How Cryptocurrency works. Explained P1

All right bitcoin blockchain dogecoin Ethereum nights Everyone is talking about Cryptocurrencies right now, but Good lord, what does all of it mean so Welcome to the one post that will take You from crypto noob To crypto genius.




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 going up to them and be like oh my Really like your horse. I’ll trade you my cat for it sorry Milo I never trade you, but the issue with a




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 me 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 is 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 in 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 Everm 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 physicist 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

A 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 sets 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

The 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

A computer that’s on the network and

Give me 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 of 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.

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