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How Bitcoin Works · Stuff You Should Know

0:01
Speaker 1: Welcome to Stuff you Should Know fromhouse Stuff Works dot com. Hey,
0:11
Speaker 1: and welcome to the podcast. I'm Josh Clark, and there's
0:13
Speaker 1: Charles W. Chuck Bryant, and uh, this is Stuff you
0:16
Speaker 1: Should Know the podcast the Tech Edition, which we don't
0:21
Speaker 1: dive into tech too much because that's that's Jay Strick
0:25
Speaker 1: and Lauren's territory. Yeah, and frankly, we're a little scared
0:30
Speaker 1: of our cohorts at Tech Stuff. They do a great job,
0:33
Speaker 1: but we've gotten so many requests for this topic that
0:37
Speaker 1: we were like, you know, we got we gotta satisfied
0:39
Speaker 1: the Stuff you should Know fans. We don't want them
0:41
Speaker 1: showing up with torches led by Moe the bartender at
0:44
Speaker 1: our door. You know, you know, this might be the
0:47
Speaker 1: most requested of all time. Possibly, Oh you think, I
0:52
Speaker 1: think it might be. I can't think of another one
0:55
Speaker 1: that that comes to mind. That was maybe like mormon Ism, Yeah,
0:59
Speaker 1: Mormonism apology. And I see accents a lot. People want
1:02
Speaker 1: to get to the bottom of accents. That would be
1:04
Speaker 1: a good one. We need to do that. You want
1:06
Speaker 1: to do that now? Instead? Crikey, that's good. I could do.
1:11
Speaker 1: How bad accents work? Do it? Do? Italian No, I'm
1:15
Speaker 1: not to your monkey. That's good stuff. It's not that
1:18
Speaker 1: I think you're my monkey. It's that you do um
1:21
Speaker 1: accents way better than me. No, meaning that I attempt
1:25
Speaker 1: them and do with them poorly, where you you don't
1:27
Speaker 1: even attempt them, and it is off the charts. It's
1:32
Speaker 1: not bad, so chuckers. Yes, you know much about money? Um,
1:39
Speaker 1: not much? No, No, I know that I got a
1:42
Speaker 1: few pennies in the bank and that's about it. How
1:45
Speaker 1: that works? Okay, Well, we've talked about money before. We
1:48
Speaker 1: where where was it that the first a lot of
1:51
Speaker 1: financial stuff? There was something we did recently where we
1:54
Speaker 1: were talking about how Mesopotamia the first system of wasn't
1:59
Speaker 1: it like the first coinage in China? Of course too.
2:03
Speaker 1: But um, nowadays, when we think money here in the U. S.
2:08
Speaker 1: At least, and in Canada and actually pretty much the
2:11
Speaker 1: world because the world uses dollars um, we think of
2:16
Speaker 1: paper money or coins printed by the U. S. Mint
2:20
Speaker 1: at the behest of the U. S. Treasury on behalf
2:22
Speaker 1: of the United States government banks are backed and insured. Clearly,
2:29
Speaker 1: we know that they're covered in case something goes wrong. Yeah,
2:31
Speaker 1: because you and I are covering them buddy, Yeah, basically,
2:35
Speaker 1: but it wasn't this system that we take very much
2:38
Speaker 1: for granted now of you know ones, fives, tens, twenties, hundreds,
2:42
Speaker 1: and then there were some other ones. This is fairly new.
2:45
Speaker 1: It was just the beginning of the twentieth century that
2:47
Speaker 1: the Federal Reserve was created. Before that and during the
2:52
Speaker 1: Civil War era, I think maybe even post Civil War,
2:56
Speaker 1: there was there more than eight thousand different entities, typically banks,
3:02
Speaker 1: that we're printing their own currency. Yeah. Man, we talked
3:05
Speaker 1: about that. What was that? Was that the barter thing? Maybe?
3:07
Speaker 1: So yeah, but you're right, it's a great wall to
3:12
Speaker 1: go back to because it's so interesting and like, you know,
3:16
Speaker 1: if you're a bank, you can just be like, hey,
3:18
Speaker 1: I got a bunch of gold here, I'll print some
3:20
Speaker 1: money based on this, and I'm gonna put my picture
3:22
Speaker 1: on it, or maybe a picture of my favorite horse.
3:24
Speaker 1: This is a Jim At Fearson dollar exactly. See. Anyway, um,
3:29
Speaker 1: all that went to the wayside when the Federal Reserve
3:32
Speaker 1: came about, and then everybody's like stop, just the federal
3:36
Speaker 1: government can print money from now on, and we're gonna
3:38
Speaker 1: back it with golden and you know what, We're not
3:39
Speaker 1: gonna back with gold anymore. Let's just say you guys
3:42
Speaker 1: believe this has value, will go with that. Well, at
3:44
Speaker 1: that point that everyone's had bought in literally and figuratively,
3:47
Speaker 1: so exactly, so we went from the gold standard to
3:50
Speaker 1: a fiat currency, which is everybody, come make believe that
3:53
Speaker 1: this actually has value, and it actually will have have value.
3:56
Speaker 1: It's pretty magic. And that transition to a yeah currency
4:00
Speaker 1: gave birth to what we're going to to talk to today,
4:03
Speaker 1: or the possibility of what we're going to talk to
4:05
Speaker 1: about today, which is bitcoin, which is a real thing
4:08
Speaker 1: right now. It's you know, will it survive who knows,
4:11
Speaker 1: But as of the recording of this podcast, it is
4:14
Speaker 1: super legit and what about a billion dollars It may
4:17
Speaker 1: in fact be too legit to quit. Maybe. Um, I
4:21
Speaker 1: didn't see an estimated value of all the bitcoins and circulation.
4:25
Speaker 1: I saw that, but it, as we will find out,
4:27
Speaker 1: it fluctuates like on a minute to minute basiss next week. Yeah. Um,
4:34
Speaker 1: but like you said, though, the whole thing hasn't crashed.
4:38
Speaker 1: It may be what we're seeing is a bubble and
4:40
Speaker 1: then another bubble and they just bubbles bursting. But the
4:44
Speaker 1: system hasn't crashed, and that's because the system, the theory
4:47
Speaker 1: behind it, and the practice it turns out is extremely sound. Yeah.
4:52
Speaker 1: And what's even more awesome about bitcoin, which is, we
4:55
Speaker 1: should say the world's first digital, entirely digital, decentralized currency, um,
5:03
Speaker 1: is that it has a great origin story. It's shrouded
5:06
Speaker 1: in mystery. No one knows who created it, and the
5:10
Speaker 1: things that it's used for it can be shady and weird,
5:14
Speaker 1: and it's all just very you know, some of it's
5:16
Speaker 1: on the deep web, and it's just very interesting and
5:19
Speaker 1: like salacious, and it's very anarchistic in nature. It's there's
5:22
Speaker 1: no not only is it not backed by any government,
5:26
Speaker 1: it's not issued by any central authority. Yeah, it's part
5:30
Speaker 1: if you're part of the bitcoin network, then you are
5:33
Speaker 1: part of this the authority to issue it. Yeah. And
5:38
Speaker 1: it's actually technically it's mathematics that has the authority to
5:41
Speaker 1: issue bitcoins. Yeah. It took me while to wrap my
5:43
Speaker 1: head around it because it's such an entirely new thing
5:46
Speaker 1: and it's very complex. Yeah. And well, although it really
5:50
Speaker 1: isn't like when you break it down, that's what I
5:52
Speaker 1: had to eventually figure out. I studied enough, or I
5:54
Speaker 1: was like, oh wait, this is actually kind of simple
5:56
Speaker 1: and at the root of it all, as who wrote this,
5:59
Speaker 1: it's strickling, right, No, this is a Nathan Chandler. Um
6:02
Speaker 1: Chandler points out, at the root of it all, basically,
6:05
Speaker 1: all that you have to do to invent a currency
6:08
Speaker 1: is have enough people say this is currency, and then
6:11
Speaker 1: you have currency. Whether, like I said, whether it sticks around,
6:14
Speaker 1: who knows. But as of now there are enough people
6:17
Speaker 1: buying and selling bitcoins and use speculating and using bitcoins, well,
6:22
Speaker 1: that's that's trade. Then it's it's a thing. That's the
6:25
Speaker 1: other thing that gives it value is that if there's
6:27
Speaker 1: somebody out there who's willing to accept that currency for
6:30
Speaker 1: a pizza, then it has the value of a pizza
6:34
Speaker 1: at least. Right, So let's talk about the origin first.
6:38
Speaker 1: Uh sure, the origin. Back in two thousand eight, a
6:42
Speaker 1: mysterious pseudonym popped up, uh Satoshi Nakamoto. And we don't
6:51
Speaker 1: know if this is a lady or a man, or
6:53
Speaker 1: men or women or both, could be a group who knows,
6:57
Speaker 1: and uh they or he or she or it published
7:02
Speaker 1: a document that outlined what bitcoin was said, this is
7:06
Speaker 1: a new thing that we or I or me are
7:09
Speaker 1: trying to create. And I believe that person mented the
7:13
Speaker 1: first fifty coins himself or herself or themselves. Yeah, that
7:17
Speaker 1: was two thousand nine. And the document that that he
7:20
Speaker 1: she that Satoshi published, um, it was really groundbreaking because
7:25
Speaker 1: it it figured out a longstanding problem that was preventing
7:30
Speaker 1: digital currency from being established. And that was what was
7:33
Speaker 1: to prevent anybody from copying and pasting the code that
7:38
Speaker 1: makes up your digital currency and then using it again
7:40
Speaker 1: and again and again. Well, there's one easy way around it.
7:43
Speaker 1: You have a ledger, but you have to have somebody
7:45
Speaker 1: you trust to keep track of the ledger. And what
7:48
Speaker 1: Satoshi came up with and that what bitcoin does is
7:51
Speaker 1: it makes the ledger entirely public, so that everyone is
7:56
Speaker 1: working out the ledger and it's actually that process of
8:00
Speaker 1: keeping track of the ledger and who has what coin
8:03
Speaker 1: and what coin has been transferred to whom uh that
8:07
Speaker 1: actually mints new coins. So we need to step back
8:10
Speaker 1: and explain what's going on here, because I think people
8:12
Speaker 1: are already confused. If you don't know what bitcoin is,
8:14
Speaker 1: You're like, what are these guys talking about? Bitcoin is
8:18
Speaker 1: virtual money that you can now use online to buy
8:22
Speaker 1: and sell things and there are a number of retailers
8:27
Speaker 1: that are accepting this. Um, it's not just the deep web.
8:30
Speaker 1: We'll get to that in a minute. UM. And now
8:32
Speaker 1: they're even go between companies that allow you to I
8:36
Speaker 1: guess they uh not transfer, but they convert your real
8:40
Speaker 1: dollars into bitcoins too. You know, if you want to
8:43
Speaker 1: shop at like Macy's, let's say they convert your bitcoins
8:46
Speaker 1: into real dollars, bitcoins and real dollars the other way around.
8:49
Speaker 1: And Chandler points out a good way to think of
8:51
Speaker 1: bitcoins is it's a digital standing for cash because it's anonymous, exactly.
8:55
Speaker 1: And that's the big key. So if you want to
8:58
Speaker 1: buy things anonymously, or if you are a libertarian and
9:01
Speaker 1: you just want to stick it to the government, or
9:04
Speaker 1: if you don't trust the government, or you don't trust banks.
9:06
Speaker 1: A big thing that um Nakamoto preyed on was the
9:10
Speaker 1: financial collapse, obviously, and uh was basically like, hey, look around,
9:14
Speaker 1: what's going on, Like you're gonna trust your money there?
9:17
Speaker 1: Like why not trust this new thing. Let's give it
9:19
Speaker 1: a try. Let's give it a try. So basically, if
9:22
Speaker 1: there are a couple of different things you can do,
9:24
Speaker 1: you can either participate as just someone who buys bitcoins
9:28
Speaker 1: with your credit card or whatever and then uses them
9:31
Speaker 1: to shop. Chandler says that you can buy with credit cards,
9:34
Speaker 1: but I saw from a couple of different sources that
9:36
Speaker 1: like most places do not take credit cards, that you
9:39
Speaker 1: either have to give them your bank account or else
9:41
Speaker 1: figure out a way to pay cash, like using money. Graham, Well,
9:44
Speaker 1: that's been the more preferred way as of late, but
9:47
Speaker 1: they're still credit card people that will take a credit card.
9:50
Speaker 1: So the first thing you need to do is set
9:52
Speaker 1: up set up your wallet, and that is basically your account,
9:55
Speaker 1: your digital account, and then you buy bitcoins and they
9:58
Speaker 1: are in your account and you use them for whoever
10:01
Speaker 1: takes them right, and you buy them from like a
10:03
Speaker 1: central currency exchange, probably Mount Cox, although we'll talk about
10:08
Speaker 1: them in a minute too, but they've been handling about
10:10
Speaker 1: six of all bitcoin transactions. Um well, purchases of bitcoins
10:15
Speaker 1: you go to Mount Cox typically, So, like I said,
10:18
Speaker 1: one reason you might want to do this is if
10:19
Speaker 1: you don't trust the banks, or you're tired of the
10:21
Speaker 1: government getting involved in your money, or if you just
10:25
Speaker 1: want to save some money. Because what you're doing is
10:27
Speaker 1: you're skipping middlemen and so you're saving on a lot
10:30
Speaker 1: of transaction fees. Oh yeah, if you have you ever
10:33
Speaker 1: purchased something overseas through PayPal? No, not overseas. Oh man,
10:37
Speaker 1: it is expensive that pleas to Bitcoin has no central authority,
10:43
Speaker 1: and so there's no bank you're dealing with, so you're
10:46
Speaker 1: not gonna be charged the bank's fees. And the transfer
10:50
Speaker 1: companies that do work with bitcoin typically charge like two bucks,
10:54
Speaker 1: three bucks something like that, So you skip all that,
10:57
Speaker 1: you're not paying as many fees. Uh. The wallet is
11:01
Speaker 1: a software program, so it's not like a literal wallet. Obviously.
11:04
Speaker 1: You download your wallet, you've got your little account, you
11:07
Speaker 1: buy your bitcoins, and you can just do that if
11:10
Speaker 1: you want. You can just buy things. You can buy
11:13
Speaker 1: things on the regular web. You can buy things on
11:15
Speaker 1: the deep hidden web. You can also just hang on
11:17
Speaker 1: to them and speculate. Well, that's the second thing you
11:20
Speaker 1: can do. You can speculate and buy and sell the
11:22
Speaker 1: apparently the Winkle Boss Twins the Winkleby the Winkelby from
11:26
Speaker 1: the Facebook movie. Uh, in real life? Are they have
11:30
Speaker 1: like eleven million dollars worth of bitcoins now? And how
11:35
Speaker 1: much it will be worth tomorrow? But yeah, they have
11:37
Speaker 1: millions of dollars worth of bitcoins. Yes, so they're apparently
11:40
Speaker 1: supposedly bitcoin millionaires that have made their money speculating by
11:45
Speaker 1: buying and selling just like you would a stock, let's say. Right,
11:50
Speaker 1: so that's another thing you can do. The other thing
11:52
Speaker 1: you can do is actually participate in mind these coins,
11:56
Speaker 1: which is sounds complex but it's really not. All right, well,
11:59
Speaker 1: let's get into this because now we're talking about the
12:02
Speaker 1: Bitcoin network, right, Yeah, it's a peer to peer we
12:04
Speaker 1: should point that out. That's very important peer to peer network, right,
12:07
Speaker 1: like bit torrent or Skype. Yeah, there's no centralized like
12:11
Speaker 1: mainframe running this thing exactly. If the whole thing operates
12:15
Speaker 1: on the computers of the people who are part of
12:17
Speaker 1: bitcoin network. That's right. Okay, So the mining is really
12:22
Speaker 1: the most important, and I think that's where a lot
12:23
Speaker 1: of people get tripped up. There's three things basically that
12:27
Speaker 1: mining coins. You're creating coins essentially, um you are, Uh, well,
12:33
Speaker 1: let's let's get into it. They transactions are released in
12:36
Speaker 1: six ten minute blocks, so every ten minutes now coins
12:42
Speaker 1: are released into the system. That's the approximate about how
12:45
Speaker 1: long it's been taking computers to figure out this mathematical problem.
12:49
Speaker 1: Now they're released every ten minutes, whether or not they're
12:51
Speaker 1: figured out or not. Might it might take longer than that.
12:54
Speaker 1: So okay, well then you can explain this to me
12:56
Speaker 1: because I was a little tripped up by this too.
12:58
Speaker 1: Um So every ten minutes, the computer that happens to
13:02
Speaker 1: be working on the math problem and solves it at
13:08
Speaker 1: that ten minute part gets the coin. So is it random? Well,
13:13
Speaker 1: I think we need to step back again and explain
13:15
Speaker 1: what these are. It is. It sounds confusing, but it's not.
13:19
Speaker 1: Every ten minutes they release what's called a block, and
13:21
Speaker 1: a block is essentially a group of transactions across the
13:26
Speaker 1: bit coin network. So it is up to a person,
13:30
Speaker 1: but usually a group of people team up to do
13:33
Speaker 1: this because it requires a lot of computing power two
13:36
Speaker 1: perform um to basically handle these transactions, just like American
13:41
Speaker 1: Express pay someone to handle their transaction. Totally got it,
13:45
Speaker 1: I got it, Thank you. This is the this is
13:47
Speaker 1: what was tripping me up. Yeah, okay, okay. And then
13:50
Speaker 1: that block is a group of transactions, right, and this
13:53
Speaker 1: is the transactions formed the ledger, like who has what coin?
13:57
Speaker 1: What coin got transferred to what person? Like verifying all
14:00
Speaker 1: that stuff. All that takes money. That's the usually those
14:02
Speaker 1: are the fees you're paying like amex to do something
14:04
Speaker 1: like that, right, okay, and this this is also encrypted information.
14:08
Speaker 1: Well yeah, that's the key. So that block is basically
14:11
Speaker 1: a math problem for a computer to workout and everybody.
14:15
Speaker 1: So every ten minutes, everybody on the network gets that
14:17
Speaker 1: same block, and whoever figures that out first gets the
14:20
Speaker 1: newly minted bitcoins gets that reward. They call it a reward.
14:24
Speaker 1: I got it. That's pretty much it. So here's the thing, though,
14:27
Speaker 1: it's a diminishing return at this point. Um they have
14:30
Speaker 1: it every four years. Every four years the number of
14:34
Speaker 1: bitcoins that are released. They're figuring out a math problem
14:38
Speaker 1: is had. So when it started out, it was fifty
14:41
Speaker 1: and now we just reached the four year point. Two
14:43
Speaker 1: thousand thirteam is the beginning of the year, so now
14:46
Speaker 1: it's twenty five. When you unlock it, a block that's
14:49
Speaker 1: right in two thousand seventeen will be twelve fifty. So
14:52
Speaker 1: every ten minutes they're releasing these coins. So it has
14:55
Speaker 1: two three functions. Really, it's a two to satisfy the
14:59
Speaker 1: transaction and you know, get everyone working together is a
15:02
Speaker 1: big group to make sure the transactions are good. It
15:04
Speaker 1: keeps the ledger up to date, keeps the ledger up
15:06
Speaker 1: to date too. It releases more money into the system. Um,
15:10
Speaker 1: and it's you know, carefully planned out, so it's not
15:12
Speaker 1: like it's a very steady rise basically over the years, right,
15:15
Speaker 1: so nobody so like a central bank can't flood the
15:18
Speaker 1: market with more money to devalue what's out there. It's
15:22
Speaker 1: you basically forty they know exactly how many coins will
15:26
Speaker 1: be out there, and it will be twenty one million
15:28
Speaker 1: on the nose. And then that's it. Yeah, it's all controlled.
15:31
Speaker 1: And then the third thing it does, is it it
15:33
Speaker 1: keeps the system secure. Yeah, so that's what mining is.
15:37
Speaker 1: And each block two uh, it's very energy inefficient. Each
15:43
Speaker 1: block to fully satisfy over the course of twelve months
15:46
Speaker 1: takes about ten tho dollars worth of electricity. I read
15:51
Speaker 1: way more than that. I read a d fifty k
15:54
Speaker 1: for block for twenty four hours of hardcore data mining
15:58
Speaker 1: or of hardcore bitcoin mining. Sorry, costs up to a
16:02
Speaker 1: hundred and fifty thou dollars in electricity. Yeah, and that's
16:06
Speaker 1: but that's with one of these there's like certain computers
16:09
Speaker 1: out there that people have set up that are dedicated
16:12
Speaker 1: just to bitcoin mine because bitcoinshit like two bucks apiece
16:17
Speaker 1: five of those puppies. That adds up. And if you
16:19
Speaker 1: can get more and more and more, and you have
16:20
Speaker 1: computers dedicated to it, then people have they're they're just
16:24
Speaker 1: bitcoin miners and they have computer systems or they're parts
16:27
Speaker 1: of co ops that divide the bitcoin. Right. Well, that's
16:30
Speaker 1: kind of the only way to do it now. They say,
16:32
Speaker 1: if you're a single user, then you have virtually no
16:34
Speaker 1: chance these days. I would imagine it just takes too
16:38
Speaker 1: much computing power for that average you know, home computer, right,
16:41
Speaker 1: And if you team out, even if you've got a
16:42
Speaker 1: great system, if you team up with ten people with
16:45
Speaker 1: a great system, then you're ten times. It's likely because
16:48
Speaker 1: that was the other thing that the number of bitcoins
16:50
Speaker 1: that come out or had right. And um, the math problem,
16:55
Speaker 1: the encrypted math problem that is released as a block
16:59
Speaker 1: because is increasingly difficult. They wanted to be hard, right,
17:03
Speaker 1: that's the whole point. Um. And there was an article
17:06
Speaker 1: I don't know if you read this that I sent
17:08
Speaker 1: you that right now, you can still make money mining,
17:11
Speaker 1: but it won't be long because it's a diminishing thing
17:15
Speaker 1: before it's going to cost too much in power and
17:17
Speaker 1: hardware to even make it worth your while. So I'm
17:20
Speaker 1: kind of curious how that's gonna work out. Yeah. I
17:21
Speaker 1: saw like a computer built specifically to mind bitcoins started
17:26
Speaker 1: about six grand on eBay and that's like, again, the
17:30
Speaker 1: electricity involved this just ridiculous. Yeah. Plus, if you're splitting
17:34
Speaker 1: twenty five bitcoins, I mean that ain't a lot of
17:37
Speaker 1: dough right, Well, it depends, like we'll see. Yeah. Um
17:40
Speaker 1: so so that's it. That's the network. That's how the
17:43
Speaker 1: the bitcoin network functions, right, Yeah, and it's beautiful. Think
17:48
Speaker 1: about the elegantness of the figuring out a math problem
17:52
Speaker 1: to unlock new coins. Is what you're doing to keep
17:56
Speaker 1: the ledger up to date, that's awesome. So like it's
17:59
Speaker 1: it's providing these three functions. And not only is an
18:02
Speaker 1: open ledger, they have open source, so their their code.
18:05
Speaker 1: If you're a programmer and you know what you're doing,
18:09
Speaker 1: you can actually look at their code and figure it out.
18:11
Speaker 1: Because it's not like it's not a big deal. If
18:13
Speaker 1: you understand their code, it's not like you can hack
18:16
Speaker 1: into them. It's very secure on that side of things,
18:21
Speaker 1: but it can also be uh not secure. As we're learning,
18:25
Speaker 1: hackers are now getting into like uh, the the like
18:29
Speaker 1: you can actually convert your bitcoins into real cash, and
18:32
Speaker 1: those are the places that are susceptible to being hacked
18:35
Speaker 1: at this point, right right it is um just one
18:38
Speaker 1: more thing about why it's secure or the in theory. Um,
18:42
Speaker 1: when that computer figures out that math problem that unlocks
18:46
Speaker 1: that block. Yeah, that what they came up with is
18:49
Speaker 1: shared with every other computer in the network to verify
18:52
Speaker 1: that this ledger is accurate and is that a hole? Yes,
18:56
Speaker 1: So that's why that's why it's secure, because everybody knows
19:01
Speaker 1: everybody's computer knows what's what, and if there's a discrepancy,
19:04
Speaker 1: then it has to be worked out. That's why a
19:07
Speaker 1: transfer bitcoins transaction can take a long time because it
19:11
Speaker 1: has to go across all the network. Gotcha for a verification? Yeah,
19:16
Speaker 1: all right, well that's cool, okay. But insecurity, well many
19:19
Speaker 1: ways it can be insecure. Like we said, they can
19:21
Speaker 1: hack into like when you go to a like what's
19:24
Speaker 1: one of the places they listed for um converting back
19:28
Speaker 1: to cash? Um bit spin this one, I believe, and
19:32
Speaker 1: uh what was the other one. Yes, bit pay and
19:36
Speaker 1: bits spin. They convert your bitcoins into credit or whatever
19:41
Speaker 1: you can shop anyway, whatever, or or your local currency
19:44
Speaker 1: like if you want to cash them out and get
19:46
Speaker 1: your cash back, right, their companies that do that, and
19:48
Speaker 1: that apparently is where hackers can get in there. Yeah,
19:51
Speaker 1: and they can also get to Mount Cox, which is
19:53
Speaker 1: the currency exchange, which apparently if you have an account
19:56
Speaker 1: at Mount Cox, a lot of people are like, oh well,
19:58
Speaker 1: this is like a bank. It's not like a bank.
20:01
Speaker 1: And whether it's Mount Cox or whoever, Um, that's a
20:05
Speaker 1: really bad place to actually keep your virtual currency. Because
20:09
Speaker 1: number one, since it's a decentralized system, anywhere where there's
20:14
Speaker 1: a bunch of people's stuff parked, that's a target. And
20:18
Speaker 1: since there are fewer targets, that means that people can
20:20
Speaker 1: get better at better at attacking them. Since a terrible
20:23
Speaker 1: place to keep your your bitcoins. And then also a
20:26
Speaker 1: lot of those places, a lot of those currency exchanges,
20:29
Speaker 1: if they go under, your bitcoins go with them. And
20:32
Speaker 1: that's the thing where have your bitcoins are gone? They're
20:35
Speaker 1: just gone and you don't have them any longer, which
20:37
Speaker 1: is why if you have a bitcoin wallet or account.
20:40
Speaker 1: You want a physically removable backup of them somewhere a
20:45
Speaker 1: flash drive or removable hard drive away from your computer,
20:48
Speaker 1: so that if your computer crashes where Mount Cox goes under,
20:52
Speaker 1: or the FED swoop in and sees something or freeze something,
20:55
Speaker 1: you still have your bitcoins because you've got that that
20:58
Speaker 1: account of it on your flash drive back. Yeah. I
21:00
Speaker 1: would back it up two or three times exactly. I
21:02
Speaker 1: did read one account of this guy that lost like
21:04
Speaker 1: eight hundred of him because his laptop crashed. Oh my god.
21:07
Speaker 1: But it was early on, so he was just like
21:09
Speaker 1: it was no big deal at the time because they
21:11
Speaker 1: were like twenty cents apiece. But can you imagine No,
21:14
Speaker 1: I couldn't. So, I mean that's one of the dangers
21:16
Speaker 1: of it and one of the risks. So let's talk
21:19
Speaker 1: a little bit about this whole speculation thing in the
21:21
Speaker 1: wild ride a bitcoin, because it's like the wild West
21:25
Speaker 1: out there, so early on it and it's gone from
21:27
Speaker 1: twenty cents at the beginning to hive about two hundred
21:32
Speaker 1: and sixty dollars per bitcoin early this year, right uh
21:37
Speaker 1: in two thousand and eleven, it went from uh thirty
21:41
Speaker 1: dollars in the middle. I'm sorry, in two it was
21:45
Speaker 1: worth a few cents. It rose to thirty bucks in
21:47
Speaker 1: two thousand eleven, and then it dropped down towards the
21:51
Speaker 1: end of the year to two bucks. Like, currencies are
21:53
Speaker 1: not supposed to do that. That's and that's one of
21:56
Speaker 1: the big problems is like it it cree's wildly all
21:59
Speaker 1: over the place because of speculation. Yeah, some people are
22:02
Speaker 1: attracted to that though. Yeah, like the cowboys are into that,
22:06
Speaker 1: like get rich really quick and get out right. But
22:09
Speaker 1: if you're the average person like buying some bitcoins because
22:12
Speaker 1: you're really you know, believe in the anarchistic sentiment behind it,
22:17
Speaker 1: then you're you're really at the whim of speculators who
22:21
Speaker 1: can gain this system fairly easily because they're the only
22:25
Speaker 1: ones who know how to do it. Because the community
22:27
Speaker 1: is small enough well, and a lot of financial you know,
22:30
Speaker 1: guru say it's a sucker's bet, and it's it's just
22:32
Speaker 1: a bubble maker basically, is one one way to look
22:35
Speaker 1: at it, at least for now, because it's too unstable.
22:38
Speaker 1: It's like the Lawrence Welk show out there. Half of
22:42
Speaker 1: our fans are going, huh so the deep Web. We've
22:46
Speaker 1: mentioned a lot of people don't know this. I know,
22:48
Speaker 1: Matt Frederick of stuff they don't want. You know, like
22:50
Speaker 1: three years ago, came up to me. I was like, dude,
22:52
Speaker 1: check this out. The Silk Road and the deep web
22:56
Speaker 1: is a web that's not accessible. You can't go to
22:58
Speaker 1: Google and type in deep web and say now I'm
23:00
Speaker 1: on the deep Web. You have to have like special
23:02
Speaker 1: software to take you to this deep web. Tour t
23:06
Speaker 1: R and that's where bad things go on. Well, that's
23:09
Speaker 1: a that's a I think it's like an operating system
23:13
Speaker 1: that allows you to be entirely anonymous. And yeah, if
23:16
Speaker 1: you don't have tour, I don't think you can even
23:18
Speaker 1: get onto silk Row. But if you did, would be
23:20
Speaker 1: a really bad decision because Silk Road is where you
23:23
Speaker 1: go buy well, drugs, um, pretty much anything. I think
23:29
Speaker 1: out of the thirty thousand things they offered, roughly twenty
23:32
Speaker 1: of them were drugs. Yeah, and this is like there's
23:35
Speaker 1: some dude in Chicago who's got a bunch of heroin
23:38
Speaker 1: for sale, and you go use your bitcoins on Silk
23:41
Speaker 1: Road to buy heroin and emails it to you, and
23:44
Speaker 1: your bitcoins are putting new an escrow account. And then
23:47
Speaker 1: when you say, oh, yeah, I got my heroine, thanks man.
23:50
Speaker 1: I just came out of like an eight day stupor
23:52
Speaker 1: that the escrow account releases the bitcoins to the guy
23:55
Speaker 1: in Chicago, and that is going on right now. But
23:58
Speaker 1: now that guy has a little addendum that says, would
24:01
Speaker 1: you mind releasing before you do all the hair point exactly. Yeah,
24:04
Speaker 1: don't forget um. But it's a thing like you can
24:07
Speaker 1: buy like whatever you want. You can there are services
24:10
Speaker 1: that you can hire hitmen. Yeah, this really troubles me.
24:13
Speaker 1: And kidnappers and people to like rob someone's house or
24:17
Speaker 1: burn down your house for insurance money like that can
24:20
Speaker 1: hire someone black market reloaded is that? And then there's
24:25
Speaker 1: another one called the Armory, which is apparently like an
24:27
Speaker 1: arms marketplace and all of its all of this stuff
24:32
Speaker 1: would not be possible were it not for bitcoin. And
24:36
Speaker 1: you can understand that this has really kind of gathered
24:39
Speaker 1: the attention of the FEDS. Yeah, well it's attracted more
24:43
Speaker 1: than the Feds. The Silk Road actually, as of about
24:47
Speaker 1: two about a week ago, was shut down really by
24:51
Speaker 1: a unidentified hacker, basically a blackmailer named Lance G threatened
24:59
Speaker 1: to crash the site with a what's called a d
25:02
Speaker 1: d o S Distributed Denialist service, which is I think
25:05
Speaker 1: they basically flood your site so much that it's inoperable.
25:10
Speaker 1: So Lance G whoever that is, threatened to crash the
25:13
Speaker 1: side unless they paid five thousand dollars, which everyone was like,
25:18
Speaker 1: that's a really weird small amount. And so they're thinking
25:21
Speaker 1: it might be either some like not someone that's interested
25:25
Speaker 1: in money, but someone that just wants to see it
25:26
Speaker 1: taken down. And some people speculate that the US government
25:31
Speaker 1: is actually behind that. Well, you know, some people actually
25:33
Speaker 1: speculate that the US government is behind bitcoin as well.
25:38
Speaker 1: Either it's some genius economists, some genius mathematician, maybe somebody
25:42
Speaker 1: who works for the government. Um or it's actually like
25:46
Speaker 1: a government project. That's one of the things. There's a
25:49
Speaker 1: really really great article called the Rise and Follow Bitcoin.
25:53
Speaker 1: It was from BuzzFeed, I believe, or wired when it
25:56
Speaker 1: was wired and um it was it wired and it's
26:00
Speaker 1: just amazing. It's like a nice long form article. I'll
26:03
Speaker 1: take you a little while to read, and um it's
26:05
Speaker 1: from two th eleven, so like it's a little out
26:07
Speaker 1: of date, like the big bubble hadn't happened yet, but
26:09
Speaker 1: I mean it talks a lot about Satoshi Nakamoto and
26:12
Speaker 1: like who he is, who he could be, and all
26:15
Speaker 1: the wild theories running around. But it also gives you
26:17
Speaker 1: a really good explainer of bitcoin and how it how
26:20
Speaker 1: it operates. And Nakamoto supposedly got out too, if you
26:24
Speaker 1: believe the story they tell you. Um, he's not like
26:27
Speaker 1: sitting on some pedestal getting rich. Supposedly he created this
26:31
Speaker 1: and then said now it is yours and got out.
26:33
Speaker 1: But who knows. I have to get back to this
26:37
Speaker 1: psy ops thing that we're working on in the Pentagon.
26:40
Speaker 1: So as of now, the Silk Road is shut down.
26:43
Speaker 1: I'm sure it will pop back up or something like
26:44
Speaker 1: it will um pretty soon, you know. So the hacker
26:50
Speaker 1: just basically crashed the site or disabled to I think
26:54
Speaker 1: threatened to or maybe did. I'll have to look into that.
26:57
Speaker 1: I'm not sure if it actually happened. And there was
27:00
Speaker 1: a D D O S attack on Mountain Cox as well. Yeah,
27:04
Speaker 1: and uh, you know the problem is when you don't
27:07
Speaker 1: have any uh anything back in your currency it you know,
27:11
Speaker 1: the value of bitcoin is plummeted when that happened because
27:14
Speaker 1: of your transactions were halted, right, which is this is
27:18
Speaker 1: one of the games that a speculator who's very I
27:21
Speaker 1: guess hecker savvy. Where is a hacker? Let's call it
27:24
Speaker 1: that UM could do to manipulate the value of of
27:29
Speaker 1: bitcoin is like attack Mount Cox, let the value plummet,
27:33
Speaker 1: and then go to one of the other exchanges that
27:35
Speaker 1: aren't crashed and buy a bunch of them there and
27:38
Speaker 1: then just let everything go back to normal and let
27:40
Speaker 1: the value rise once more. It's definitely not stable. No,
27:43
Speaker 1: it isn't. And um, you were saying that the silk
27:45
Speaker 1: Row got hit by a hacker. Well, the FEDS have
27:50
Speaker 1: finally interviewed Vaned. A lot of people have been waiting
27:53
Speaker 1: for this because you can buy drugs, you can get
27:57
Speaker 1: around paying taxes, you can hire a murderer. You can
28:01
Speaker 1: do all these things thanks to bitcoin. And now the
28:03
Speaker 1: the the Department of Homeland Security, right, not even the
28:07
Speaker 1: i r S. Yeah, the DHS froze Mount Cox is
28:11
Speaker 1: the the parent companies accounts yesterday? Yeah right, Well this
28:16
Speaker 1: should give you a good idea of how things are
28:18
Speaker 1: not stable. On Tuesday in May fourteenth, that story broke
28:23
Speaker 1: that Mount Cox had been had been Did they shut
28:27
Speaker 1: them down or did they just they froze some of
28:29
Speaker 1: their accounts, and it was so a lot of like
28:32
Speaker 1: the transfer companies, the companies that work with mount Cox
28:36
Speaker 1: saying like, we're not doing anything with mount Cox anymore.
28:39
Speaker 1: So if you want to make some purchase or whatever,
28:41
Speaker 1: you're gonna have to figure out another way or use
28:43
Speaker 1: somebody else. So that happened yesterday. At the same time,
28:47
Speaker 1: another story was released yesterday that uh a startup will
28:52
Speaker 1: someone who funds startups is investing three dollars into bitcoin Um.
28:58
Speaker 1: They're interested in h making it easier to spend bitcoin currency,
29:02
Speaker 1: They're making security better. They think those are good opportunities. Basically,
29:06
Speaker 1: I make money on those are huge problems that this
29:09
Speaker 1: currency has right now. So in the same day the
29:12
Speaker 1: FEDS shut down mount Cox, one company invested three d
29:16
Speaker 1: fifty grand and yesterday CNN money Um global risk strategist
29:21
Speaker 1: Ian Bremer said predicted the end of bitcon, So that
29:25
Speaker 1: just shows you like no one knows. He said, I'll
29:28
Speaker 1: be highly surprised if this is around in ten years.
29:30
Speaker 1: And what he thinks is going to happen is this
29:34
Speaker 1: is the first one and someone's gonna learn Bitcoin will
29:37
Speaker 1: not be around, but something else will pop up that
29:40
Speaker 1: does it better and that may last exactly. Like somebody
29:43
Speaker 1: in one of the articles we I think we researched
29:46
Speaker 1: UM said, you know, bit Torrent wasn't the first P
29:49
Speaker 1: two P file sharing network, and Skype wasn't the first
29:52
Speaker 1: V O I P network exactly, so Bitcoin may not
29:55
Speaker 1: be the first one. And there's a lot of rivals
29:58
Speaker 1: just waiting to take over if coin falls. But the
30:01
Speaker 1: it seems like the precedent has been established and it's
30:05
Speaker 1: been shown like this can work. Whether or not it
30:08
Speaker 1: will be allowed to work is a big question because again,
30:12
Speaker 1: the Feds can always step in and shut down whatever
30:15
Speaker 1: they want if if they want to go after a
30:17
Speaker 1: Mount Cox, they can do that. Well, yeah, and the
30:19
Speaker 1: big boys are already getting involved of course. Um. Amazon
30:22
Speaker 1: now has Amazon coins that you can buy for the
30:26
Speaker 1: Kindle network and spend them like money. So you realize
30:31
Speaker 1: what we're talking about is the same thing that was
30:34
Speaker 1: happening post Civil War in the US when eight thousand
30:36
Speaker 1: different banks Russuman currency. That's what we're seeing right now,
30:40
Speaker 1: but in a digital form. This is the beginning of it.
30:43
Speaker 1: It's crazy, it's the wild West. It's pretty awesome. UM.
30:46
Speaker 1: Aside from the Hitman, Yes, I don't think I have
30:50
Speaker 1: anything else. Did you hear people get it? You know,
30:53
Speaker 1: the guy from the lead singer of As I Lay Dying,
30:55
Speaker 1: that metal band, I don't know them. He uh. He
30:58
Speaker 1: got set up trying to buy a murder for hire
31:02
Speaker 1: from an undercover detective to murder his ex wife through
31:06
Speaker 1: bitcoin or just back full of cash. Yeah, yeah, wow, yeah, Yeah,
31:14
Speaker 1: that's a tough one to get away with, although maybe
31:16
Speaker 1: people get away with him and you just never hear
31:18
Speaker 1: about it. Yeah. I hope it's a tough one to
31:20
Speaker 1: get away with. That definitely should be hard to get
31:22
Speaker 1: away with. Yeah. I think the moral of the story
31:25
Speaker 1: is kill someone yourself. Just kidding. Um. So, if you
31:31
Speaker 1: want to know more about bitcoin, it's it's pretty interesting
31:35
Speaker 1: and there's a lot of really great writing all over
31:37
Speaker 1: the web about it. Yeah. I would first go to
31:40
Speaker 1: our beloved How Stuff Works, type that word in the
31:43
Speaker 1: search bar, then maybe start next at Wired. The Economist
31:46
Speaker 1: has a good explainer. Mother Jones has some good stuff
31:49
Speaker 1: on it. Go check it out or check the news feed,
31:52
Speaker 1: because literally every day you're gonna get some new changing story.
31:56
Speaker 1: I mean, by the time this is released, there may
31:58
Speaker 1: not be any bitcoins in two weeks. Who knows, but
32:02
Speaker 1: there will be yeah, I hope so, or else they're
32:05
Speaker 1: gonna have to add an e D to how bitcoin worked?
32:08
Speaker 1: Do you have any? Have you bought any? No? I
32:11
Speaker 1: mean I'm the fool. I think I said a search
32:15
Speaker 1: bar in there somewhere. So that means it's time for
32:18
Speaker 1: a message break right, that's right, and then a really
32:20
Speaker 1: good listener mail. I now, Chuck, it's time for listener mail.
32:28
Speaker 1: Thank you, sir. This is from pink Chris Pinkerton, who
32:32
Speaker 1: has been a fan of our Showa very beginning and
32:35
Speaker 1: active on our Facebook and the famous detective and a
32:37
Speaker 1: good guy. That's right. So this is about e c
32:40
Speaker 1: t RT electro convulsive therapy podcast that just dropped in
32:44
Speaker 1: real time and uh he has a story. While in
32:48
Speaker 1: high school, guys in Omaha, Nebraska, I met two girls,
32:50
Speaker 1: Gloria and Susan. For about three years, we were inseparable.
32:53
Speaker 1: We would hang out after school party together. Glory and Susan.
32:57
Speaker 1: We're even closer and sometimes I was just a third
33:00
Speaker 1: ill another feeling buddy. Yeah. Uh. The girls, being a
33:03
Speaker 1: year younger than I, stayed in school when I was
33:05
Speaker 1: shipped off to join the marine corps or not what
33:08
Speaker 1: shipped off. He chose to go shipped out. Yeah, we
33:12
Speaker 1: lost touch, but then eventually I moved back to Des Moines, Iowa,
33:15
Speaker 1: and I found Susan living there as well. She informed
33:18
Speaker 1: me that should call Gloria and fill her into the
33:19
Speaker 1: misyears while I was away. Apparently Gloria had a daughter
33:23
Speaker 1: who passed away under terrible circumstances and became very depressed
33:27
Speaker 1: after the loss of her daughter, and Um actually had
33:30
Speaker 1: to undergo ect treatment for depression. In your podcast, you
33:34
Speaker 1: stated there slight memory loss, but in my experience that
33:37
Speaker 1: is an understatement. Gloria had no clue who I was,
33:41
Speaker 1: did not remember any of our high school years. Gone
33:44
Speaker 1: were the memories of harassing teachers, making out in the auditorium,
33:47
Speaker 1: and memories of working on my car in shop class.
33:50
Speaker 1: Apparently she was pretty good with a wrench, So we
33:52
Speaker 1: get to tell her all over again. Uh yeah, Um.
33:55
Speaker 1: As it turned out, she had forgotten Susan as well,
33:57
Speaker 1: but not as much as she had forgotten me, because
34:00
Speaker 1: Susan was there for her throughout the treatment, and Gloria
34:02
Speaker 1: has been able to recall more memories. Have heard you
34:04
Speaker 1: to this. It's very sad. To me that I've lost
34:07
Speaker 1: a friend. Um, not because of intent, but due to
34:09
Speaker 1: a treatment I failed to help her through and failed
34:12
Speaker 1: to understand. That is one regret I will always have,
34:15
Speaker 1: and it shames me to think that she has no
34:16
Speaker 1: clue who I am and how important to my life
34:19
Speaker 1: she was. Ever since, I vowed to tell people how
34:22
Speaker 1: important they are to me in case they never remember,
34:25
Speaker 1: at least all know that I tried to explain that.
34:28
Speaker 1: And uh, Pink, let yourself up, buddy, Um, you were
34:32
Speaker 1: in the Marine Corps. You were serving your country and
34:34
Speaker 1: it was a very unfortunate series of events, and so um,
34:39
Speaker 1: take that off your shoulders. I say, uh. And Chris
34:42
Speaker 1: goes on to say, enjoy your day, guys, smile and
34:44
Speaker 1: have fun. And that is Chris Pinkerton and Demine, ps,
34:48
Speaker 1: could you tell Jill Marie McFadden that she has a
34:50
Speaker 1: love of my life? I think you just think, yeah,
34:53
Speaker 1: exacinitely done. Thanks for the words, pink. He's always super
34:57
Speaker 1: supportive and like just my sky. Yeah, clearly, Yeah, thanks
35:00
Speaker 1: a lot, pink. Um, that's a wow. If you have
35:03
Speaker 1: a story that you want to tell us, almost overwhelmingly depressing,
35:09
Speaker 1: we want to hear that. Um, You can tweet to
35:11
Speaker 1: us at s y s K podcast. You can join
35:13
Speaker 1: us on Facebook dot com slash stuff you Should Know.
35:15
Speaker 1: You can send us an email of the Stuff podcast
35:18
Speaker 1: at discovery dot com and join us at our home
35:20
Speaker 1: on the web at stuff you Should Know dot com.
35:28
Speaker 1: For more on this and thousands of other topics, is
35:30
Speaker 1: it how stuff works dot com with over a hundred
35:40
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