What is Bitcoin?

Beau Stoner
A free video tutorial from Beau Stoner
Certified Bitcoin Professional|Engineer|Investor|YouTuber
4.7 instructor rating • 2 courses • 6,860 students

Lecture description

In this lecture, students will learn about Bitcoin, the digital currency behind all other cryptocurrencies.

Learn more from the full course

Cryptocurrency Investment Fundamentals | Buy, Sell & Store

This course teaches the key fundamentals in buying and investing in cryptocurrencies, focusing on the Australian market

04:10:05 of on-demand video • Updated December 2018

  • Learn all about the fundamentals of Cryptocurrencies, including the foundational Blockchain technology behind it
  • Learn about Bitcoin, Ethereum, Bitcoin Cash and Ripple
  • Learn about Australian cryptocurrency exchanges, how to create an account and know your customer/anti money laundering laws
  • Learn how to buy, sell, and store cryptocurrencies including using digital wallets
  • Learn about the risks involved with cryptocurrency investment, including scams, hacks, phishing and pump and dumps
  • Learn about how to identify cryptocurrencies to invest in and how to employ proper investment strategies
  • Learn about Australian specific cryptocurrency tax and superannuanation
  • Learn some excellent resources for increasing your knowledge on investment fundamentals, and where to find cryptocurrency communities
English [Auto] I go. And welcome to the very first lecture we're I'm going to teach you all about Bitcoin. So if there's a God I want you to open coin market Captain com. It's going to be a major racehorse throughout this entire human course. So in the resources box is he you will see a link. This is called market capital. I want you to open it up an issue of the Pied Piper very just like it has here. The coin market cap Dockum lists every single cryptocurrency in existence. The current price the volume circulating supply and lots of other really good information will be referring to this a lot throughout the duration of this course. So make sure you keep it open and it contains a lot of information. If you ever want to go out and have a look at a bit more. OK so let's get straight into a quiz. What is Bitcoin. Well Bitcoin is this digital thing that somehow still seems to keep going up in value it keeps popping up in the media. I Cape's getting shunned by bank is getting shunned by governments. So what the heck is it. Well let's have a little bit of a closer look if we click on Bitcoin at the top. We can see it's currently trading at eight thousand U.S. dollars. Wow that is crazy. That's a lot of money. And guess what. Just one year ago. Let's have a look. Just one year ago Bitcoin was trading for seven hundred and thirty four dollars. That's a 10 times increase in price in just one year. So what does it keep going up in value. What do we keep hearing about it we're going to get into that in just a minute. But first off I just want to show you some really basic things. I'll give you a good understanding for a big coin. But for all the credit. So we're going to show you something called the market cap. Now what the market cap actually is and this is a term that's used in the stock market a lot is it's purely just a circulating supply of us of a particular asset say a stock or a share or in the case of cryptocurrency multiplied by its current price. Let's just do a quick calculation so the current market capital of bitcoin is 133 billion dollars. One hundred thirty three point eight billion dollars. And the car price is eight thousand twenty. So if we have a look over here we can see the circulating supply and yet the supply of Bitcoin main's the amount of Bitcoin out they in the open market that can be bought and that can be sold. Now the maximum supply is the maximum amount of bitcoin that will ever exist. In fact it's actually written into bitcoins mathematical code that no more and no less bitcoin will ever exist. OK so we know what the maximum supply is but we are only concerned again with that circulating supply because that's what they add in the market at the moment. We don't want to worry about the maximum splot supply just at this point. So just a quick calculation to make sure that we know how this market capital actually works. So multiplying the circulating supply to 16 6 9 3 6 1 2. While the current process which is 8000 $20 we get 1.3 three or 133 billion dollars that's how easy it is to work at the market capital in the month Capital is a good way of gauging just how big a certain company or certain cryptocurrency is. Now Bitcoin is the numero uno. If we come back to the main page we can say Bitcoin is number one. It has a current market cap of a hundred seventy nine billion dollars Australian. But we generally we like to look at things in U.S. dollars because the US dollar is a good global currency to compare. Every other cryptocurrency too. So you have Bitcoin at $136 Indos a theory with 35 Bitcoin cash 20 nothing comes close to Bitcoin it is the biggest. It is the oldest. And it was the first. So with that out of the white Let's go have a little bit more of a look about what is Bitcoin and how it's actually used. So you've come to this course because you want to learn more about bitcoin you want to be more to currencies and potentially you want to even lude have to invest into this brave new amazing asset classes well. Well you're not the only one in front of you is a Google Trends search for the word Bitcoin over the past five years. Now as you can see there is a general trend upwards and in fact in the last couple of years we can see almost an exponential curve in the amount of people searching for bitcoin. So again you're not the only one and this really is starting to become a global phenomenon. Now here we have a curve that represents the amount of transactions that are happening on the bitcoin network over the past five years. Again we are starting to see an exponential increase in demand transactions. What's that mean. It means more people are using bitcoin more people are buying it more people are transacting with it more people are sending it to one another. The big Kumud network is getting busier and busier by the day. Now here we have the amount of wallets created. What's a wallet. We'll get into that in just a bit. But this again is a five year graph showing the number of wallets that are being created in the bitcoin that were everyday. And again it's an exponential curve. In fact it's nearly exactly the same as the number of transactions so we can see these two bits of data correlate that show more people are becoming active in bitcoin. More people are downloading these wallets and using them and overall more people are just starting to get involved in using bitcoin and cryptocurrency every day. OK so let's say your boss a bitcoin. What do you do with it. Well you can spend it. Now we are in the early days and not a lot of places. But more and more are coming every day in front of you is a map of downtown Sydney CBD all these places on the map. Places that accept bitcoin as payment. So instead of using your debit card you can use your phone. And no it's not linked to your bank. It's linked to your bitcoin wallet. There is no bank. So when you have bitcoin you are the bank and you can walk into one of these places let's have a little bit of a close look and let's find some way. So let's say we want to go to a cafe we can walk into a greenhouse cafe we can buy a meal and we can pay for it in Bitcoin without any bank or any financial institution having to be involved because Bitcoin is de-centralized. You are the bank you are the wallet. So what else can you do with bitcoin. Or you can pay your bills with it over here own living room of Satoshi and Australian based company inside. You can pay for your bills using bitcoin with pay you can pay a credit card you can pay but you can send Bitcoin straight to your bank account. If you want to convert it to Astroland dollars. So here we have Bitcoin items in Australia. So what the heck is a coin AGM Labby coin IDM is you can walk straight up to it. You can feel it a strong Indos pretty you had a receipt with the end of a man of bitcoin on a wall of for you. So basically goes and bought some Bitcoin from an exchange for you Prince you get a receipt and gives you your Bitcoin and the opposite can be used as well. You can scan your QR code or your wallet and you can get a Straley does of the item. So I know this seems a bit overwhelming and we will get into the technical detail a little bit more. But just quickly how does Bitcoin work. Well it works on a de-centralized system. So Bitcoin is basically a program that runs over the Internet. There are minds around the world. There are nodes around the world that verify these transactions. So at the moment when we have a bank a bank is a centralized institution that manages and money for us they use databases they use a lot of human processing to process transactions to generate loans et cetera et cetera. So these de-centralized system works but basically managing the particle or the big one block chain is running over the Internet. So if it's in a transaction do you if I get my phone with my bitcoin will and almost in a transaction to you there are no words or in the world anyone can be a node and there are these special monitors that verify these transactions for some cell that bank bank needed to be used without a centralized institution to be used. It's completely de-centralized what you're running out in front of you are live Bitcoin transactions happening on the bitcoin network savings every single time one of these goes past. This is someone in the world sending Bitcoin to someone else. What are you saying here with these codes and these numbers are wallet and wallet bait. And what you saying. He is the quantity of Bitcoin being sent. This is live. This is the amazing thing about Bitcoin. The network that operates Bitcoin or the block site is public. We can see anything happening on the bitcoin that work at any time. We don't know who owns these wallet addresses because Bitcoin is pseudonymous which means that we can say how much money people have in the coin wallets so we can say how much how many transactions happened. But we don't know who owns them unless that person explicitly says but on this particular Bitcoin wallet. So this is amazing stuff cause this is live 24/7 transactions happening on the world right now. So how do these transactions get confirmed. Well there's two ways of this nodes and this morning. What are you seeing in front of you is a picture of a bitcoin mine located in China. So Bitcoin is basically a bunch of parallel computers that have been set up that run a special coin to verify transactions on the network. Basically that getting too technical. These models compete with a manner of processing power they have if they win the little competition that's run in the mathematical code in the background they get awarded in bitcoins. So when they get awarded Bitcoins the circulating supply increases as it slowly leads up to that maximum supply. Now the second way is by running a node. Now the nodes are very different but anyone can run a node you can download the Bitcoin core. It runs in the background of the computer and it helps to verify transactions on the network and it helps to keep the bitcoin network strong. This is that distributed system we were talking about before. It's extremely de-centralized and Bitcoin is spread all over the world. Now this is a pie chart of the biggest mine is operating in the world. Now the size of the pot chart basically is the size or the control that that certain mining operation has over the verifications of transactions on the network basically means that they have more computers as we can see he will go Baty say to com and Paul Beatty's a top. A lot of these operate out of Tanabata white and Waldrop right out of China because China has cheap electricity these huge money farms as if we can say he used a ton of electricity. And in fact as Bitcoin grows as more people use it more processing power is being required to make it profitable for the money. So the more processing power the more it city these processes and these computers use so they can say hey we got Bitcoin Russia Bitcoin India bat poor Bitcoin dot com. These are all these major markets around the world but there are quite a few small minds as you can see here and this unknown is 1.7 percent. There are quite a lot of small ones around the world but again as Bitcoin grows and it requires more energy and more processing power it is becoming more more difficult for everyday Joes to run a bitcoin morning network and to actually make enough revenue for it to be profitable back in the old days. Anyone could run a bitcoin morning operation you could run it from your own home computer and people are making hundreds of bitcoins. Back when Bitcoin was really really cheap quite a few years ago people by running a morning operation. But again it's becoming very competitive based on the processing power is being required to verify these transactions. So here we have the nodes that are running around the world. So we can see there's a heap. They are not states that some in South America there's a lot around Europe and the some in Australia. Now these nodes as we talked about before we get to do is they are going to be coding quite cool. You don't get any reward for it but you're hoping to contribute to the strength of the bitcoin network and you're doing something good for Bitcoin ules you'll learn over time that Bitcoin has a very. The community is very passionate about bitcoin because they centralize Niger it's freedom people say be coin's freedom. They say it is a while to get away from having to use bank accounts because anyone can create a bitcoin wallet which is just as amazing. It doesn't matter who you are and what you need is fine. So a bit more about how the coins actually created. So basically the code that runs out would be coin or the script that runs on the coins has been mathematically programmed to produce Bitcoins at a certain right and done these to stop any form of inflation. Bitcoin is inherently programmed and mathematically designed to stop inflation and to be deflationary. So we have a graph that represents the amount of the coins that are being created over time. So we can see back in 2001 when Bitcoin was first released up to about now so I light up. If we draw a line right at P we can basically say that there's a 16 million Bitcoins have been released. Now you can see that curve is starting to slow in right. So every few years the amount of bitcoins that are being produced slows down. So instead of a traditional a central bank that prints money into circulation that can actually control inflation bitcoin you cannot control the inflation. These numbers of bitcoins that are replaced is wreaking of the code. No one commodify. No one can change it. So this is the amazing thing about the coin and this is part of the reason what Bitcoin is going up so much in value at the moment is the production of bitcoins is starting to slow down. So coming back here to Komaki capitalism these period along here from about two thousand and thirteen up to about 2015. A lot of bitcoins were being created. And because we have supply and demand economics that control the value of Bitcoin there's a lot of supply coming in the market but the supply is starting to slow down and the demand is starting to go up which is what the coin is going up so much value. So quick now remember how I said before that Bitcoin more addresses were public and that you can view any data in any statistic on the Bitcoin at any time. Well what you're seeing in front of you is the top 100 richest Bitcoin addresses in the world. So these addresses these wallet addresses are basically like think of it like your home address. But for bitcoin. So with a traditional bank you have an account number you have at the SBA you have these details that people need to send you money will you be coin. Address is just like your account number with your bank except it doesn't see the bank it says with you. You control it. It's only fine on its own computer. No one else is in control of the need and without the private key which we're getting to a little bit lighter the product is different to the wallet. No one can touch your bitcoin. It is an hackable and it is immutable. So that's ticket taken some of the addresses so he can say his top address has 146 thousand bitcoins. Well guess how much that is in U.S. dollars. 1.1 billion dollars of Bitcoin. Let's have a little bit of a look more will click on this address and we'll have a look at some of the other information. So what you're seeing here is basically the transactions as happened through this wallet or Dras. Now again the coin is public. Everything on the bitcoin it is public information. Anyone can view this at any time. These QR code is merely just a quick way to get this person's address or could send the person Bitcoin if I wanted to I could scan the QR code like get their wallet address Crockett's and send Bitcoin. Now I'm not going to. In fact I wish they'd send me some damn Bitcoin but we can just see how much money they have and all the transactions they are wasting in front of you is all the transactions that this person has done out of this wallet address. So truly amazing stuff guys they'll again be quiet as she documents. We don't know who owns this wall of dress. We merely know it exists and we can really say all the dot inside it. If this person came out and said I own this wallet address it is mine. Then we would know OK so how do we create a wallet. And what's all this wall stuff what we going to get into that more later on. But I just want to show you how easy it is and how amazing it is and what crypto currencies and Bitcoin are going to change the world. So in front of you you're seeing all the information on to create the Bitcoin wallet or put him on email or put in a password of a graded type of service. Continue. Now watch to see how easy this is. And we've done that took 40 seconds on you have a bitcoin wallet on block 9 dot info. Isn't that incredible that you all took it didn't require me to register my night. It didn't require a passport. It didn't require birth certificate. Nothing. All I had to do was put an e-mail a password bomb. I have a big caramel. And to be honest most of the big quotes don't even require you to do that. So now all I need to do if all I want to request them be going on someone to send me some bitcoin. I just click on request and there is more unique won't address that. That address belongs to me. It's my almost like my account number. No one knows who unzips unless our publicly site on this address is my address. Now what if for us want someone to send you aka. Well there we go. Q Our code. Why have I become wallet and my phone will have to do is scan the QR code and all I can since I'd be going to it in about a minute. So here is an example of a bitcoin more refined. I've got multiple wallets on my phone. This is how amazing it is that QR code that is all you require and that bitcoin address I can send Bitcoin to you and be kind of my friends to my family to in exchange whatever I want to do that is Bitcoin. And that is all crippler currencies based on that same amazing revolutionary technology. So guys I really hope that information helped you learn a bit more about Bitcoin and we're getting going more into the block chain technology that is the fundamental underpinning behind bitcoin. In light elections so with this election out of the way let's move on to Theoria.