Explained

Do you ever feel ike you're being watched?

By big corporations? The government?

Banks?

Companies you've never even heard of?

Escaping that was the original promise of the first cryptocurrency.

Bitcoin.

The beautiful anonymity of cash,

but cash that wasn't printed by governments.

Instead, it was made by a bit of code... powered by citizens of the internet,

and you could trust it.

Today, anyone can buy cryptocurrency.

A few signups, type in your credit card number,

and trade in your money for digital cash.

Bitcoin got so popular, that by the end of 2017,

it was as valuable as the big banks it stood against.

And with a few more steps,

you can use Bitcoin to buy what the majority of Bitcoin is spent on:

Illegal services.

Virtual currencies can pose challenges for law enforcement,

given the appeal they have among those seeking to conceal.

There are now thousands of cryptocurrencies,

like Ethereum, Litecoin, Ripple and even a goddamn Dogecoin.

Dogecoin, you can buy them on exchanges, you can mine them...

Now, it started off in 2013 as a joke based on an internet meme.

Well, Dogecoin now is worth...

It kills me.

Dogecoin now is worth about half a billion dollars in market cap,

which just blows my mind.

Add them all up,

and people had bet half a trillion dollars on something.

So what are they betting on?

The world's largest bank account is in our bank.

That account belongs to the US government.

Bitcoin doesn't constitute legal tender.

It's probably the biggest innovation we've seen since the internet.

Any money is counterfeit, unless issued by the federal government.

The fundamental promise of Blockchain is decentralization.

We're in the early days of Bitcoin. We're in the mid-90s.

The only thing that's worse, than having a few people control currency,

is having absolutely nobody control a currency.

To understand cryptocurrencies,

you have to go back to an earlier form of digital money.

Diners Club was the first-ever credit card,

and it advertised itself as the ticket to a new modern lifestyle.

In the 1960s, the executives at Diners Club

talked about how cash was not sufficiently modern.

It couldn't interface with our fast-moving world.

Sign your way around the world with Diners Club International.

Credit cards were a revelation.

By 1970, half of American households had one.

They freed us from carrying around cash, everywhere.

And in the age of Amazon, Google and Uber, there's no need for cash at all.

Until there is.

For as long as we've been tinkering with computers, on any mass scale,

there's been a dream of digital cash.

A cash that would function like cash, in the sense that it's non-traceable,

anonymous, instant,

free to use...

and, yet, would be able to interoperate with computer networks.

In countries... that have dictators

or other negative influences on the transactions in the country,

they can choose not to allow certain types of transactions they don't want to,

and people can't spend their money freely.

A way to buy and sell things online without Big Brother watching.

That's a lot harder than it sounds.

It's actually a problem that flummoxed computer scientists for decades.

It even had a name:

The Byzantine Generals Problem.

A group of generals, each commanding a portion of the Byzantine Army,

encircle a city.

They must decide whether to attack or retreat.

But whatever they decide,

the most important thing is that they reach a consensus.

But consensus is difficult to reach,

because the generals in this army also can't trust each other,

just like we can't trust each other... online.

A general might say they plan to attack,

when they actually plan to retreat.

And just one dishonest general means everyone else dies in battle.

The generals had no choice,

but to route all of their battle plans through a central authority.

That's also why a site like Amazon needs to check with your bank,

to make sure you're good for the money you promise to pay.

The internet at large was built upon a paradigm,

that everyone was a trusted user.

Essentially, a government official or a researcher at a university.

And this technology was built

with that fundamental set of assumptions baked-in,

from the early days of the internet, till now.

It doesn't end there.

A lot of what we do online

is exchange things of value with each other.

And since we needed third parties to store and verify everything,

the internet filled up with huge third parties.

The key point here is that value exchange is not just money.

It is anything of value.

You are not Facebook's customer. You are Facebook's product.

We've been effectively paying, all these large behemoths, with our data.

That doesn't always go well.

We didn't take a broad enough view of our responsibility,

and that was a big mistake.

And it was my mistake.

Still, there wasn't much of an alternative

without a solution to the Byzantine Generals Problem.

And then, someone came along and solved it.

Satoshi Nakamoto.

-Who is Satoshi Nakamoto? -Actually it doesn't exist.

It could be a woman. It could've been a group of people.

Newsweek identified a man likely to be the cryptocurrency founder.

He's a 64-year-old physicist, apparently.

I have nothing to do with Bitcoin. So, he's probably not the guy, I guess,

but we know that the real Satoshi Nakamoto doesn't want to be found.

That guy did not invent Bitcoin,

and we may never know who did,

but they unleashed a cryptocurrency that you could buy online

and then spend as freely and anonymously as if you were using cash.

Satoshi's innovation, that powers Bitcoin

and all cryptocurrencies that came after it,

is called blockchain.

A blockchain is a ledger of transactions, much like a bank maintains,

but copies of that ledger are distributed among computers all over the world,

automatically updating with every transaction.

Think back to those Byzantine generals.

If their orders were recorded on the blockchain,

each general would have a copy of every other generals' battle plans,