Hello, everyone, and welcome to MBIT. I am your host, Seamus Madan. And today, we will be discussing what cryptocurrencies are, how they work, and how they could impact the future of currency. Now when one hears the word cryptocurrency, the first thought of many could be Bitcoin. And in today's episode, we will mainly be discussing Bitcoin as not all cryptocurrencies work exactly the same way. Also, before we start, this is not financial advice and is not a recommendation to buy or sell crypto.
Alright. Let's jump into it. Alright, everyone. So first some background. The 1st cryptocurrency Bitcoin Ridge created back in the year of 2009 during the great recession. A so called person named Satoshi Nakamoto is the creator of the infamous cryptocurrency. However, this is where things get a little interesting. Satoshi Nakamoto has actually never been publicly seen. And when he created Bitcoin, his colleague claimed to have never seen him in person.
Although this is slightly strange, he actively participated in Bitcoin blogs to answer questions and discuss a cryptocurrency up until 2011 in which he mysteriously vanished, never to be heard from since. Side note, Satoshi Nakamoto in Japanese actually means central intelligence. Alright. Transitioning back to Bitcoin. He released in 2008 e white paper, which is a 9 page report explaining the logistics of the new technology Bitcoin, to the world. The report gets pretty complicated.
So to simplify things, it basically just discusses the flaws of the current financial system, including things like nonreversible transactions, and how Bitcoin can solve these problems. Okay. So before discussing the cryptocurrency further, it's imperative to understand the fundamentals of how the technology works. Now, bitcoins don't just appear from thin air. They're actually mined using a 2 step system.
The first step is where a system of computers solve highly complex math problems on the Bitcoin network, which produces the Bitcoin. The next step is for the Bitcoin miners to verify the transaction information to make it trustworthy. Now there are many more details about the mining, including how fast the Bitcoin can be mined. But for now, we'll keep it at the basics. It's good to know that there's a limit on the number of Bitcoins that can be mined at 21,000,000.
Now this is why I mentioned Satoshi Nakamoto earlier because he is the holder of 1,000,000 of those Bitcoins, which is around 4.76 percent of all Bitcoins to exist by 2140. And to put that in perspective, the United States government has around 4.3% of all gold known to exist. Because of his large stake, if Satoshi were to make a trade with those Bitcoins it could vastly affect the price of Bitcoin, which is one of the main reasons why people have been searching for him for years. Alright.
So you may have heard of something called the blockchain before. And the reason why it's so essential is by making transactions using Bitcoin. Each transaction is added to the blockchain, a public record of all Bitcoin transactions. These blockchains are then created and verified by Bitcoin miners who verify each transaction on the chain. Alright. Fun fact.
So because of how hard and intense it is to add things to the blockchain and verify each and every transaction that goes on there, Bitcoin miners are actually rewarded some Bitcoin for verifying each blockchain. So now that we understand some of the logistics behind Bitcoin, let's discuss why Bitcoin skyrocketed from around $6700 1 year ago, tating 60,000 just a couple weeks ago. First of all, it's important to note that Bitcoin is a decentralized currency.
Which means the government does not control directly its value. The reason why that's so important and how it could drive up the price recently is because the Fed has been pumping 1,000,000,000,000 of dollars into the economy resulting in inflation and decreasing the value of the dollar. However, with Bitcoin, there's a limit on the quantity that can be produced without restrictions or control from the government. But the government can just keep printing as much money as they want infinitely.
And then the other reason is just speculation on how Bitcoin can change the future of currency and transaction making. In many cases, Bitcoin can also be viewed as a very similar to the dot com bubble. So for some quick background, the dot com bubble occurred right around when the internet started to become super popular. So when a domain ending in dotcom was created, the value of the site basically just increased exponentially.
Dogecoin also follows a similar trend as it was initially designed to be a joke, which is now a joke worth $10,000,000,000. Now crypto does have a lot of risk, and it's important to note that currently, it's based heavily on speculation of the future, making it a very volatile high risk investment. Also, despite crypto being used in conjunction with cash, it's definitely not a replacement for cash from where it stands right now for one main reason.
See cash like the US dollar is referred to as fiat money, which means it's backed by the government, and in this case, controlled by the central bank. The importance of being backed by the government is one's money is insured, especially when put into banks, which means if there's a bank run, you can recover your up to $250,000. This is very different from Bitcoin because their service could shut down at any moment and investors in Bitcoin would lose all of their cash and nobody to turn to.
Alright, everyone. Thank you so much for tuning into MBIT. I'm your host, James Madan. And if you enjoyed the episode, please feel free to share it. And, I will see you on the next episode. Disclaimer, the MBIT podcast is reflecting the opinion of only the host The podcast is for informational purposes only. The podcast is also not a research report. It is not a recommendation to purchase or sell any stocks holdings or securities.
The podcast is also not meant to serve as a basis of any investment decision.