In this video, I will set a world record and conduct the first Bitcoin lecture at 30,000 feet in the air on an American Airlines flight from Boston to Dallas. Lol! 🙂
What Is Bitcoin (BTC)?
Tai Zen: I’m with prisonorfreedom.com, and I’m broadcasting from 30,000 ft. in the air on American Airlines flight 1054.
With me, next to me here, my passenger right here, on the same seat here, is David.
He’s a school teacher, and we were talking about Bitcoins, and he asked me to explain to him what is Bitcoin.
So in this video, I want to give a non-technical explanation of what a Bitcon, the platform, the currency, and how it works including the why, the how, the what, the when, and everything.
Thanks to American Airlines. They’re sponsoring us with the ginger ale! 🙂
First of all, just say hello David. How you doing?
Tai Zen: So David first heard about Bitcoins a few weeks ago, and he wanted to…
He got online, did some research on it, and was still confused about it.
Let me go ahead and explain it to him.
Bitcoin is a public ledger, it’s a platform. It’s a:
- public ledger
- accounting ledger
- it’s a platform
- and a network.
You can describe it in any of those manners.
Now the easiest way to understand the platform, I mean Bitcoin, is think of it as:
- Bitcoin is a highway system, like a highway system in your country, and that highway system is called Bitcoin.
- The rules, the laws, and the regulations that govern the way things travel through that highway network is also called Bitcoin.
- The actual vehicles themselves that travel through that highway are also called Bitcoin.
So there’s the first confusion, is that, so now we understand that Bitcoin is a network.
The things that go through there are called Bitcoin, and the rules that govern how things travel through there are also called Bitcoin.
Do you have a question? That help you so far?
David: So far, so good, yeah.
Tai Zen: So the objects, the vehicles that travel through that network, that highway system, right now is being used as a currency.
What is a currency? A currency is anything that people decide to use as an exchange of value.
Throughout history, we know that gold has been the main, the primary vehicle of exchange, of value exchange, so I give you an ounce of gold, and you give me something in exchange for it.
Any questions so far? Any confusions so far?
David: No, I think it’s still not totally clear, but let me keep listening. Keep going.
Tai Zen: Probably the first question that comes to your mind is that why did someone create this Bitcoin network, or this highway system, right?
David: No. I think, I mean I think I understand. There’s some attraction to a non-governmental, non-regulated…
Tai Zen: Universal?
David: …universal form of currency. If that’s the intent, I understand why that would be of interest to people.
Tai Zen: So the question that probably comes to your mind is why are these vehicles that travel through these networks that’s being used as a currency and what is so special about these vehicles that people would want to use it as a currency?
Like… why not just use gold or the US dollar, or the Euro, or Yen?
Do Businesses Accept Bitcoin?
David: I mean, that’s one of the big questions. I think the second big question is… let’s say I want to buy, I don’t know, an iPhone.
Could I buy an iPhone using Bitcoins, and how?
And how would that work, and how would I feel secure that I’m getting value from my Bitcoins?
Tai Zen: The question that you’re asking about the iPhone example is very good.
Right now you can buy almost any electronic gadget, or hardware, or software. You can pretty much buy this plane ticket with Bitcoin.
All you have to do is go online and search for a business that accepts Bitcoin. You just search online, and there is also a Bitcoin directory that lists businesses that accept Bitcoin.
Just like you have businesses that accept Visa, or Mastercard, or anything like that, or they accept the US dollar, or the Euro, or the Mexican Peso, then you just find the business that accepts it, and they will give you the phone, and it’s not a gimmick, it’s not a scam.
They say that on the website they accept Bitcoin, and they also have Visa, MasterCard.
For example, Overstock.com accepts Bitcoin, so you can go on there and buy your phone and stuff on there.
David: That’s helpful. So then, my next question is… so I understand…
I work. I earn a paycheck.
Tai Zen: Is your paycheck right now in US dollars?
David: Yes, it’s in dollars. I save up my money, and I go to buy the iPhone in dollars. I know exactly where my money came from. I know exactly where it’s going.
This is what I don’t understand with Bitcoin. I have no idea how, like how do I get the money to purchase my iPhone with Bitcoin and where does, I guess it goes to the business.
If I purchase it from the business, but I think that part, how do, where does this money live?
What Is The Bitcoin Public
Ledger (Block chain)?
Tai Zen: Who mints the money [bitcoin]?
David: Yeah, well that’s a piece of it.
Tai Zen: So the highway system is also referred to in the Bitcoin world, it’s referred to as a public ledger.
It’s an accounting ledger and that accounting ledger technically is called a block chain, but you don’t need a block chain.
This ledger was invented by a computer scientist and a cryptographer named Satoshi Nakamoto.
David: I remember reading about this.
So the term ledger to me, and maybe it’s, maybe I don’t have the term right, implies a zero sum, it implies that it’s always going to equal out eventually.
Tai Zen: Exactly. This ledger right now… whenever you get paid, your paycheck is in US Dollars. It’s stored at the bank.
What bank do you use? Bank of America? Whatever okay.
So let’s say you have a Bank of America, they have a ledger that accounts for how much money you have in there. So if you were to send me some money, they would update that ledger.
If I send you some money, they would update that ledger.
So in the Bitcoin world:
- The Bitcoin ledger is being kept and managed by the entire community.
- In other words, there is no centralized bank.
- There is no centralized computer.
- There is no centralized individual.
- There is no centralized organization that maintains that ledger.
When Satoshi Nakamoto invented this ledger, he released it to the wild, the public, and he said that anyone can come in and help to manage that ledger.
Whenever you send a Bitcoin to me, it has to be updated in the ledger.
There are millions of people out there using the ledger right now, so they volunteer their computers to update the ledger.
So instead of having Bank of America update the ledger… if you want to, you can volunteer your computer to update the ledger.
Who Is Responsible For
Processesing All The
David: And what does it mean to “volunteer my computer.” If I volunteered my computer, it’s a little bit of storage or something?
What am I volunteering?
Tai Zen: You are volunteering your CPU, and your graphics andyour processing power. Right now, when you transfer me a US Dollar, Bank of America uses their servers to process a transaction, correct?
Alright so when you send me a Bitcoin, the process, the transaction is being processed by the entire network, the entire Bitcoin community, and this is what technically is called a peer-to-peer network, because everyone can volunteer their computers to help process the transactions.
David: As long as you’re online. It requires an internet connection, obviously.
Tai Zen: Obviously there has to be.
Why would you volunteer your computer for?
Right so there’s people that are investing and spending millions of dollars in computer hardware to help volunteer to process everyone’s Bitcoin transaction.
If I send you a Bitcoin right now, or if you send me a Bitcoin, it has to be updated in the ledger and it has to be secured so that my Bitcoins actually go to your account and it doesn’t go to someone else’s account. Agree?
David: Okay, yeah.
What Is The Reward For
Processing Bitcoin Transactions?
Tai Zen: So, what is the reward for volunteering your computer to process these Bitcoin transactions?
When Satoshi Nakamoto invented the network, the platform, he wanted people to help to volunteer to work.
There were two problems:
- How do you get the public to volunteer their computers to process the Bitcoin transactions?
- How to mint the new currency?
… because if Satoshi just out of nowhere minted 21 million Bitcoins, people would say that’s not fair because now you’re like the Federal Reserve.
You just minted all the money and it’s not fair to us!
So to create a fair system and to incentivize people to volunteer their computers to process all these Bitcoin transactions that people are creating, he offered a reward.
David: In the form of Bitcoins?
Tai Zen: Yeah, in the form of Bitcoins. You get rewarded 50 Bitcoins if you’re willing to process all these transactions.
Every 10 minutes, a new block of transactions is compiled, so whatever all the transactions in the last 10 minutes…
It’s more than 10 minutes but just for simplicity reasons, explanatory reasons, let’s just say it’s 10 minutes, okay?
So all the Bitcoin transactions that happened around the world in the last 10 minutes, it’s compressed together.
If you volunteer your computer to process all these Bitcoin transactions and then compress it, and then encrypt it so that it’s correct, and then you send it out to the network and every other computer out there on the network gets updated and they look at it and they go, and they verify to make sure it’s correct.
David: So when I’m volunteering, it’s literally just CPU space and not time. There’s nothing I actually have to do?
Tai Zen: No. The Bitcoin software does it by itself. So what happens is, after you process that data, that block of information from the last 10 minutes of transactions, and you submit it to the network, all the other computers in the network are going to jump on it to verify, to make sure it’s correct.
Now I’m not a computer scientist, but the way that it was explained to me is that basically if you…
It’s like finding a square root of a number.
If you ask me, Tai what’s the square root of 5?
I’d say that it’s 2-point-something, right?
Whatever it is, it’s going to take me a while, but once I find the answer to it and I give it to you, it only takes you a quick second to verify it’s correct. Do you agree?
Tai Zen: So that’s how it gets verified immediately and if you’re the first one to process all those transactions, and you’re the first one to encrypt it, and everything is correct, and everything is legit, and you submit it to the network, and they review it and they double check it to make sure it’s correct, then you get rewarded 50 Bitcoins for it.
But it’s random.
So let’s say your son right there, his computer is doing the same thing, and if he submits it, it’s first come, first served, and it’s random.
David: Based on how much CPU space?
Tai Zen: It’s based on whoever gets the transactions done first and correct, and encrypted.
David: And how do you verify that it’s correct and encrypted?
Tai Zen: The software does it all automatically.
David: Your explanation makes it like I have some control. I get that it’s random.
Tai Zen: You don’t have control because what happens is once the software is installed on your computer, it processes the transaction, it submits it, and it’s like a lottery system. It’s like submitting a lottery ticket and then whoever gets it. So, everyone’s computer is…
David: So at some point, basically, if I’m on the Bitcoin network, if my computer’s on the Bitcoin network, at some point I’m going to end up with some extra Bitcoins in my wallet?
Tai Zen: Yes.
David: Just by virtue of being on the bitcoin network?
Tai Zen: Yes. If you get it correct.
But here’s the caveat though. If a million people start processing these transactions, guess what happens?
David: My chances go down.
Tai Zen: Your chances go down, so the difficulty level gets really, really hard, and the reason why they did it like that…
Satoshi made it like that, so that someone doesn’t come in and try to “game” the system or try to overrun the system.
Tai Zen: By taking control of over 50% of the network.
David: By having lots of CPU’s? I see.
Tai Zen: Exactly, so it’s a security issue. When you submit those transactions, there’s no guarantee that you’re going to get the 50 Bitcoin reward and so that when Satoshi designed the Bitcoin network, he designed it so that the reward gets cut in half every 4 years.
So when Bitcoin was invented in 2009 and released in January of 2009, in 2013, the reward got cut in half from 50 Bitcoin reward to 25 Bitcoins.
David: And this is based on some assumption of growth?
Tai Zen: Yes, so there will only be a total of 21 million Bitcoins ever created.
How Many Bitcoins
Will Be In Existence?
David: Could I take my paycheck and convert it all from dollars to Bitcoins?
Tai Zen: Yes, and vice versa. What you would have to do…
David: I’m still not adding to the Bitcoin supply? I’m taking from the existing up to 21 million Bitcoins?
Tai Zen: Right now, after the first 5 years that Bitcoin has been available to the public, there has been about 13 million Bitcoins that has been minted.
David: Over half?
Tai Zen: Over half and all 21 million Bitcoins will be minted by the year 2140 according to the Bitcoin algorithm, the Bitcoin software, and the math.
How is it that in 5 years that they’ve done over half? Why does it slow down?
Tai Zen: Because every 4 years, it gets cut in half. So in the year 2017, it will get cut down to 12 and a half Bitcoins and so on.
David: So there are more, theoretically, so there are more and more users, the value of each Bitcoin grows, the relative value of each Bitcoin grows.
Tai Zen: Yes, exactly.
That’s why, in 2013, when the Chinese population found out about Bitcoin and they jumped on it, that’s why the value of Bitcoin went from $13 dollars to over $1,200 dollars.
David: You mean they affected the exchange rate?
Tai Zen: Yes, the exchange rate.
Can You Work And Get
Paid In Bitcoins?
Tai Zen: So let me answer the question you asked about getting paid in Bitcoins and getting converted to Bitcoins.
What happens is, if you work for a company, or an organization, or an individual that is willing to pay you in Bitcoins, then you can accept it in Bitcoins.
So for example, let’s say you were going to teach me some math, and you said that you were willing to accept Bitcoins, and I have some Bitcoins to pay you, then obviously you can use those Bitcoins and not have to convert it to US dollars or to the Euro.
As long as you use it with someone else who is willing to accept Bitcoins.
David: Okay this is helpful. I’m starting to understand it.
How Do You
Get A Bitcoin?
Tai Zen: Right now, let’s say that you want to get your first Bitcoin.
There’s several ways to get that.
The easiest way is obviously if you open up your phone right now and I just send you some Bitcoin.
Obviously, that’ll take less than… however long it would take me to type in your address.
David: Why would you do that? I mean, why would one do that?
Tai Zen: I would do that.
I would send you a fraction of a Bitcoin just so you can see how fast the transaction is, and how easy it is, and how you don’t need an ID.
You don’t have to, you know. I just want you to see the ease of it.
Obviously we’re on the airplane right now and there’s no internet connection, so I’m not able to do it.
I usually do that, but let’s say that you agreed to tutor me in math, and I agreed to pay you x amount for your time, then I would send you the Bitcoins with my phone and my computer also.
I don’t need to go to no bank and you don’t need to go to no bank either.
Does that make more sense now?
David: Yeah, absolutely.
Why Are There Only
21 Million Bitcoins?
Tai Zen: So, the reason why only 21 million Bitcoins will ever be created is because , Satoshi, the inventor of Bitcoin, did some research and there was something with how many digits that you can store on a computer and that people can type in. Something like that.
I read it somewhere, but I don’t understand the full math, but there’s a technical reason why it’s there. So it’s not just some random or arbitrary number that he pulled out of left field somewhere.
Now you have some, a lot of new copycat coins that create a different number like a billion coins for their new currency or whatever, or a trillion coins, but that’s just a random supply.
They just made that an even number for no reason.
21 million was technically and specifically researched and created for a reason so that in case our technology evolves, right?
So the way that I would send you, like right now one Bitcoin is worth around $500 dollars as we’re speaking, if I wanted to send you a dollar, then I would send you a fraction, the proportional fraction of that Bitcoin that equals a dollar, and that’s how I would pay you.
David: Yeah I get it.
What Are Bitcoin ATM’s?
David: So was I right that there are now Bitcoin ATMs?
Tai Zen: In addition to me giving you a Bitcoin, or paying you with my Bitcoins, you can also go to an exchange, to exchange your US dollars or your Euros for a Bitcoin, and now like you mentioned, they have ATMs available to where you can go there and put in US dollars, or put in the Euro, and then take out Bitcoins.
David: And taking it out means I scan my Bitcoin wallet and it gets put in? Because there’s nothing physical?
Tai Zen: No, all the Bitcoins are digital, and if you want to, you can print it on a piece of paper and have it in physical form, but it’s all digital right now.
Just like over 90% of the US dollar and the Euro are digital, and if you want, you can get some that are printed, you can go to the bank and get some that are printed on a piece of paper referred to as a US dollar, and Bitcoin can be done the same way also.
Who Maintains The Bitcoin
Infrastructure And Code?
David: I’m curious… I think I understand now, how it works, very helpful.
I’m now curious about the operation and organization.
So, there’s software, obviously, that involves finances and security.
So, it’s got to be a fairly robust occupation, and then there’s also somebody doing currency exchanges.
Tai Zen: Okay, so the thing is this okay. Bitcoin is the network, and the currency, and is a platform that you can use to transact finance, make financial transactions.
The software is being updated by volunteers right now.
During the first couple of years, Satoshi Nakamoto, contributed and wrote the software himself with volunteers helping, because it’s an open source software, so anyone can download the software, review it for bugs, security, and things like that and offer a recommendation and code to patch the software, to upgrade it and to make it better.
So there is a team of people that develop the software. However, anyone can do it.
What that team is… that team was formerly led by a person named Gavin Andresen.
He is the chief scientist, computer scientist, for the Bitcoin Foundation, and the Foundation is an organization that is set up to promote Bitcoins and to educate people on Bitcoin.
What Satoshi did was that he looked at all the people that was helping him, that volunteered their work and their effort to develop the Bitcoin software and the code, and contribute their time and energy and effort, right?
And over the years, he saw that Gavin Andresen was a very capable person.
He was a very good coder, computer scientist, and understand cryptography and everything like that and computer security.
So, he gave-basically, he handed the torch over to Gavin.
Gavin was willing to be public.
He was willing to be public and he’s out of San Francisco, I think, or Boston. It’s one of those two cities.
I think he might even be in Boston, but he was left in charge of being quote-unquote “the lead developer” or “the lead programmer” for Bitcoin.
What happened was, just recently, just a couple of weeks ago, like two or three weeks ago, he announced that he would step down from that role, and he had the role of the lead developer for I think since 2010 when Satoshi left the Bitcoin project.
Satoshi did not want to be, no one knows who he is, no one knows what he looks like, no one knows what he sounds like, or has seen pictures of him or nothing.
The name Satoshi Nakamoto is actually just a pseudo name that he used.
He is a very private person and does not want to be in the public’s eyes. When he released his code, he wanted people to focus the attention on the technology that he had invented which is the public ledger technology instead of focusing on him.
He wanted the merit of his software and his technology to benefit humanity and not let people determine the value of Bitcoin based on him.
He has chosen to remain anonymous from 2009 and then when he handed the role of lead developer over to Gavin Andresen, he has disappeared since then.
Who Is Satoshi Nakamoto?
So no one knows how to get in touch with him. No one has been able to get in touch with him, contact him, or nothing.
So anyone in the news right now and the media that claims they know who he is, or that they’ve gotten in touch with him, is all bogus, or all bogus.
The only way that Satoshi can be authenticated.
There’s two ways that people would know that it’s the real Satoshi Nakamoto because in the beginning when he first created the Bitcoin network and the platform, he was the main guy processing everyone’s transactions. His computer was.
So he set up a bunch of computers to process everyone’s transactions until new volunteers came in to the network to volunteer their computer.
So because of that in the first few months that he volunteered his computer to process the transactions for everyone, he was rewarded 50 Bitcoins every 10 minutes, basically.
So right now, he has more Bitcoins than anybody else in the Bitcoin world.
So he has over a million Bitcoins, so when Bitcoin was worth over a thousand dollars, he was a billionaire.
Everybody complains, some people might say that, you know, that that’s not fair that he has all that.
But keep in mind he was the inventor of Bitcoin and he was willing to volunteer his computer to process everyone’s transactions and then all the early adopters they are all millionaires right now simply because they were…
David: They were early.
Tai Zen: Yeah they got in early and they were able to volunteer their computers and take the time to secure the network because keep in mind not only are you volunteering your computer to process the Bitcoin transaction for the users, but you’re also securing the network to make sure that the users right don’t get hacked or anything like that. The Bitcoin, not the user’s computer, but the Bitcoin network.
David: Right I get it. I’m okay. That was helpful.
Did Bitcoin Get Hacked?
Tai Zen: So whenever you hear that the exchanges are getting hacked, keep in mind that the exchanges are a business. So that would be similar to saying that Bank of America branch got robbed by a bank robber, but just because Bank of America gets robbed at one of their branches, that doesn’t mean that the US dollar has collapsed.
David: No I get it. Makes sense.
Tai Zen: So that’s the same thing. So the biggest collapse and the biggest exchange to collapse was an exchange called Mt. Gox in Japan and they were the biggest and the oldest exchange and when they collapsed, they lost a lot of people’s money.
The reason for that was they lost a lot of peoples, customers Bitcoins was because they were told by the Bitcoin Foundation, and other computer scientists and security specialists, that their system was not good, was not secure, and they needed to connect to the Bitcoin network.
So what they did was they disconnected their computers and their system from the Bitcoin network and so other people couldn’t volunteer to process their transactions for them.
The reason they did that was to increase the speed of transactions, the speed of trades, and after the transactions and the customers trades were done, they would reconnect to the network to broadcast out to the network what had just happened, but during the time they were disconnected from the network, they got hacked by a computer hacker trying to steal their Bitcoins.
When they connected back, they found out that there was a discrepancy, or a difference in what their ledger shows and what the public Bitcoin ledger shows, so that’s what they discovered and that’s what happened.
It’s no one’s fault but their own but they were told over and over since 2011 that this was an issue.
So does that make sense?
- It’s not the Bitcoin community’s fault.
- It’s not the Bitcoin network’s fault.
- It’s not the volunteers that process all the Bitcoin transactions.
It’s not nobody’s fault except for the owner of the Mt. Gox exchange.
Thanks for joining us today, guys.
I know this is kind of interesting to broadcast from 30,000 ft in the air in an American Airlines plane, but I appreciate you guys joining with me and I hope this broadcast, if you’re watching this ,and you’re new to Bitcoin, that he conversation I had with David will help you to better understand Bitcoin.
If you want to support our site, and our channel, and our efforts, you are welcome to make a Bitcoin donation and I will use it to help other people understand Bitcoin.
If you want to donate any other all coins, I will be happy to accept it and use it to help other to understand the all coin question and also thanks for joining us guys and I look forward to doing future broadcast again from 30,000 ft. in the air.
This may be the first Bitcoin broadcast from 30,000 ft. in the air, so if someone else has it and I’d love to check it out.
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