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[narrator] Do you ever feel
ike you're being watched?
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By big corporations? The government?
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Banks?
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Companies you've never even heard of?
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Escaping that was the original promise
of the first cryptocurrency.
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Bitcoin.
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The beautiful anonymity of cash,
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but cash that wasn't printed
by governments.
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Instead, it was made by a bit of code...
powered by citizens of the internet,
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and you could trust it.
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Today, anyone can buy cryptocurrency.
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A few signups,
type in your credit card number,
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and trade in your money for digital cash.
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Bitcoin got so popular,
that by the end of 2017,
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it was as valuable
as the big banks it stood against.
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And with a few more steps,
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you can use Bitcoin to buy
what the majority of Bitcoin is spent on:
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Illegal services.
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Virtual currencies can pose challenges
for law enforcement,
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given the appeal they have
among those seeking to conceal.
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[narrator] There are now thousands
of cryptocurrencies,
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like Ethereum, Litecoin, Ripple
and even a goddamn Dogecoin.
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[woman] Dogecoin, you can buy them
on exchanges, you can mine them...
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Now, it started off in 2013 as a joke
based on an internet meme.
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Well, Dogecoin now is worth...
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It kills me.
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Dogecoin now is worth about
half a billion dollars in market cap,
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which just blows my mind.
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[narrator] Add them all up,
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and people had bet half a trillion dollars
on something.
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So what are they betting on?
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[man] The world's largest bank account is
in our bank.
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That account belongs to the US government.
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Bitcoin doesn't constitute legal tender.
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It's probably the biggest innovation
we've seen since the internet.
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[man] Any money is counterfeit,
unless issued by the federal government.
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The fundamental promise
of Blockchain is decentralization.
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We're in the early days of Bitcoin.
We're in the mid-90s.
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The only thing that's worse,
than having a few people control currency,
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is having absolutely nobody
control a currency.
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[narrator] To understand cryptocurrencies,
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you have to go back to an earlier form
of digital money.
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Diners Club was
the first-ever credit card,
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and it advertised itself as the ticket
to a new modern lifestyle.
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[Lana Swartz] In the 1960s,
the executives at Diners Club
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talked about
how cash was not sufficiently modern.
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It couldn't interface
with our fast-moving world.
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[add presenter] Sign your way around
the world with Diners Club International.
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[narrator] Credit cards were a revelation.
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By 1970,
half of American households had one.
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They freed us
from carrying around cash, everywhere.
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And in the age of Amazon, Google
and Uber, there's no need for cash at all.
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Until there is.
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For as long as we've been tinkering
with computers, on any mass scale,
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there's been a dream of digital cash.
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A cash that would function like cash,
in the sense that it's non-traceable,
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anonymous, instant,
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free to use...
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and, yet, would be able to interoperate
with computer networks.
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In countries... that have dictators
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or other negative influences
on the transactions in the country,
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they can choose not to allow certain types
of transactions they don't want to,
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and people can't spend their money freely.
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[electronic music]
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[narrator] A way to buy and sell things
online without Big Brother watching.
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That's a lot harder than it sounds.
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It's actually a problem that flummoxed
computer scientists for decades.
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It even had a name:
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The Byzantine Generals Problem.
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A group of generals, each commanding
a portion of the Byzantine Army,
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encircle a city.
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They must decide
whether to attack or retreat.
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But whatever they decide,
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the most important thing
is that they reach a consensus.
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But consensus is difficult to reach,
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because the generals in this army
also can't trust each other,
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just like we can't
trust each other... online.
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A general might say they plan to attack,
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when they actually plan to retreat.
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And just one dishonest general
means everyone else dies in battle.
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The generals had no choice,
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but to route all of their battle plans
through a central authority.
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That's also why a site like Amazon
needs to check with your bank,
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to make sure you're good
for the money you promise to pay.
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[Hunter Predergast] The internet at large
was built upon a paradigm,
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that everyone was a trusted user.
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Essentially, a government official
or a researcher at a university.
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And this technology was built
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with that fundamental set
of assumptions baked-in,
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from the early days of the internet,
till now.
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[narrator] It doesn't end there.
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A lot of what we do online
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is exchange things of value
with each other.
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And since we needed third parties
to store and verify everything,
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the internet filled up
with huge third parties.
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The key point here is
that value exchange is not just money.
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It is anything of value.
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You are not Facebook's customer.
You are Facebook's product.
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We've been effectively paying,
all these large behemoths, with our data.
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[narrator] That doesn't always go well.
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We didn't take a broad enough view
of our responsibility,
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and that was a big mistake.
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And it was my mistake.
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[narrator]
Still, there wasn't much of an alternative
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without a solution
to the Byzantine Generals Problem.
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And then,
someone came along and solved it.
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[woman] Satoshi Nakamoto.
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-Who is Satoshi Nakamoto?
-Actually it doesn't exist.
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It could be a woman.
It could've been a group of people.
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Newsweek identified a man likely
to be the cryptocurrency founder.
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[woman presenter]
He's a 64-year-old physicist, apparently.
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I have nothing to do with Bitcoin. So, he's probably not the guy, I guess,
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but we know that the real Satoshi Nakamoto
doesn't want to be found.
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[narrator]
That guy did not invent Bitcoin,
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and we may never know who did,
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but they unleashed a cryptocurrency
that you could buy online
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and then spend as freely and anonymously
as if you were using cash.
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Satoshi's innovation, that powers Bitcoin
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and all cryptocurrencies
that came after it,
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is called blockchain.
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A blockchain is a ledger of transactions,
much like a bank maintains,
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but copies of that ledger are distributed
among computers all over the world,
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automatically updating
with every transaction.
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Think back to those Byzantine generals.
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If their orders were recorded
on the blockchain,
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each general would have a copy
of every other generals' battle plans,
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always up-to-date and 100% verified. Maintaining this distributed ledger
takes a lot of work,
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but it's no one's job to do the work.
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Instead,
the system pays out cryptocurrency
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to those who volunteer to do it.
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For the first time,
you have a distributed network
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to come to consensus about
what transactions happened on the network.
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This allows for a trustless ledger,
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a ledger where there isn't
a single central party maintaining it,
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but rather,
a network of people maintaining it.
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That's an incredibly powerful concept.
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[narrator] Satoshi didn't just solve
the problem of cash on the internet,
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he had a solution for the problem
of trust on the internet, too.
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Blockchain facilitates
an entirely different perspective,
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which is that no one is a trusted user.
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It facilitates a new type of interaction
that we've never before seen possible.
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[narrator]
Bitcoin was blockchain's first trial run.
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A money system with nobody in control,
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no laws, and no regulations.
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That's a wild experiment,
and its timing was impeccable.
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Call it Nightmare on Wall Street:
The meltdown in the financial market.
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[woman presenter] The Dow plummets
as the financial world is rocked
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by the biggest bankruptcy in US history.
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It seems every time you think
it's as bad as it could possibly get,
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another disaster's just waiting
around the corner.
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[narrator] A lot of people were angry
with their governments,
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and pretty much everyone was furious
with big banks.
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People were very aware at that time
that there was something broken
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with the old, centralized,
architecture of money.
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And it took off.
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[narrator]
A new money? The press ate it up.
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And they got even more excited
when huge online drug markets sprung up.
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[man presenter] About $18 million
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in Bitcoins seized, last fall,
from a website known as Silk Road.
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[woman presenter] ...a $1.2 billion
online criminal marketplace.
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[man presenter] ...where users could
anonymously buy heroin, LSD...
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[woman presenter] In a couple of clicks,
drugs on your doorstep.
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[narrator]
Bitcoin had made it to prime time.
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Businesses began creating
their own cryptocurrencies
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and selling the coins
as a way to raise money,
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like shares on a stock market.
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And people treated cryptocurrencies
like a stock market too,
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investing in different ones,
trying to buy low and sell high.
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[bit music]
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[narrator] And over the last few years,
it's been pretty easy to sell high.
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Before anything, it's a movement.
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-Are you a millionaire?
-Yes. Many times over.
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It feels pretty great. Not too bad for 19.
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You can absolutely make a ridiculous
amount of profit in crypto.
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What you wanna do, is make your money
in a concentrated position.
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Put it into Bitcoin and HODL for now,
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which means hold on for dear life.
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Make a little bit of profits
on Bitcoin and then...
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Everybody was like
"It's gonna burst, it's a bubble,"
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but something told me to hold on,
and I'm glad that I held on to it.
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"The revolution will be ushered in
by young cryptocurrency millionaires."
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Who could they be talking about?
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♪Dropping crypto knowledge
making the ladies go cray cray♪
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[bit music]
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[Bromberg] The same way gold's value comes
from people trusting the value of gold
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Bitcoin's value comes
from trusting the value of Bitcoin
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and using that as a place
to put existing monetary value.
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It kind of just became a huge snowball,
and as it was going down a hill
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it just kept getting more and more steam.
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[narrator] In 2010,
when one Bitcoin was worth six cents,
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50 Bitcoin would have been just enough
for a fancy cup of coffee.
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At its peak in 2017,
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those same Bitcoin
would have been worth $850,000.
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That's an expensive cup of coffee.
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[mysterious music]
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[narrator] In January 2018,
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cryptocurrencies crashed.
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It may have been all the reports
of suspicious trading and fraud.
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Some worried the government
might swoop in at any moment.
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Or maybe it was general uncertainty
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about how much this stuff...
was really worth.
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Whatever the reason,
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half the value of all cryptocurrencies
went up in smoke.
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But there was an even easier way
to lose your money with Bitcoin.
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Just forget where you wrote down
your password.
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There's no way to reset it.
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I just wish I could go back in time...
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and not throw that drive away.
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[narrator]
There are over 2.5 million lost Bitcoin,
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which at their December 2017 peak,
were worth over $20 billion.
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[Palmer]
The average person doesn't feel safe
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controlling their own security
for all that money.
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People are willing to rely
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on what are in essence banks
for their Bitcoin,
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which in a way,
defeats the whole purpose.
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[add presenter] You can easily trade
money for cryptocurrencies and vice-versa.
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[narrator] And a bunch of cryptocurrency
companies have lost huge amounts of money
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to hacks and mismanagement.
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[man presenter] A hack attack at Bitstamp,
the world's largest Bitcoin exchange.
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MT.GOX lost three quarters of a million
Bitcoins that belonged to users.
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[woman presenter]
Tokyo-based Coincheck was hacked
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by almost $500 million in digital tokens.
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[narrator] The computers working
to maintain the distributed ledgers,
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they've been using more energy
than many countries.
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Blockchain is very expensive,
and right now it's kind of slow.
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[narrator] Visa's payment network can
process 24,000 transactions per second,
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and Bitcoin, just seven.
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Even though giant centralized institutions
sometimes abuse our trust,
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they're also really convenient.
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[seventies music]
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The question really becomes
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"What advantages do you get
from moving
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a previously centralized service,
like Dropbox or Whatsapp messenger,
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into a decentralized blockchain,
and does it really pay off?"
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[narrator] But people are placing
a huge bet
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00:12:26,245 --> 00:12:28,205
that some of these problems will get fixed
237
00:12:29,039 --> 00:12:32,334
and that blockchain will revolutionize
a lot more than just money.
238
00:12:32,460 --> 00:12:34,628
It's just not clear what that is yet.
239
00:12:35,129 --> 00:12:36,380
[Casey]
I don't know what's next.
240
00:12:36,464 --> 00:12:40,301
In the same way that we weren't able
to predict Uber in the 90s,
241
00:12:40,384 --> 00:12:44,263
I don't think we're able to predict
what new decentralized applications
242
00:12:44,346 --> 00:12:47,850
are gonna emerge
out of this new... infrastructure.
243
00:12:48,893 --> 00:12:51,687
[narrator] Cryptocurrency was
only the first experiment,
244
00:12:51,771 --> 00:12:54,815
and it may not end up being
the revolution people hoped.
245
00:12:54,899 --> 00:12:56,567
We will see regulations
start to come in.
246
00:12:56,650 --> 00:12:58,986
People will have to start to obey
what the government says.
247
00:12:59,445 --> 00:13:01,155
Much of this has not happened, yet.
248
00:13:01,238 --> 00:13:03,365
We've been in
a little bit of a Wild West.
249
00:13:03,449 --> 00:13:06,869
[narrator] We may have code that solves
the problem of trust on the internet.
250
00:13:07,953 --> 00:13:12,374
We just don't know if trust is a problem
technology can ever truly solve,