Banking on Bitcoin Page #3

until Nancy called me

and mentioned digital currency

and I'm thinking

she must have been

in the bottle this morning

or something.

Digital currency, oh.

What, what?

You know.

But they say it's for people

who don't have bank accounts.

I can't understand.

If you have one coin,

it's...

Let's say it's worth $150.

What do you do, give the

number or something to the...

Say, the grocery store person,

and then they subtract it?

How do you know?

How do you make change?

How do you know what you have

left or what you've spent?

You can have the money supply

controlled by a computer.

That's all bitcoin really is.

The key point here is that

this a distributed ledger.

There is no central server.

All the other ledgers

that we have,

all the banking ledgers,

all company ledgers,

they all sit and reside

inside that company,

which means they have

one point of attack.

They can be hacked.

Jp Morgan was hacked

by, you know, the cyberthieves

not so long ago.

Home depot, target, we've had

all these companies get hacked,

precisely because there's one

central repository of information.

The bitcoin ledger resides,

on, you know,

thousands of computers.

You can't hack that.

Every single transaction

is recorded,

and once it is recorded

in the blockchain,

it is there, it is permanent.

It cannot be altered. It cannot be

changed, so that you can read it.

Now the identities

of the people are encrypted.

The wallets are encrypted,

so you don't know who

is spending the money,

but you know that every

single bitcoin out there

has a history,

you know where it's been,

you know the different

addresses it's gone between.

The most important pieces

of the bitcoin infrastructure

are the miners.

These are the computers

that are tasked

with maintaining

the ledger of the blockchain

to verify the information,

to update it,

to make sure

that it is trustworthy.

So how do we

incentivize them to do so?

As they are going through the

process of confirming transactions,

they are simultaneously

being subjected to

a very, very difficult

computing test.

The bitcoin core protocol

is forcing them

to look for a number.

All of these miners

are ultimately competing

to be the one that receives

that payout every ten minutes.

But really that's

the secondary component.

They're really being

rewarded with bitcoin,

but what is

the more important task

is the validation

and verification

of transactions and

the maintaining of the ledger.

Bitcoin, in being

the first to achieve

this holy grail of

decentralized value exchange

that transfers

that process of trust

to a collective agreement

around a body

of independent computers

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