hi i’m sean and this is tech explained so bitcoin’s at nearly 40 000 is that right now you might be wondering should i buy or should i sell but more importantly what is the technology behind bitcoin and how does it work well i’m here to explain that the idea first came out of this mysterious author’s publication around 13 years ago in 2008 satoshi nakamoto published the seminal paper bitcoin a peer-to-peer electronic cash system in it he or she published the vision of what we now call a blockchain now originally blockchains were invented to make financial transactions easier post 2008 satoshi did not like that the financial system involved third parties those third parties or middlemen created information asymmetries and that often required trust that simply wasn’t there sketchy things would happen and often did happen people would delete or try to hide certain transactions you just couldn’t trust some third parties so satoshi’s workaround was to make all transactions public get that public that means getting rid of the middlemen in order to do this realistically you need to make sure that some of these transactions are actually real now on a super high level his idea was to store the timestamp of a transaction in an abstract data block think of it like a chunk of data now likewise these chunks just can’t be deleted because there isn’t just one copy in fact every person you get using the ecosystem carries a copy in that way it’s formally considered distributed among many peers or people and immutable which means it cannot be changed now let’s get into the details so if you have a transaction how do you add that time stamp into this digital and distributed ledger well the way that you can do this is actually by guessing a correct nonce which he refers to in the paper now non says to keep them simple are like secret words or numbers that you just have to guess like the word cat turtle if i’m thinking about it or hamtaro now are you ready for this so it’s not you necessarily guessing the number but rather your cpu or central processing unit satoshi’s vision was to literally have this egalitarian world where all users could participate in this ecosystem now in his paper he even makes a point about how using compute and electricity today was akin to gold miners using resources to mine gold now the next question is how do you incentivize people to actually let their computers do all this type of work and spend both precious electricity and cpu or now gpu graphics processing unit power enter bitcoin now the entire idea was that bitcoins would motivate people to participate in this ecosystem and ultimately create and receive value you essentially allow your computer’s cpu or gpu to solve this mystery nonce guess word or number and voila if you’re the lucky one then you get a bitcoin see bitcoin for you and bitcoin for you and bitcoin for you unfortunately one thing that was overlooked was how some people realized that they could game the system in fact not all gpus or cpus are created equal likewise i think he didn’t anticipate that 13 years later gpu and cpu farms dedicated purely to bitcoin mining would spring up that said the back end blockchain behind bitcoin does have some unique and useful use cases in fact i’ve actually built them out and patented them myself well i hope this video was educational for you by now my goal is that you have a better understanding of why bitcoin popped up the main problem that it tried to solve and the mechanism behind why gpus and cpus are used to attach new blocks that contain transaction histories in a distributed ledger so here we are in 2021 bitcoin hype is back up to where we saw it in 2018.
why do you think that the currency is so volatile and do you see any shortcomings when this white paper’s theory moved into practice if you found this video useful please leave a like and leave a comment below i’m sean patier and this is tech explained [Music].
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