8 simple questions on cryptocurrency

Brut America

Why are there over 17,000 types of cryptocurrencies? Can we steal crypto? Will it ever replace traditional currency?  8 simple questions on cryptocurrency, answered.

Transcript

00:00Bitcoin. Ethereum. Dogecoin. It's cryptocurrency.

00:11Cryptocurrency is digital money and it's programmable. So you can make it do what you

00:18want. The biggest application is probably going to be decentralized finance or DeFi,

00:23which allows you to bypass the traditional banking sector. It allows you to loan

00:30your money. It allows you to take a loan out on your own money. There's tons of different

00:37applications in the art world as well. So if you want to interact with NFTs. So I would say that

00:42more and more, the value of cryptocurrency is not just holding and storing your wealth,

00:48it's interacting with the crypto ecosystem. Blockchain is the technology that powers

00:59almost all of cryptocurrency. It is what allows us to send money across the globe

01:06in a permissionless fashion, in a trustless fashion. When people use words like trustless

01:12and permissionless, that means that I don't need to rely on a third party intermediary.

01:19I don't need to rely on a different company to say, oh, yep, you've got it. You're good to go.

01:25That is all baked right into the code.

01:32Let's say I have five Bitcoin and I'm trying to send five Bitcoin to each of my friends, right?

01:37What there needs to be is these miners, quote unquote, in place to verify this transaction.

01:45So there needs to be somebody that says, OK, does this guy have five Bitcoins? Yes, he does. OK,

01:51cool. We can go ahead and send it. So what miners do at their core is they verify the

01:56validity of transactions to make sure that you have the amount that you're saying you do,

02:01to make sure that it goes to the right place. And in reward for verifying that transaction

02:07is legit, they get a little bit of reward, which is called Bitcoin mining rewards.

02:12There are over 17,000 cryptocurrencies right now. There are so many cryptocurrencies because it's

02:17incredibly easy to create one. What happens is because 99% of all crypto is open source,

02:26that means that you can go on to GitHub and you can see the entire code for how Bitcoin was created

02:34and what it does. So what that inevitably leads to is people saying, oh, wow, I really like what

02:40Ethereum is doing. They're making smart contracts. I want to do that, too, but in a different way.

02:46So there's a great kind of arms race to see who can handle the most transactions

02:54in a fast and secure way.

03:04What determines the value of the cryptocurrency, and this is the interesting part,

03:12is primarily the community. Now, granted, it still has a product to put out. It still has

03:16a product that it needs to market. All you need to do is look no further than Dogecoin.

03:21Dogecoin was started as a meme. I mean, thank God for Elon Musk tweeting about it every five days,

03:27but these coins didn't start out with any real utility. They didn't have great tech. It was

03:33built off of Ethereum. So if you have a strong community, that comes secondary to your technology.

03:41It also has something to do with tokenomics as well. So every coin does this. They'll say, okay,

03:47we're going to release 5% or 10% of the total available supply when we launch,

03:53and as time goes on, we'll continue to kind of leak in 5% or 10% more each month or each quarter

03:59or each year, whatever it's going to be. If there's only 5% of the total shares,

04:03coins, whatever available on the market, and people are buying those up, then that's going

04:08to make the valuation go up. And if it's a brand new coin and the price is way up,

04:13introducing more supply into it could potentially make the demand and the price go down.

04:18The dollar, the yen, the euro, these are all relatively stable. If you have cryptos that

04:25have just come out, or maybe they've even been out for a couple of years, they can still have

04:30rapid swings of volatility. They can be down 10%, 15%, 20% in a day. It also has days where it's

04:37heavy in the green. And that's where a lot of people kind of get that adrenaline rush,

04:41because you can make three, four, five, six, seven, eight, 10,000 dollars a day.

04:46You can make three, four, 500% on your return. So the gains can get insane, especially if you're

04:55in at the right time. One massive advantage of crypto is that it's your own and no one else

05:02has their paws on it. That's the whole decentralized ethos.

05:06Yes, it happens all the time. Just because there is a big established company like Bitfinex,

05:13you know, they've only been in the game for a couple of years at that point.

05:16So any hacker, any developer, any coder could look through their documentation,

05:22they can look through all of the available resources and say, oh, here's a vulnerability.

05:28I can hack that. The interesting thing about the blockchain is that it disincentivizes

05:32I can hack that. The interesting thing about the blockchain is that it disincentivizes that,

05:37because every transaction is recorded on chain. That's exactly how those hackers got caught,

05:45because everything was on chain.

05:52I personally believe so, yes. If you look at what China is doing, China has already implemented

05:58their own central bank digital currency, and they've rolled it out in several major cities.

06:03But then you also are going to have countries like El Salvador, who choose to have Bitcoin

06:09be made into legal tender. I would say the well-established countries are probably going

06:13to continue to develop their own central bank digital currency so that they can control it.

06:17And there are other countries who have realized that by one way or another, they are unable to

06:25manage their own currency efficiently, and they want to use a decentralized system that is free of

06:30the US or other Western nations' influence, and they'll adopt something like Bitcoin.

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