Name: Why Bitcoin Is Not Working
Uploaded: 2018-03-25T01:21:46.000Z
Duration: 11 min 7 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

Currency, in its many forms, has been part
of human civilisation for thousands of years.

A natural evolution of trade from the the
arduous process of bartering, where traders

needed to find an equivalent exchange of goods
to complete a transaction.

The advent of metal coins, which had a known
and reliable value, allowed trade to flourish.

It facilitated the diversification of jobs,
and even invented a new one, the banker.

As trade flourished, and coins were minted,
the wealthy needed a secure location to keep

Banks became common place, where vasts amount
of money was stored, and the responsibility

of keeping track of it fell into the hands
of these bankers.

The banker could facilitate trades between
people, without the physical coins, from which

the currency gained its value, ever needing
to be seen.

This evolved to the world we now know where
electronic and paper money is commonplace,

Trust that this money has intrinsic value,
trust that became tarnished by the global

financial crisis where bankers created excessive
amounts of another new form of currency debt,

a currency based on assumed future earnings.

When this system fell apart with the crash
in property prices, many ran back to the tried

and true method of using gold as a safe and
reliable currency, resulting in the prices

peaking at the height of the crash, but one
clever individual started to wonder is there

That person was allegedly “ Satoshi Nakamato”
the mysterious founder of the first cyptocurrency,

Satoshi released this statement conveying
his motivation for creating bitcoin:

“The root problem with conventional currency
is all the trust that's required to make it

The central bank must be trusted not to debase
the currency, but the history of fiat currencies

Banks must be trusted to hold our money and
transfer it electronically, but they lend

it out in waves of credit bubbles with barely
a fraction in reserve.

We have to trust them with our privacy, trust
them not to let identity thieves drain our

Their massive overhead costs make micropayments
impossible.

Cryptocurrencies were invented primarily to
eliminate the banking system middle men from

To ensure the security of people's hard earned
money and allow for cheap accessible transactions.

A beautiful idea, that in practice has its
flaws.

In order to eliminate these middle men, we
need to find a way of creating a trust system

A way of ensuring that someone cannot simply
write a transaction crediting their account

In its purest form, Bitcoin is a currency
that uses a system of complicated keycodes

to verify transactions between individuals.

Batches of transactions are filed into something
called a block every 10 minutes.

For bitcoin the max amount of transactions
per block is around 2,400, so bitcoin has

a max transaction speed of 4 transactions
per second.

Each of these blocks needs to be verified
in order to verify the transaction history

and cryptocurrencies do this in a pretty surprising
way.

Bitcoin uses a system called a cryptographic
hash function, in this case Sha-256. to verify

SHA-256 simply outputs a string of 256 bits,
that's a 256 long string of 1s and 0s, for

SHA-256 will always give the same output for
a given input, BUT, as far as we know, it's

impossible to take the output and figure out
what the input was.

That means, in order to generate a specific
desired output, the only way of doing it is

And to do this quickly requires a significant
amount of computational power.

Essentially employing millions of little monkeys
in your computer to type numbers until one

So how does this apply to the blockchain verification
of Bitcoin?

For a block to be added to the chain it needs
to be signed with a SHA-256 input that will

result in a predetermined string of zeros
at the start.

The number of zeros needed is determined by
how much computational power is trying to

The more zeros needed, the more computational
power is needed.

We want the blockchain to be verified every
10 minutes, so in order to maintain that verification

time, the number of zeros needed keeps rising
as more computational power is dedicated to

It is through this huge dedication of computation
power that ensures security of the blockchain.

It would be unfeasible for an individual to
rewrite the blockchain with false information,

as they would first need to dedicate enough
power to sign previously written blocks, and

manage to keep up with the blocks currently
being written by the rest of the network.

A herculean task, as we are about to see.

There are more nuances to this system, and
I highly recommend you watch 3blue1brown's

video on the subject if you want to learn
more.

This blockchain technology is fascinating,
and has a huge amount of potential outside

of just cryptocurrencies, but it has negative
side effects, which have been exacerbated

by the hijacking of the bitcoin hype train.

The blockchain is verified by miners, these
are people who guess the inputs for SHA-256

to generate the desired output, and they are
rewarded for doing so with some bitcoin.

To increase your chances of being the first
person to correctly guess an appropriate input,

you need to maximise your computational power,
basically employ more monkeys, but obviously

Computation requires expensive equipment,
and equipment prices have only risen as the

demand for blockchain verification tech increases,
and it also requires electricity.

There are giant mining farms in the wastelands
of Iceland that use the cheap geothermal energy

and the abundance of cool air to minimise
their electricity costs for this very reason.

But the price of Bitcoin has inflated so dramatically
that it's still profitable to dedicate a

huge amount of computation power to mine,
and it has risen to damaging levels.

One Chinese mining facility was reportedly
spending 80,000 dollars a month on electricity,

but was turning over 1.5 million per month.

With returns like that, it would make perfect
sense to expand and increase your electricity

demands, and this is exactly what we are seeing.

Digiconomist have constructed a Bitcoin Energy
Consumption Index which has estimated that

the network of computers that verify bitcoin
transactions draw 3.4 Gigawatts (GW) That

Subtitles ListPlay Video

Why Bitcoin Is Not Working

eliminate

majority

brilliant

achieve