How does Cryptocurrency ACTUALLY work?

okay bitcoin blockchain dogecoin ethereum nfts everyone is talking about cryptocurrencies right now, but my goodness, what

does

it all mean? Welcome to the video that will take you from crypto novice to crypto genius. I'm going to tell you what it is, why it's becoming more and more important what I've really invested in myself, and the dark side of it. Well, when society was in its early stages, money did not exist, we will call this stage. The only way to buy something from someone was. Go up to them and say: oh, I really like your horse, I'll trade you my cat for him, sorry milo, I never trade you, but the problem with a system like that is that, although you might be perfectly happy to give up your horse, you may not want a cat so that trade never happens, but that's where currency came in in stage two, coins that, because they were made of precious materials like gold and silver, everyone just accepted that they were worth something what you've heard about in the British. pound, well the reason they're called pounds is because a pound literally used to be a pound of silver and suddenly in a trade it

does

n't matter if you don't want my cat as long as I have it. coins that we can still exchange for your horse, even if you have no use at all for silver because it is a precious material, you are assured that you can take that coin, give it to someone else and exchange it for something you want that is convenient, but Then this evolved to stage three when banks were established and governments had control, we realized that as long as there was trust in the system we could move from the need to transport blocks of precious metals to something even more convenient: paper money. , does the same. but now money has no value because it is made of pure silver, it only has value because the government says it has value like this £10 note here in the UK, the note itself is made of well, it is

actually

made plastic that they changed.

It was made recently because it is more durable, but if you look closely you can see that all this is

actually

the Bank of England promising that they will pay the bearer of this note 10 pounds. In reality, this is just a receipt, a kind of proof that you own a certain amount of money, but as technologies improved even more, we found even more convenient ways to store and exchange our things. We're now in what I would call stage four, where more people than ever are buying things online and using credit cards, and really when we're at that stage where we don't see our money anymore.

These aren't coins, bills, or cats, they're just entries in a spreadsheet, like when I buy a music album on Amazon. All that happens is my bank adds an entry on my spreadsheet that says Aaron is now ten dollars less and then Amazon's bank adds an entry that says they are ten dollars more, so the reason I give them I have given this entire introduction is to give you context on where cryptocurrencies are; many people consider them the most convenient. exchange era in stage five the way to think about a

cryptocurrency

is that it is 100 virtual. I know the bitcoin logo looks like a physical coin, now it really is a small coin, but with cryptocurrencies there is no gold, there is no silver.

There is no paper, it is really just the transfer of digital assets. The core concept is exactly the same. Think of them as literally just running spreadsheets of who paid what to whom, but instead of multiple banks keeping their own separate records with cryptocurrencies, there's just one huge one. spreadsheet of every transaction made using that currency and this is called a ledger, okay we all have a nice spreadsheet but why is there all the fuss about why everyone is going crazy about cryptocurrencies? Well, there are some distinct advantages to a monetary system like this: It is decentralized, meaning that while every transaction of a given

cryptocurrency

is recorded in the same ledger, there are many copies of that ledger and any one that is part of the net

work

has one, maybe you've heard of cryptocurrency mining or bitcoin mining, well all you are is someone. which sets up a computer to process transactions in your copy of this ledger or spreadsheet, there are already about a million bitcoin miners around the world and bitcoin is just one type of cryptocurrency, the reason they are doing well if you dedicate your computer power to mining, say bitcoin, then you will earn some bitcoins as compensation, so the result of this is that if I walk into a store and spend five bitcoins on something, instead of just checking with the records from a bank, the store checks with each computer on this net

work

, if I have enough and assuming I do, each computer will give the go-ahead and then each will update their records independently, so, since you end up having so many copies from exactly the same ledger, it's very easy to tell if someone is trying.

Did you do something suspicious that bought this? If I try to hack into someone's computer on the network and give me more money by adjusting the figures in their copy of the ledger, it will bypass the system and realize that 99.9 of the copies in the ledger say one thing, but one of them says something else, so it must have been manipulated. The system has a very clear organization and I think people believe in it because they see the future as open and traceable transactions much more than some. fragments of the album here and others there and I know it seems complex at this point, but as we go through this I think you will realize that for many people, in a simpler way, there are many areas in the world that have Internet access, which is all you need for cryptocurrencies, but you don't have access to traditional banks that require a lot of paperwork and documentation, well, two, and I've already implied it, but the main advantage of cryptocurrencies is that You no longer need banks because everything is stored by people in this ledger.

You can make international payments almost instantly instead of taking half a day with no spending limits. Plus, you don't need to worry about exchange rates. I need to worry about interest rates and even transaction fees are close to zero for some cryptocurrencies, but this is where the real fun begins. I'm fine at parties. I promise that the reason cryptocurrencies are called cryptocurrencies is because they are protected by cryptography and an example of this used by many major cryptocurrencies like bitcoin is blockchain now people often get confused with this blockchain is not bitcoin blockchain is not a currency itself blockchain is just a type of secure ledger, so you know that big spreadsheet that everyone has that to record transactions.

Blockchain is just a way of organizing it rather curiously into blocks, so that every time I pay for something with bitcoin, that transaction is recorded as a block, each block containing transaction data such as who was paid and how much hash , which is a unique identifier and the hash of the previous block in the sequence or the last transaction that was recorded and the pivot on which this system is based is that if something is changed in a block, then the hash of that block will change, You may be starting to see where this is going because each block also contains the data from the previous block, if the hash of the block here changes then the next block will no longer have a matching hash and therefore all blocks after those will become invalid, so if you combine this with what we talked about before, the whole idea of ​​a million different users, all having their own copy of the blockchain ledger, then if I wanted to fraudulently create a transaction that Say you paid me money, I wouldn't have to just alter one block and each one of them. lock after, but I would also have to do this on at least half a million computers worldwide so that most of the computers in the system are also consistent with the one I have manipulated probably won't happen, while simply hacking the dollar account from someone and sending money to myself, that happens and sometimes it's as simple as literally guessing someone's six-digit PIN, but there's a huge jump between that and trying to hack 500,000 uncorrelated computers at once, okay, So cryptocurrencies have their problems.

I'm literally going to get to them in a minute, but I hope you can see why some people are excited about them and that brings me to investments. You've probably heard of people investing money in cryptocurrencies and all that means is that they are trading. normal currencies like dollars for cryptocurrencies like bitcoin, they expect those cryptocurrencies to become the next big thing and therefore suddenly skyrocket in value, at which point they can spend them or simply exchange them for more dollars than they bought. actually a term for cryptocurrencies that skyrocket this way going to the moon or being on the moon, but that can mean something very different depending on who you talk to, but the only decision anyone would have to make right now is what cryptocurrency, because we have talked about it. bitcoin, but bitcoin is just one of over 4000 different cryptos and each of them has different properties, for example, ethereum, which is the second most invested in, can process transactions even faster than bitcoin, there is one called cardano, which is considered technologically superior.

It's called litecoin which has a newer algorithm and if you are enjoying this video then a subscription to the channel would be a pleasure so let me show you what I have done and disclaimer this is in no way financial advice, I do not recommend it. In this I have literally only invested a small amount of money that I am comfortable losing and to be honest the way I look at it is more of an optimistic bet than a strategic investment, the only thing you should absolutely buy is Una one of the best purchases i have made is financial advice so i put 40 in ethereum 20 in polygon 20 in cardano 10 in cartesi and 10 in litecoin and this portfolio basically went up and then down and then up and then down and then honestly , you'll probably get more consistency from Wish.com, so cryptocurrencies are in a pretty strange place right now and this brings me to their problems.

The dark side, one of the main ones, is exactly this reason why I think a lot of people. What you don't take cryptocurrencies seriously is their volatility because these currencies are very new and completely digital, unlike the gold market, no one really knows how much they should be worth, so you find that cryptocurrency prices are quite speculative. Tied to the news cycle, like when a glowing article appears about them, prices spiral up, but then when Elon Musk posts a tweet dissing them, they go way down. Two is the fact that they are not actually accepted as a form of payment in Well, in most places, yes, I can now book vacations with cryptocurrency.

I can donate to Wikipedia with cryptocurrency, but there have been a lot of companies that come and go quite a bit with Microsoft, Tesla, even Burger King being examples of companies that said they were going to accept. bitcoin and then they said they were not going to accept bitcoin three, there may be an environmental concern. The reason many of these cryptocurrencies are so secure is because of this concept of transactions verified many, many times by many computers. I think it's a fair criticism that that in itself creates a fundamental inefficiency that a lot of computing power requires a lot of electricity, but at the same time you could counter this by saying that traditional banking uses more electricity and that there are newer currencies with better technology that they are more efficient and that one day we will be able to get that electricity from renewable sources depends on who you ask and four, there is also a pretty strong feeling that because there is no real oversight or regulation on cryptocurrencies right now, it's like the perfect currency for criminals, but To be honest, I think the data speaks for itself, based on chain analysis. 0.34 percent of crypto transactions are criminal.

Up to 5 of normal cash transactions are criminal and I think that's because it's a bit of a misconception that currencies like bitcoin are anonymous. They are actually pseudonyms, which means that although your real data is not visible to everyone, your public key, your unique identifier, will be permanently integrated into the blockchain when you transact with it, so cash is a better option. currency for most types of criminal activity. because by its very nature it is untraceable, don't ask me how I know, but besides the negatives, there are also some strange things that have arisen due to cryptocurrencies, for example, you may have heard of an nft or a non-fungible token, if you haven't you might want to grab a seat for this one.

I don't want to call it stupid, but this is a head scratcher so you know hownow you can go to an art gallery and pay. Owning a painting, now thanks to the blockchain, you can pay just to have digital ownership of something, so that doesn't stop anyone from using or sharing that thing, but all it means is that you would effectively own the original and they. We would all share copies even if for most purposes they look and behave identically, as if many of these nfts were literally just jpeg images. I think the reason some people find this stupid and funny is because there is a clear difference. between buying an nft and buying the rights to something, so if you buy the right service, it is a very legitimate purchase because you can create products or sell licenses with an nft, you can't, the original owner still has all the reproduction rights on that piece. all it is is that you're using blockchain to prove that you have some ownership over that asset, but clearly you can only say it has some value because an nft of this Gucci ghost was sold for 3600, Twitter CEO Jack Dorsey , sold the first tweet he made as an nft for $2.9 million.

Five words. I could do that. Anyone interested and this one leaves me speechless. This photo is basically a general description of one guy's parts. of art sold for 69 million dollars very good to clarify this literally only gives the buyer some digital ownership over a jpeg image and finally you may have heard of dogecoin dirt coin it is based on the same technology as litecoin but was created as a joke. They started sharing it and investing a little money in it because they thought it was fun, but that boosted its value to the point where now we have people who have actually become millionaires just because they bought Dogecoin when it was cheap.

It's an interesting world out there. If you found this helpful, consider sharing it with a friend or family member. You could benefit. I would really appreciate it. For my best phones of 2021, click here for an Instagram story that locks your phone. Click here. My name is Aaron, this is it. sir who's the boss I'll see you next time