- Hi, I'm Jonathan, this is Brain Stuff

and I've got some bad news for you.

Money is imaginary.

Now I don't mean that this printed piece of paper

is make believe.

I can feel its texture and the ink even smudges off

on my fingers, but when you compare it to this other

piece of paper, what's really the difference?

Well one is a recognized currency

and the other isn't.

And the reason why?

Well people agree that this piece of paper is a dollar

and has value.

That's where money's worth comes from.

We all pretend it's a currency.

This is one reason why the digital currency Bitcoin

appeals to some people.

See it's not tied to any political system

or government so it's not vulnerable to any of

their failings like the economic collapse in 2008.

All it needs is for people to believe in it,

but lately well, some people are having a crisis

of faith.

That's why today on Brain Stuff we're going

to quickly establish some facts about Bitcoin

to better inform your beliefs about it.

Now basically it's virtual money you can use

to buy and sell things online and it mimics real world

limited resources like gold for instance.

It's also a cryptocurrency meaning that it's encrypted

in a way that prevents it from being copied.

See every Bitcoin transaction is recorded

using a blockchain.

Now that information acts like a ledger

that is encoded onto the Bitcoin itself.

This prevents people from spending the same Bitcoin

more than once since everyone else on the currency's

peer to peer network knows that it just was spent.

It's essentially just a number associated

with an internet address.

You can store it on your phone

or a hard drive until it's used again.

Now, here's some ways you could acquire Bitcoins.

Accept them as payment for goods and services,

exchange them for a more traditional form of currency,

or you can mine them.

That's right, like gold Bitcoins are mined.

Not by old timing, grizzled prospectors,

but by powerful computers and like gold

the more people mine Bitcoins, the less there are

to be found, so they become harder to find.

So instead of physically mining with a pick ax

you can attempt to solve math problems

with a computer.

Imagine the problem is something like x + y = 15.

Now if you can figure out what x and y are, congratulations,

you get a bitcoin.

With little competition the problems are easier to solve

but when more people join the search you've got a race

and the problems get way more difficult,

but as Bitcoin miners dwindle, the math problems will

get easier again to ensure the flow is steady,

their value is boosted, and they remain inflation proof.

Not all have been mined yet and we expect they won't be

until around 2140.

So let's say you heard all this and thought

you know I want to grow up to be a professional Bitcoin

miner and trader.

Well there are a few risks you should probably know

about first.

For instance, because there's no regulatory agency

setting Bitcoin's value it tends to fluctuate wildly.

Another Bitcoin problem is security.

Now actually the format itself is fine,

but that doesn't protect it from hackers who target

the banks and exchanges that deal in Bitcoins.

Again, this isn't the fault of the currency.

If a bank were robbed, you wouldn't blame the dollar bill

for getting stolen right?

So Bitcoin has its slumps and for it to become

widely used its volatility needs to settle down

quite a bit.

It's currently a high risk currency

that's totally unpredictable and we didn't even

get into the mysterious identity of Bitcoin's founder

Satoshi Nakamoto.

Now personally I think the biggest drawback to Bitcoin

is that you just can't make it rain..

If you have experiences with Bitcoin,

let us know in the comments below.

And let us know if there are any topics you'd like us

to cover.

I actually have another pile of them right over there.

Really, I mean it's just offscreen.

So, the best part about this is I don't even have

to pick it up.

We have interns to do that.

See you guys later.