4.1 Explaining Cryptocurrency - Video Tutorials & Practice Problems

In this lesson, we're gonna talk about cryptocurrency. Key thing that I wanna point out to you is that we've talked about Bitcoin. Bitcoin is a type of cryptocurrency. To be exact, it was the first decentralized cryptocurrency. As we go through this lesson, I'm gonna talk to you about what cryptocurrency is and why it's such an important innovation. So to do so let's start explaining cryptocurrency. And I wanna ask you a question. When was the last time that you actually did a transaction of value and you got change in large denomination bills. If you're in the United States, it might be easy because you're used to what a $100 bill looks like, but let's say you're in a different country, and you're actually getting large denomination bills in. If you go to Argentina or you go to Brazil or you go to Spain or you go to France, you're going to different countries with different currency that you may not be as familiar with. How can you tell that those bills that you're receiving as change are valid and that they're not counterfeit. Or let's say that you actually do a transaction and you get paid with a check. So you take the check and you deposit it in your bank, and you're under the assumption you got paid, so you start writing your own checks or paying for services your own, and then you find out that the check actually had no funds. So several days later you get hit with fees because your checks actually were denied because you had no funds in your account because you took a check that actually had no funds with it. But it's your responsibility. There are many gaps in the way that money works currently, which presents some vulnerabilities. And as technology moves forward and the pace of money increases and things move faster and faster, there's a lot of gaps in how money behaves. There's a big problem, in all these things. And these are key areas where cryptocurrency can make a difference. Let's define first a cryptocurrency. A cryptocurrency is a type of digital asset, which can be used to exchange value between parties. It uses cryptography to secure how it's transferred and to control creation of new units of that currency. We're gonna dive further into these various elements, but as you have seen building out in the course, you saw how cryptography is used in Bitcoin. Well now you need to understand that cryptocurrency uses cryptography to secure how this cryptography is transferred, sorry, this cryptocurrency's transferred and also how the new units of that currency are created. So let's talk about some key benefits of cryptocurrency. For starters, it's impossible to counterfeit. There's no such thing as a fake Bitcoin, you simply can't create a fake Bitcoin. It's impossible to counterfeit. Furthermore, decentralized cryptocurrencies are impervious to manipulations by government. So you may have seen sometimes when governments talk about monetary easing of policy, or like for example, you hear what may be going on in Venezuela, for instance, where the currency is being devalued because a lot of it is being produced. So governments have a way of manipulating the currency supply. With cryptocurrency it's impossible to do that, specifically decentralized cryptocurrencies because there's no centralized institution that could change the supply of that currency. Furthermore, you also get fast settlement. So we spoke about a check. When you receive a check, you actually have to wait until that check clears. Same thing applies when you do a wire transfer, if you're actually sending a wire transfer to someone else, sometimes you may have to wait 48 hours, sometimes even more. But when you use cryptocurrency, you can actually receive the payment almost instantly you'll receive a notification, but you should wait for confirmations, but even waiting for confirmation should secure that that transaction is recorded on the blockchain. Once that's done, it's settled and there's no manipulation of it because you can't reverse it and you can't change it. The information is recorded permanently and immutably. Therefore you can use cryptocurrency and it provides for a much faster settlement. Additionally, cryptocurrency can help the over 2 billion people worldwide, who are under-banked. There's many places where there's very limited infrastructure and you simply don't have access to banks. But if you actually have mobile devices and you have access to the web, you can actually do cryptocurrency transactions. And this is a very, very valuable quality of cryptocurrency that can help many third world countries, where the infrastructure is really not there. And finally, one thing I want to point out is there are billions of dollars in cryptocurrency exchanging hands daily, and this happens 24 hours a day, seven days a week. And we'll be talking more about that as we go on with these lessons.