Understanding Bitcoin and Cryptocurrency: A Simplified Guide

hello everyone so unless and until you've been living under a rock you would have definitely

heard the term called bitcoin um cryptocurrency and you know these are terms that we keep hearing nowadays

uh more often than before and i'm going to explain in this video uh in the most simplest of terms you

know what is bitcoin what is digital currency or cryptocurrency and some of history behind it and also

you know technically what it actually means uh what is blockchain that is that

system behind the cryptocurrency so i'll try and explain it in the most simplest of terms so that you will understand it

by the end of this video so before we even go into the uh details of what

uh bitcoin is you know why is the need for a cryptocurrency why do we need a digital currency in the first place like

you know we have indian rupees us dollars and we store our money in the bank so

it's all safe so why do we need to go for it a few months back one of the major

indian banks punjab national banks had a big collapse and people who had put their money in the

bank they were not able to withdraw their money they were not even able to use their money the cards were not valid

the money was there in the bank electronically or you know it was on paper at least

showing the money was there in the bank but the bank had collapsed so they were struggling to get their money out

and in countries like india the government actually uh backs up some of the money in the bank

up to about 1 lakh rupees and in some countries like uk for example the governments back up the money till

about 85 000 pounds selling if the bank collapses the bank the government will provide up to 85 000

points in some countries like uk but in every country it differs

but there's no guarantee if you had like a one crore deposit in a bank and the bank collapses

the money is gone you know literally even if it's on paper you can't go and get it from anywhere

and in some cases the country itself collapses like for example when iraq invaded kuwait

the kuwait and dinar basically lost its value so people who had thousands and thousands

of kuwait and dinners that was basically paper and it had no value anymore which is where the concept of um you

know having a digital currency comes into place where there is no physical bank there is no

physical entity that stores it and there is no government that that needs to exist to recognize it which is

what the whole concept of digital currency is the origin of bitcoin um or the

technology behind bitcoin is a concept called as blockchain now the blockchain concept wasn't new it

was something that had existed for nearly 20 years and um until about 2009 there was no

real usage for it now what is blockchain now basically uh when we put our money in a bank right

you know the data is existing in one computer it's in a server or it's in a data

storage room and you would have seen it in big movies where there is a computer room and hackers

basically hack into the computer they can get the money out using um you know brute force algorithm or whatever

hacking method they use but there is basically one computer or basically two or three computers that

they hack into and the data is sitting in one place and they hack into it and they can change

the data and once you change the data the money is gone like that's how you would have seen it

in all the movies and that's how the data storage used to exist before the concept of blockchain

what does blockchain actually mean let's take a simple example right let's assume that there is a rich

person and this rich person has one bookkeeper now the bookkeeper is basically making

sure how much money this person is having this in and outs that's he's writing it

in a book and that book is with him so if you want to make sure that

you take the money out from the rich man or change the money that the rich man has

if you can just go to the bookkeeper and and and modify that notebook that he is

maintaining then you can basically say that instead of one crore he has only 50 lakhs if you can modify the notebook

that the rich that the bookkeeper is maintaining also if you convince the bookkeeper that

he needs to change it he can change it or you can go and steal the notebook and change it

basically is one source of data which you can go and change now this is the traditional database that i talked

about one machine concept that i talked about right now if the rich man anticipates that this could happen and

instead of one bookkeeper and one book he basically pays 10 bookkeepers and asks everyone to maintain his accounts

on a daily basis in parallel right so 10 bookkeepers individually each have their own

notebooks and they're all writing the same accounts so even if you manage to get hold of one

bookkeeper and change the one note um one notebook and the data and the one notebook the other nine

bookkeepers are going to have the data so you can you have actually not changed anything so

if you really want to change the you know 10 000 rupees to 20 000 rupees or change any data

you have to basically go to all the 10 bookkeepers and simultaneously you have to change the data in all of the 10

notebooks and imagine if the richmond knew that this could also happen

and instead of 10 bookkeepers he now has 100 bookkeepers and each of them have their own notebook

and if these 100 bookkeepers are basically not in one location they spread across

all across the country or maybe all across the world for that matter and which

means that it's technically impossible to to access all of these 100 bookkeepers

change all of their notebooks change all of the data in all of those notebooks

only then you will be able to steal money or change the data that belongs to that

richmond now this is the concept of blockchain this is exactly the concept of blockchain that

the data is decentralized and the data is stored in multiple copies so instead of one database instead of

one computer or one server having the data the blockchain concept basically ensures

that the data is is decentralized and it's not sitting in one place so

every transaction is happening in multiple entries across the world and the other thing is

because it's uh decentralized to that extent you don't even know where

the 100 bookkeepers are sitting or you don't even know the number of bookkeepers are sitting all you know is

that there are multiple bookkeepers and each of them keeping

their own individual note of every transaction that happens which means if somebody is to hack into

the blockchain and change the data they will have to first find out how many computers or how many

copies of this data are there and they will have to find a way to simultaneously

in parallel change all of the data across all of the blockchain which is technically impossible

add to the complexity uh you're basically saying that to every bookkeeper that

before you write anything on the on the notebook before you actually edit anything

or put an entry into the notebook you will have to tell me what is 1024 into 2715. some complex

arithmetic that they need to solve manually before they are able to enter in which

means that it takes time for them to do it before they can even touch the pen and paper

so there is a complexity that is built in before you even actually go and edit it in even one notebook

so this is additional complexity error which means that if hacker wants to hack into a blockchain they've

technically made it near impossible with the current infrastructure in the current technology

that's what blockchain offers that you're not able to hack into the data you're not able

to modify the data and the data is so secure and it's decentralized that it is not controlled by one person

it is not controlled by one entity it is not controlled by any government for that matter

so this concept existed on paper and in 2008 someone called satoshi nakamoto this

nobody knows whether this is one person or a group or in who the exact identity of the

satoshi nakamoto is but they wrote a white paper basically a detailed

uh description of how to implement this in a protocol for a peer-to-peer cash service appear

to be a digital currency which is what the the the whole concept of bitcoin was

and this 2008 white paper was widely received a lot of people read it they understood it and in 2009

they implemented into the first cryptocurrency of the world which is bitcoin

and that's how bitcoin was formed basically bitcoin was a decentralized blockchain based cryptocurrency which

had no value with just a theory at that point of time in 2009 and literally it was like less

than one rupee when it was created and there were a few computers across the world god knows if it was

100 computers a thousand computers when it was originally started all of them were processing bitcoin

transactions simultaneously all of them were storing the data in their blockchains individually they were

all having a consensus algorithm between them and um the value was was not there you

know bitcoin was just created as a concept and nobody understood what it was to be used for and slowly

they were trying to create a value for this now um how do you create a value for a

currency now this goes back in time right so when uh when we didn't have currency you

know what did we used to do we used to have a barter system like if i made bread and somebody else made

milk i go and give them bread and they gave me milk and we just basically exchanged

so this is how all the world transactions were happening you know we were exchanging goods

for another goods like you know people exchanged clothes for food people exchange um you know ornaments

and so on so sorry they they started from essentials and they basically extended it to

as well from a bartender system and eventually kingdoms were formed and kings basically said that okay you know

instead of bartending i'm going to create something called as a coin it could be a gold coin silver

coin whatever it is i'm going to create something called the coin and everybody needs to

start buying um using these coins and we will be the only people who will be issuing these coins

the kingdoms wanted to control what a system and how that's how this this whole concept

was created so exactly in the same way um people tried to create value for

bitching they they went around and started asking merchants to um offer or accept

bitcoins and offer goods or services whatever it is and that's how the the value was created

the most notable transaction in history was basically uh two pieces and there was a piece of chain called uh

papa john's and two pieces were sold for apparently 10 000 bitcoins at that point of time this is basically a

an urban story and um the value of these 10 000 bitcoins you'll be surprised one bitcoin in 2017 was nearly 20

000 which means that in indian rupees we are talking about nearly thousand four hundred crores

um of money for just two pieces imagine thousand fold across today you can buy every pizza in every pizza

shop in a in an entire state in india and that's how much money that was basically spent

10 000 bitcoins for just buying two pieces and that was the first notable transaction where

somebody said okay i'll accept bitcoins i don't know what it is but i'll accept it i'll give you these two pieces

and slowly but um you know surely the value of the bitcoin started growing you know

these are some of the notable price points of bitcoin in about two years it reached about ten dollars and

it took another couple of years before it reached hundred dollars and when it reached hundred dollars in

2013 was an important year because it jumped to thousand dollars in the same year by the end of the year

and it kind of stayed in that thousand dollars to 100 range um for about four years 2017 was

probably the most critical year for bitcoin when it actually exploded it started the year with about thousand

dollars and by the time it reached its peak value in 2017 it was nearly about twenty thousand dollars

and that was the highest point that it reached in terms of value in 2017

so in 2009 if you had bought bitcoins for even 10 rupees 10 bitcoins you are probably looking at about one

and a half crores of indian rupees right now which is staggering amount of money that you can think of and

nothing else has grown as much as bitcoin has grown in the last 10 years i would say

now um bitcoin was actually free at that point of time you know even now it is free

for mining so what is mining mining is basically you know we talked about the decentralized computing right

decentralized processing so individually anyone with a computer with a decent computer in 2009

can basically uh run the bitcoin node on their computer which then stores and processes these

blockchain transactions their computer is actually processing these blockchain it's storing this blockchain and in 2009

any decent computer could have actually been a bitcoin um processing computer and you would be

earning free bitcoin for the effort that you're putting in of adding your computer

to that um to that bitcoin mine and uh you're because you're using your computer you're lending your computer

for this processing you get free bitcoin as a reward for it which is called as bitcoin mining

today that process has become so complex that the computers are expected to solve a

mathematically complex computation problems that normal computers that we have in

our houses normal laptops and normal desktops that we have in our houses no longer able to solve these problems

you know they are so complicated that there are specifically computers that are made for bitcoin

mining um in fact they use the gpu more than the cpu and you need really power intensive

computers the power that the electricity that these computers need for doing bitcoin mining

is enormous that it is no longer profitable to have a computer in the house

and do bitcoin mining and uh be profitable with bitcoin mining you people i mean now companies actually

make this as a business they have thousands and thousands of gpu computers run

specific units where they're super cooled and they are they have their own electric um

supply which is the cheapest and probably that place and so they made it as a business

to do bitcoin mining right now so bitcoin is is mining a bitcoin with the home

computer is virtually impossible right now so like share trading can you trade on

crypto currencies yes you can but it's really complex and there are over 10 000 different cryptocurrencies today and

coins are now created for specific purposes not just the monetary values like for example ethereum and xrp are

number two and number three xrp is created for cross-border transactions to send money from one

country to another or one currency to another i'll explain it in my next video and

blockchain these days are not just used for cryptocurrency so it's not interchangeably used blockchain and

cryptocurrency so we'll look at all of this in the next video [Music]

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