 Say there's a coin that's currently worth thousands of US dollars yet it's not made of any precious material, it's not gold, platinum or any other substance. In fact it only exists digitally which means it's electronic and you can't even put it in your piggy bank. Today we're talking about Bitcoin. I'm talking about Bitcoin. Bitcoin isn't like other currency, it's not tied to a state or government so doesn't have a central regulatory body. Cryptocurrencies wouldn't work if it wasn't for a whole network of people to come in together and a thing called cryptography. Cryptocurrencies are fully virtual currencies which means you can exchange them between computers using a worldwide peer-to-peer network. The whole point of most peer-to-peer networks is sharing legal stuff like movies and MP3s. So if you're on a peer-to-peer network that distributes cryptocurrency what's to stop you making a whole load of copies and becoming amazingly rich and wealthy in this crypto world? So unlike an MP3 or a video file, Bitcoin isn't actually just a string of data, it's actually a huge entry into a massive global ledger called the blockchain. For reasons we'll get to the blockchain records every Bitcoin transaction ever made and as of 2016 it's estimated to be about 106 gigabytes of data and that's just text. So when you send somebody Bitcoin it's not like you're just sending them a bunch of files, it's actually you writing in the global ledger something like Steph sends Chris Adele one Bitcoin. But wait there's no central authority keeping track of all this right? Even though the blockchain is a central record, there's no official group of people who update the ledger and keep track of everybody's money like a bank. In fact it's decentralized and anybody can volunteer to maintain this massive global ledger and tons and tons of people do that's why Bitcoin works. It all works because there's so many people keeping track of the same things trying to make sure everything is accurate and all transactions are verified. So the best analogy I've ever heard of blockchain is this. It's like you're having a game of poker but none of you have chips and you left your cash at home. There's no money on the table so a few of you get out your notebooks, these are your ledgers, and start writing down who bets how much, who wins and who loses. At the end of a hand you all compare, that way if someone makes a mistake or cheats the discrepancy is caught. After a couple of hands you might fill a page with notes on the money's movements. Think of each page as a block of transactions. Eventually your notebook will have pages and pages of information. Now if thousands of people are keeping the blockchain ledgers how are these kept in sync? To stick with the poker analogy imagine the entire Bitcoin network as a giant poker table with millions of people. Some are just exchanging money but lots of volunteers are keeping ledgers so when you want to send or receive money you have to announce it to everybody at the table so the people keeping track can update their ledgers. So for each transaction you're announcing a couple of things, your account number, the account of the person you're sending it to and how many Bitcoin you are sending. Then all of the users keeping track of the blockchain will add your transaction to the block. Having a bunch of people keep track of the transaction seems like a good security measure but if all it takes to send Bitcoin is a couple of account numbers that seems like it might be a problem. So it's a huge problem with regular money just think of other ways criminals try to steal your account information and with Bitcoin there's no central authority keeping track of all this and trying to keep us secure. So what if all of a sudden all my savings get spent on delicious delicious hummus? So what stops Chris Adele sending herself all of my Bitcoin? Well cryptocurrencies are kept pretty safe by something called cryptography and that is in fact where the name cryptocurrency comes from. So Bitcoin is kept safe by something called keys these keys are little chunks of information that are used to make mathematical guarantees to the people keeping the ledgers that a message received is from me. When you create an account on a Bitcoin network which is also referred to as a wallet you are assigned a public and a private key. Your private key is used to scramble or encrypt anything you send out and only you have access to it it also can't be replicated. Then you send the signed message I'm sending one Bitcoin to Chris Adele out to the network and everyone can use your public key to discramble or encrypt it proving that it really was from you. That way everyone who keeps the ledger knows to add my transaction to the blockchain. Unlike a signature or an account number this proof of identity isn't something that can be faked by a scam artist. So the who is obviously super important but so is the when say I only have one Bitcoin and I try and buy a car and a dog at the same time what happens well with a bank they would honor the first purchase and decline the second if they didn't do that you'd be able to spend the same money multiple times. So if I do this as a check built into the Bitcoin system both the wallet and the network will check my previous transactions to ensure I have enough currency to make the purchase. But there's another problem that can happen timing because lots of people around the world are keeping ledgers over this peer-to-peer network sometimes there can be delays which mean that they get transactions in the wrong order so now you have a bunch of people with very slightly different blocks but none of them are necessarily wrong so how do we solve this problem well we solve this mathematically and that my friends will bring us on to the next episode which will feature mining. What's up guys I hope you enjoyed this first episode about crypto currencies if you liked it don't forget to leave a little thumbs up down below and also subscribe to the channel if you want to see more of this that will help it'll make daddy George give me permission