people to use their computing power to keep the blockchain secure.
Okay.
I'm starting to see how it all fits together.
But can you walk me through it again?
So it's like step by step.
How does a Bitcoin transaction end up on the blockchain?
(09:56):
Right.
So let's say you want to send some Bitcoin to a friend.
Okay.
You do that through your Bitcoin wallet.
Right.
I've got one of those.
So I send the Bitcoin.
And that transaction.
It gets broadcast to the whole network of miners.
And all those miners.
They start trying to solve this complex math problem that's specific to that block of transactions.
And whoever solves it first gets to add the block to the chain.
(10:19):
Exactly.
And they get some Bitcoin.
Right.
And this happens like all the time.
It does every 10 minutes.
A new block gets added.
So it's a chain of puzzles constantly being solved.
Precisely.
And each solution adds another link to the blockchain.
Exactly.
And each block, it's linked to the one before it.
Using cryptography.
Creating this tamper-proof record of every Bitcoin transaction.
(10:41):
It's brilliant, but I have to ask, doesn't all this mining use a ton of energy?
That's a valid concern.
The proof of work algorithm.
It is energy intensive.
And that's not great for the environment.
Right.
There's been a lot of debate about that.
But people are working on more efficient methods.
Like what?
Well, Ethereum, another big cryptocurrency.
They've switched to something called proof of stake.
(11:02):
Roof of stake.
It uses way less energy.
So there are alternatives.
There are.
To make it more sustainable.
That's good to know.
But going back to Bitcoin for a sec.
Sure.
If no one's in control, how do we know it's secure?
Yeah.
That gets to the heart of what makes blockchain so revolutionary.
Okay.
Tell me more.
Bitcoin's security.
(11:23):
It doesn't depend on a central authority.
It's all about this mix of things.
Like what?
Clever cryptography for one.
Decentralized consensus, meaning everyone agrees on the rules.
And this concept called unspent transaction outputs.
Unspent transaction outputs.
Or UTXOs for sure.
UTXOs, okay.
Think of them like digital receipts.
(11:44):
Receipts.
Yeah.
They prove you have the Bitcoin to spend.
So when I send Bitcoin to someone, I'm basically creating a UTXO for them.
Exactly.
And every time there's a new transaction, the network checks these UTXOs.
To make sure the sender actually has the coins.
And that they have an R-E-Spent though.
Exactly.
It's like a massive cross-checking system to prevent double spending in fraud.
Precisely.
And because it happens across so many computers, it's really hard for anyone to cheat.
(12:09):
Okay.
That makes sense.
But what about that 51% attack I keep hearing about?
Ah, yes.
The 51% attack.
Couldn't someone just get enough computing power and take control of the majority of the network?
Theoretically, yes.
But it's extremely unlikely.
Why is that?
The cost of doing that.
Getting and running all those computers.
(12:30):
It would be astronomical.
So it's not worth it.
Not really.
The potential gains.
Yeah.
Would be way less than the cost.
So the risk is there, but it's pretty much impossible.
Pretty much.
And besides all the technical stuff, there's also this concept of forks.
Forks.
Yeah, like a fork in the road.
Imagine the Bitcoin community wants to make a big change.
Okay.
(12:51):
Like the rules, the protocol.
Right.
To make transactions faster or add new features, that's where a fork comes in.
So it's like splitting the code.
Exactly.
Creating two different versions of Bitcoin.
You got it.
There are soft forks and hard forks.
Soft forks are backward compatible.
Meaning the old software still works.
Okay.
But hard forks, they create a whole new blockchain with its own rules.
(13:13):
Right.
Like Bitcoin cash.
But Bitcoin cash is a great example.
It came from a hard fork of Bitcoin.
So it's like a branch off the main path.
Exactly.
Creating a whole new cryptocurrency.
Precisely.
And because of that branching, the original Bitcoin stays safe.
Exactly.
And people disagree about changes.
Right.
It's like built-in evolution.
It is.
(13:34):
So we've covered Bitcoin pretty thoroughly, but it's just one piece of the puzzle.
It is.
The crypto universe is huge.
Yeah.
And constantly growing.
One of the cryptocurrencies are out there.
Oh, tons, thousands, actually.
Each with its own purpose and features.
And are there any other blockchain technologies that we should be paying attention to?
Well, one of the most prominent ones is Ethereum.
(13:57):
Okay.
I've heard of that.
But I don't really know what it is.
It's more than just a currency.
Ethereum lets you create smart contracts.
Yeah.
And decentralized applications.
Decentralized applications like apps on my phone.
Kind of, but they run on the blockchain.
Smart contracts and dApps, those sound like game changers.
They are.
Can you tell me more about those?
So smart contracts and dApps.
(14:18):
Yeah.
They sound pretty revolutionary.
They are.
Like, what makes them so special?
Imagine a vending machine.
Okay.
But instead of snacks, it dispenses these digital agreements.
Agreements.
Yeah. Agreements that execute automatically.
Oh, and a mat.
When certain conditions are met.
Okay.
I'm listening.
That's essentially a smart contract.
So it's not a contract on paper.
(14:40):
No.
It's code.
It's a self-executing agreement written in code.
And what's the advantage of that?
Well, you don't need those traditional middlemen lawyers, banks.
No.
Okay.
Transactions more efficient, transparent and secure.
So give me an example.
How would I use a smart contract?
Let's say you want to buy digital art.
(15:01):
Okay.
From an artist, you can use a smart contract for that.
How would that work?
The code would handle everything, transferring ownership of the artwork and the payment.
At the same time.
Simultaneously.
Without needing a third party to manage it.
So it's like a guaranteed instant transaction.
Exactly.
And what about these dApps?
Decentralize applications.
Yeah.
(15:22):
How are they different from regular apps?
They're built on blockchains like Ethereum.
Okay.
They use the blockchain security and transparency to create a whole new kind of software.
So instead of relying on a company's server.
Right.
DApps run on a decentralized network.
Exactly.
So they're harder to censor or shut down.
And less vulnerable to data breaches.
It's like a whole new way of thinking about software.
(15:43):
It is.
A paradigm shift.
Give me some examples.
Imagine social media.
Okay.
But controlled by users.
Not a corporation.
Interesting.
Or financial apps that don't need banks.
Giving people more control over their money.
Exactly.
The possibilities are huge.
This is all fascinating.
But I'm also curious about the real world impact.
Like, how is this stuff actually being used today?
(16:06):
One big area is decentralized finance.
Or DeFi.
DeFi.
Okay.
It's about creating a more open financial system.
Using blockchain.
And smart contracts.
To do what banks do.
But without the banks.
So like, I could get alone.
Without going to a bank.
You could use a DeFi platform.
To borrow money directly from other people.
Exactly.
And smart contracts would handle the terms and repayment.
(16:28):
Precisely.
That's pretty amazing.
DeFi is still young.
But it has huge potential.
To change how we think about finance.
And to make financial services more accessible.
For everyone.
For everyone.
So what else is coming?
What other cool blockchain applications are there?
Well, there's a lot of buzz around DAOs.
DAOs.
It's decentralized autonomous organizations.
(16:51):
That's a mouthful.
There are basically organizations run by smart contracts.
Without any bosses.
Without traditional hierarchies.
That sounds radical.
It is a different way of organizing.
What are the benefits of that?
Increased transparency.
More participation from members.
Less bureaucracy.
So how are decisions made in a DAO?
Through consensus mechanisms.
Everyone gets a say.
(17:12):
And the rules are all coded into smart contracts.
So it's like a digital democracy.
You could say that.
It's a new model for how we govern and collaborate.
Then beyond DAOs and DeFi.
Is blockchain being used in other areas?
Oh, definitely.
Like where?
Supply chains.
Healthcare.
Even voting system.
It seems like blockchain can be used for almost anything.
(17:34):
The potential applications are vast.
This has been a mind-blowing journey.
From bartering to Bitcoin.
The whole evolution of money.
It's a fascinating history.
We've covered so much, blockchain, smart contracts, DApps, new ways to think about finance and governance.
It's a lot to take in.
I feel like I've learned a ton.
But I also feel like we're just scratching the surface.
(17:56):
That's the exciting part.
We're seeing a new era of technology unfold.
It's hard to predict where it will lead.
But one thing's for sure.
The future of money, organizations, maybe even society.
It's all going to be shaped by these innovations.
I completely agree.
It's a truly transformative time.
And for our listeners, keep exploring this world.
Dive deeper, engage with the community.
(18:18):
Never stop learning.
The crypto world is full of possibilities.
And we're all in this journey together.
Thanks for joining us on this deep dive.
And until next time, keep exploring.
Until next time, keep exploring!
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