Episode 84: A bit about Bitcoin…

The rise of Bitcoin with Mak & G

SHOW NOTES

Today, we’re diving into the world of cryptocurrencies, how they work, what gives them their value, and how safe they really are…

 

With Bitcoin increasing in popularity it sometimes seems like its price is just going up and up.

 

But what are these cryptocurrencies? How do they work and what gives them their value?

 

Today, Mak & G look at the origins of Bitcoin, the world of cryptocurrencies, and what are the risks involved with having crypto.

 

“If you want any currency to have value, people have to believe it has value first.” – Mak

 

“You can buy almost anything in Japan with Bitcoin” – Mak

 
Time Stamps:

01:10 – How the market has been moving this week.

01:54 – When Bitcoin was created.

02:34 – How the technology behind Bitcoin works.

02:54 – What a cryptocurrency is.

03:53 – What a blockchain is, the type of information it holds, and why it’s hard to hack.

05:16 – What gives Bitcoin its value.

06:20 – How much Bitcoin is currently worth and how many coins are out there.

07:36 – The man who lost over 7000 Bitcoins.

08:08 – Where you store cryptocurrency.

08:56 – How we know that Bitcoin is valuable.

09:27 – The first-ever Bitcoin transaction.

10:32 – The benefits of having a hardware wallet.

11:42 – What ‘peer to peer’ means and why banks don’t like it.

12:42 – What makes cryptocurrency anonymous and how mining works.

14:19 – Different types of cryptocurrencies.

16:05 – What you can buy with Bitcoin.

21:27 – How many people use cryptocurrency for illegal activities.

 

Connect with Ben Jones:

 

TRANSCRIPT

DAD: Hello! Welcome to Money With Mak And G. We’re going to be talking about the week ended February 19 2021. We’re going to talk a bit about Bitcoin. Yay! Makkado, that’s the word for the day for you hon?

MAK: Really nothing except for I had a lot of French bread today and it was really good.

DAD: Well, that’s a good thing to do. How about you Mak or you Grant? I’m looking right at you and you should be offended.

GRANT: Really just a normal week.

DAD: I’m thinking one day I’m going to ask you you’re going to say yeah, an elephant ran through the school yard and blew his horn at me, his big trunk and it’s going to be really interesting. But we are here today to talk about what Makado?

MAK: Bitcoins.

DAD: More general comment, which is, cryptocurrency, right? Yes. So welcome. We’re going to talk about February 19 2021. And what did the markets do this week? Anybody?

MAK: And we’re mostly done just kind of sad, but that’s okay. Except for Bitcoin.

DAD: Yeah, except for Bitcoin and Bitcoin went up by what do you think? About 10%. We even had a bad week for the day trading too. We went down 10%. The crazy part is is as of Friday at 5 p.m., Bitcoin is up 79.5% And our day trading is up 79.8% So the only problem is Bitcoin went up even more. So it’s really interesting. Bitcoin is in the news quite a bit. And we wanted to dig in right guys? Yes. And we wanted to understand it just a little bit more. Now Grant, when we start to talk about cryptocurrency and Bitcoin, when Bitcoin actually start?

MAK: Bitcoin started on 2008.

DAD: In 2008, and they started to trade it in which year? In 2009. Was it a government that started Bitcoin or who did that?

MAK: His name was Satoshi Nakamoto.

DAD: There you go. And is that an actual person do you think, because I remember we read on Wikipedia…

GRANT: We don’t know if it’s a person or group.

DAD: Or group of people? Because it’s kind of hard to think that he created all this crazy stuff and he was the only guy. Yeah. And what was the technology? Remember, we talked a lot about the technology earlier. It’s having blocks of information and those blocks are connected on a long way, on a long chain. So it’s called blockchain technology. Is that right Mak? Yes, yes. And the interesting part about creating, by the way, what is a cryptocurrency?

MAK: Cryptocurrency is like digital currency, basically.

DAD: Digital currency. And what is the crypto referred to? Remember that long name we talked about which had to do with deciphering information? It was called cryptography. Do you remember that? Yes. You guys aren’t really awake today. Wow, we did talk about it and it’s called cryptography. And cryptography is just a high level way in order to disguise or keep stuff secret. So if I’m sending you money Mak and you’re getting it, I want to put it out there on the internet but I don’t want anybody to be able to read it. And so cryptography actually goes ahead and makes it secret. And that unless you have code to decipher it, you can’t actually see it, right? So that’s pretty cool. So 2008 and 2009 is when everything started. And what is blockchain, what’s all the information in the chain all about? Can you guys tell me just a little bit? What’s in there?

MAK: So basically, there are links in the chain. And each link is like a piece of information.

DAD: Exactly. So what kind of information when we’re talking about money, and particularly about Bitcoin? What kind of information?

GRANT: Like the security?

DAD: Well, the information is when I’m sending a Bitcoin to you, and you’re sending it back or you’re receiving it, it’s all that information. Yeah. So each one of those blocks is information and they’re connected together. And Makenna, what happens if you try to break one of those chain links?

MAK: Basically, so like, let’s say a hacker was trying to hack in and steal some bitcoin from that way. They’re like hundreds of computer servers that are constantly checking if there’s anything different or wrong with the chains. And if they spot something wrong, they’ll automatically immediately fix it.

DAD: Correct. So it’s hard to hack it because you actually have to hack 1000s and 1000s of these copies on these different servers. And is that easy to do G? No. So are you telling me that like cryptocurrency is more secure than like banking stuff?

MAK: Yes. It is like the most impossible mission ever.

DAD: That’s right. So cryptocurrency is safe but the crazy part mechanic, can you explain why does Bitcoin have value now?

MAK: So basically if you want any currency to have value, people have to believe it has value first.

DAD: Wow! So like the US dollar, what happened with the US dollar? Did we just create that out of thin air? Well we did right but at first it was backed by what, do you remember when we talked about the you could actually change in your money for what?

MAK: For like other stuff like gold?

DAD: Gold. It was backed by gold remember we talked about it? There is actually a Fort Knox all this gold and if you wanted to turn in your money, they would ever actually give you a piece of gold. So it was backed by something but is Bitcoin backed by anything? Can you exchange it for anything?

MAK: You can exchange it but…

MAK: Yeah, not that many yet.

DAD: Well, it there is nothing that backs it right now. So it’s not like gold. The only thing that makes it worthwhile is people believe that it’s worth something. Yeah, so Bitcoin, how much is it worth now G, do you know when we’re looking at all of our numbers for the different markets? How much is Bitcoin worth now?

MAK: $52,000.

DAD: Yeah, and I just checked it a few minutes ago. So over the weekend, it’s jumping up to $56,000 or $57,000.

MAK: Holy cow!

DAD: So how many coins are out there? Can you tell me anything about that?

MAK: There are about 21 million coins out there and they said that they are not going to make any more. That means the price will go up if more people are going to want it. The demand goes up.

DAD: If the demand goes up and the supply stays the same…

MAK: Then the price is going to go like wee.

DAD: Exactly. What’s happening to the supply, does the supply staying the same or is it actually getting smaller?

MAK: It’s actually getting smaller because people are losing these Bitcoins.

DAD: You’re kidding me?

GRANT: They’re forgetting their passwords.

DAD: What percent do they think that were actually lost of all these? 20%. Wow. So how much is that out of 21 million? 4 million Bitcoin have been lost huh?

MAK: Just like trillions of dollars.

DAD: That’s right. Is that just like really strange to think about?

DAD: That is really sad.

DAD: There was a guy who’s the guy out in California were thinking of, what was his name? Do you remember?

MAK: Stephen Thomas. He lost 7002 bitcoins because he forgot its password $350 million.

MAK: That is so disappointing.

DAD: It is and he’s not the only one right? Because where do you actually store Bitcoin? Like if you’re storing your dollar bills, where would you store those?

MAK: In like a say for the bank or something or in your in the wallet, yeah.

DAD: And where do you store Grant, where do you start cryptocurrency? Come on, it’s an E-wallet.

MAK: Oh yeah. Yeah, just like a small safe.

DAD: It’s like a small safe online. Yeah. Because can you actually touch a Bitcoin can you get one sent to you on mail?

MAK: Unless you are like touching computer screen, unless you bought one of those eBay ones.

DAD: Unless you bought an eBay one, which is like a picture of it or the B, it has these two little things on the top on the bottom, like $1 sign all the way through? Isn’t that crazy? So governments create currencies right? And this guy, what was his name again? Satoshi Nakamoto. He created it out or his group created it out of thin air. People started to think it was what Makenna? Valuable? And how do we know it’s valuable?

MAK: Because you can exchange it for like food or like a Tesla E.

DAD: If you can just exchange it.

MAK: Oh three. Did I say E?

DAD: That’s all right. He’s the only one.

MAK: They tried to do E but it got copyrighted.

DAD: Ford already had it. That’s absolutely right. So if it’s worth something that means people are willing to exchange something of value for that Bitcoin. Do you guys remember we talked about the first transaction that ever happened, happened with which pizza place?

MAK: Oh my god, I forgot. Papa John’s.

DAD: Yeah. 10,000 Bitcoin and we threw that out there, it’s like $550 million. And why are people losing these things? Because they can’t remember their password and they bought it 12 years ago maybe for cents, each Bitcoin was worth a couple cents.

MAK: They were like, I don’t need to remember this password. It’s fine. Whatever.

DAD: Now it’s like, oh my gosh! So people like first of all, they’re not happy they’re losing their Bitcoin, correct? Do You think it does a number on their mind?

MAK: Yeah, you just used like your whole life savings. And yeah, you’re happy. You’re perfectly fine. Totally. Yeah, sure.

DAD: So you lose these things, do you think you go a little crazy?

MAK: Yeah, you’re probably like, up all night.

DAD: Up all night, maybe not even eating because you have hundreds of millions of dollars worth of Bitcoin and you can’t access it. And so it’s in your E-wallet and if we had heard, can you steal like Bitcoin? Wasn’t there somebody in North Korea that stole it from a marketplace where they were trading Bitcoins? You guys hear about this? Yeah. And they stole a whole bunch of it. And so you want to keep it really safe. So sometimes you do a hardware wallet. Do remember how we talked about a hardware wallet?

GRANT: Yeah, you can put it on a hard disk drive. Yeah.

MAK: And then you can put it in like a safe or something,

DAD: You can put it in a safe but I think from what I’d read, you only have 10 chances with a password to open it up. And if you forget your password, then…

GRANT: Oopsies, all my money’s gone!

DAD: The guy in California, well, he didn’t even think of that it was worth anything. He had all this other money, which is so sad. He bought it like years ago, like a decade ago, and who knows how much he paid for it. Maybe you paid $500 for it. And now he can’t get it. And he only has like, when I read about him, he only had two more chances at his password. And then it shuts down. Isn’t that crazy?

MAK: That is literally so sad.

DAD: Now, what makes it really, really cool, and makes banks go, this may not be a good thing for us, do you remember?

MAK: It’s super safe and it’s peer to peer.

DAD: It’s peer to peer. So what does that mean?

MAK: So when you’re in the bank, and you’re trying to give money to somebody else they charge you because they say it’s so safe? Yeah. And yeah, they’ll deliver it. But when it’s peer to peer, it’s just directly right to them. And you don’t have to go to like 50 other websites to like, or countries.

DAD: You don’t have to go to a different website, do you have to go through a bank when you’re going peer to peer? Just write to them? So do the banks like that? Do they get to collect their fees anymore? No. But is it secure? Yes, because it has cryptography, which makes it harder.

MAK: Computer language, nobody can translate it unless you have the software.

DAD: Unless you have the decrypter. Unless you have this special thing to understand what’s going on. So banks don’t necessarily like this, because I can send it to my friends in Yugoslavia, and I never have to go through a bank here. They ever have to go through a bank there. And it just goes directly to them. Is it considered anonymous? Yes. Why?

MAK: Because of the length the cryptography.

DAD: You’re guided, you’re getting it. That’s right. Because nobody can break that and we have all those people who are the people that make sure that it doesn’t get broken if something gets broke, it gets fixed? The miners and what’s a miner G?

GRANT: They dig for money around the internet and so there’ll be a few people, like a lot of people like just for one Bitcoin, right?

DAD: Well, you get paid in Bitcoin and they consider it mining because if you actually look at the information and say the information is correct, then if you do that, and you actually figure out a puzzle, which is really strange, then do they give you some bitcoin? Yeah, they give you a Bitcoin for free. Yeah, I don’t even know if it’s a partial Bitcoin or not. But what happens when they run out of the 21 million Bitcoin? Can they create any more? Well, no, they they’re not creating anymore. So unless they change your mind, I guess if they change your mind but that way I understand it is set up one time and it’s one and done. 21 million Bitcoin are out there. About 4 million are lost. The blockchain technology make sure that nobody can break it and overall it’s very very safe peer to peer. Do you know any other cryptocurrencies?

MAK: There were a few others.

DAD: Oh, there’s lots of others, but we just named a couple. Can you name a couple?

GRANT: Litecoin.

DAD: Litecoin. How about you Mak?

MAK: Erothelium?

DAD: Ethereum. Yeah, I think Ethereum is the second biggest after Bitcoin because big Bitcoin was first, Ethereum, Litecoin, Tether is kind of an interesting one and then you could do mining. Now. You know, the crazy part is you were trying to ensure that the Bitcoin that you own is for real? What if I give you a blue $10 bill?

MAK: We’re questioning that like, did you stolen blue dye or did you literally just print a dollar bill like blue?

DAD: So that’s like fraud, right? And so do you ever, like even if you got a green $10 Bill, did you ever like say, I’m not sure this thing is actually real? So you look at some of the codes on it. And do you ever notice there’s a code on the bills? Yes. You have noticed? Okay, because those codes on the bill, if you look at this one, do you see that M E and all that other stuff down there? Yes, if those codes aren’t right, then you would know that this was real or fake. Fake. So it’s the same thing with the miners. They’re checking all the information, just like we would check a bill to make sure that it looks the right way it has some of that red and the green and then it has the little thing that you can see on it on the back. And so that’s what all those miners are really trying to do. So we have Ethereum, Litecoin got some other stuff going on. We digitally confirm what’s happening. And at the end of all of this you can get some form of payment of a Bitcoin in order to do that work. Ain’t that pretty cool? Yeah. What can you buy with Bitcoin?

MAK: Almost anything in Japan.

DAD: Grant, once you name one and let Mak name another.

GRANT: You can buy basketball tickets for the Dallas Mavericks.

DAD: Now you know, Mark Cuban, he went to IU where mom and I went, and he’s a really good businessman. And he’s really into internet because he was one of the very first to do music over the internet. Did you know that and he sold his company for like a billion dollars or several billion dollars. Oh, wow. That was a long time ago. So he’s really technology driven. Okay, what about you Mak name another one?

MAK: You’ve made a whopper at Burger King my guys!

DAD: And where? Because not all Burger Kings

GRANT: In the Netherlands!

MAK: Oh yeah, I forgot you have to travel, you have to pay for your plane ticket.

GRANT: So if you had one Bitcoin, you could get like a ton of like whoppers.

DAD: Yeah, what do you think you could get? Maybe 20000?

MAK: A life supply of whoppers.

MAK: A life supply? Like yeah, that’s probably true. If that’s not a live supply, then you may want to go to the gym.

MAK: And a gym card.

DAD: What do you think like our listeners what you think? Do you think any of them have Bitcoins? I would love to know if they kind of reached out to us, leave a comment, reach out Ben@moneywithMackandG. Do that. Don’t forget to like and subscribe right but what else could you buy? This next one’s a little weird that we had. What else can you pay for?

MAK: You can pay for a funeral at St. Paul Minnesota.

DAD: I can’t take your Bitcoin with you right? You know, that’s a good question. Grant, have you ever thought about if you have Bitcoin and you die, you need to know your password and give it to somebody.

GRANT: You have to tell your kids to continue the legacy. For the children!

DAD: To continue the legacy and in this next one’s a little weird. What about the next one G?

GRANT: Okay, so you can buy guns at Central Texas Gun Works.

DAD: Yeah, so it’s like each company is just a little bit different on what they’ll accept as payment.

MAK: Like first you got like almost everything in Japan, then you got a basketball tickets, then you got a whopper in Netherlands and then you got a gun shop at two in Texas and then you got like Kamala Yeah.

DAD: So those people think that Bitcoin is worth something and they’re willing to exchange Bitcoin for their products, right? Do this like totally crazy. And I know that one of the things that can you buy a car with Bitcoin?

GRANT: You can buy Tesla three.

DAD: Yeah, I think who knows, they may say the X and the Y too but we were able to see that the Tesla three you can but there lots of things do you know any other ones Mak?

MAK: You can buy a Rolex.

DAD: Rolexes at some stores online, they offer it, yeah. Vacuum cleaners, taxi ride, gold, some airline tickets and all kinds of different things.

MAK: Oh, and a subway sub.

GRANT: Cheese fries in Pennsylvania. Last bear in Portland, Maine.

DAD: And now that Elon Musk, he went ahead and bought $1.5 billion worth of bitcoin. And I read an article, do you remember that article I was telling you about Mak on Elon, and how much he made off Bitcoin versus his company?

MAK: He literally made more on Bitcoin than his own company. That is insane!

DAD: Well, if you bought $1.5 billion.

MAK: Technically he got that money from his company then he invested it in some bitcoin but then he got more money off of Bitcoin.

GRANT: That’s frightening to know that he made more money of something that he doesn’t really own than something that he runs like huge company on.

DAD: Yeah. Well, do you care if his company made all that money by investing in Bitcoin who cares, right? Yeah. Yep. So true. So the electronic wallet is where you store your Bitcoin, you can do what’s called a hardware wallet which takes it offline, so nobody can even get at it. Because we’ve seen that some platforms when you actually buy or sell some of your cryptocurrency that they’ve actually been hacked and stolen, and there’s some pretty big ones with North Korea. But was there anything else that we wanted to talk just a little bit about Bitcoin? And cryptocurrency and cryptography and how that all works.

MAK: Oh, besides, it requires a central authority if you want to make your own currency.

DAD: Well, if you do a currency, normally you have a central authority like the US government, right? Yeah. And they created their own currency, then people believe that it had value, so they started to use it. And that’s why it took Bitcoin quite a while for people to start believing. Right? Yeah. And now do we have any believers? Yeah, we got a ton of believers. And now it’s like 55,000 out there. Well, minus that people actually lost. Yeah, so maybe 17 million and I had to hold back some for the miners who are ensuring that all of the transaction, what about the illegal since it’s anonymous? Do you think people would do things that they normally wouldn’t do? Because nobody’s going to be able to see the money that gets changed hands? Yeah, yeah, I think I read somewhere that 2% of all the transactions are from illegal. Yeah. So stuff that you may not want to people to know about you can do through cryptocurrency. Well, I think that’s about it. We just want to talk a little bit about the Bitcoin, blockchain technology and what it’s all about, had a kind of a not a great week in the markets, but bitcoins kick in. Apple’s down 2%, I think 4% for the years.

GRANT: We trusted you Apple.

DAD: We trusted you and then we had a tough day trading. So thanks, guys for being here. And we’re going to see you next week and I really appreciate it. Everybody, time to say goodbye. Bye, guys!

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