Will Bitcoin Remain the Biggest Cryptocurrency?

Bitcoin's booming value has everyone excited, but some financial experts are putting their money on other cryptocurrencies. Learn about the potential future of Bitcoin in this episode of BrainStuff.

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Episode Transcript

Speaker 1 (00:02):
Welcome to brain stuff from how Stuff Works. Hey, their
brain stuff, Lauren Vogel bomb here in sevente loan. The
price of a bitcoin exploded from under one thousand dollars
in January to more than ten thousand dollars in early December,
earning the top cryptocurrency a market capitalization of more than
one hundred and sixty seven billion dollars. Surprise success of

(00:24):
bitcoin has opened the floodgates to a torrent of new
cryptocurrencies competing for investor dollars. Bitcoin is a strictly digital
currency with no physical backing, that can be sent from
one Internet user to another. It runs on blockchain technology.
The blockchain works by recording financial transactions on a shared
digital ledger that's encrypted on a peer to peer network,

(00:46):
instead of relying on a large financial institution or centralized
servers to process payments. The blockchain runs on thousands of
computers or nodes worldwide. Advanced cryptography keeps financial information secure
and largely anonymous, so to breaches are impossible. The blockchain
is being heralded as a world changing technology that will
permanently disrupt the highly centralized and fee based financial system.

(01:10):
Investors eager to get in on the ground floor of
this potentially revolutionary technology. Are throwing money not only at Bitcoin,
but at the more than one thousand crypto competitors known
collectively as alt coins. Skeptics are comparing this to the
dot com bubble. Bitcoin was first released in two thousand
nine by anonymous coders under the pseudonym Satoshi Nakamoto. Critics

(01:30):
initially dismissed Bitcoin as a futurist pipe dream or worse,
a boon to black market criminals, but now Bitcoin's underlying
technology is being hailed by some as the future of finance.
We spoke with Andrew Miller, an assistant professor of electrical
and Computer engineering at the University of Illinois at urbanash
Champaigne and the associate director for the Initiative for Cryptocurrencies

(01:51):
and Contracts. He thinks the bubble talk is irrelevant. What's
more important, he says, is that investors speculation is fostering
rapid innovation, creating hundreds of really exciting experiments in the
form of new cryptocurrencies, each with unique functionalities. He said,
anyone investing in technology understands that there will be many failures.

(02:12):
It seems to be the case with cryptocurrencies that the
speculation is funding what is hopefully a really important infrastructure
development infrastructure. I thought we were talking about nonphysical currency. Well,
you can't have cryptocurrencies without the blockchain, and the impact
of the distributed blockchain infrastructure will likely be far bigger
than any individual cryptocurrency, and that's why so many blockchain

(02:35):
enthusiasts are big on a Bitcoin alternative called Etherium. Ethereum
isn't just a cryptocurrency, it's a platform for building applications
that run on the blockchain. Like bitcoin, Ethereum has its
own programming language, but it's more powerful and versatile than bitcoins,
and unlike Bitcoin, Ethereum isn't out to replace conventional money,
but simply to enable more secure transactions on the blockchain.

(02:58):
Ethereum has its own to currency called Ether, but it's
only useful within the Ethereum platform. You'll never use Ether,
for example, to buy Xbox games like you can with bitcoin.
We also spoke with Vople Goyle, who teaches a graduate
course on blockchain and cryptocurrencies at Carnegie Mellon University. He
thinks that the surge in new cryptocurrencies will soon stabilize,

(03:19):
leaving only a few dozen in circulation. He also thinks
that Bitcoin's position at the top may not be permanent,
and predicts that Ethereum will wind up becoming the biggest
His reasoning is that Ethereum's programming language and platform make
it easy for startups and developers to create decentralized apps
that empower individuals and businesses in new ways. One of
the biggest, says Goyle, is the idea of smart contracts.

(03:41):
Instead of paying lawyers to write and enforce a contract,
the deal can be programmed on the blockchain. Smart contracts
enforce themselves, even imposing penalties for a breach. Before coming
to Carnegie Melon, Goyle worked for Microsoft India, where he
says the company was moving contracts for real world properties
like office buildings onto the blockchain to avoid it'd costly
legal disputes. Ethereum also makes it easier to use what

(04:04):
Miller at the University of Illinois calls programmable money. He
uses the example of a college student's bank account that's
programmed with certain parental controls. The student can withdraw up
to a one dollars a week for expenses, but anything
beyond that requires an authorization by the parents. Unique cryptography.
Key Miller thinks that programmable money is one of those
ideas that will quickly spread into mainstream banking. Besides Ethereum,

(04:28):
some of the other alt coins gaining traction promised greater
security and anonymity than Bitcoin. Miller says that the initial
media buzz over bitcoin's unbreakable privacy was only partially true,
and that the original version of blockchain still leaves users
vulnerable to hackers. He says that some next generation cryptocurrencies,
like z cash, for which he is an advisor, by

(04:49):
the way, Manaro and Dash, employ much more advanced cryptography
that completely hides the identity of users and the value
of transactions. There are still plenty of obstacles that may
delay or potentially do rail the widespread adoption of cryptocurrencies.
Transaction speed is a big one. With Bitcoin, transactions need
to be verified by half of all active nodes on
the network, which Goyles says takes thirty minutes on average.

(05:12):
Ethereum can only handle thirteen transactions per second, which is
still way too slow like two D and fifty times
too slow to serve a user base of ten million,
which means we won't be using it to buy our
groceries anytime soon. Another potential monkey wrench is government regulation.
One of the benefits of cryptocurrencies is that they operate
outside of highly regulated financial systems and government control. But

(05:34):
some companies are getting ready to offer bitcoin futures contracts,
which will encourage mainstream investors to get involved, as well
as spur federal regulation via the Commodity Futures Trading Commission.
Whether all this means you should invest in cryptocurrencies, well,
that one's up to you. Today's episode was written by

(05:56):
Dave Ruse and produced by Tristan McNeil. For more on
this and lots of other technological topics, visit our home planet,
past off Works dot com m