hello and welcome to technically speaking where scientists and engineers come together to chat about a common interest share knowledge and satisfy some curiosity i'm laura and in this episode i'm joined by aneeqa and jennifer to talk about cryptocurrencies and find out how computer algorithms can make something valuable and whether all this is really sustainable and we'll get into all that in just a second but as some of you probably know from following our
social media the whole podcast team has been having a pretty weird time recently so our last episode was about science versus engineering and ruaida pretty much got straight back from traveling and went straight into managing that session which was recorded in front of an audience from the engineering development trust and it sounds like it was pretty successful they had well over 100 people in the audience and they gave us some really great feedback as well
and i pretty much got straight back from traveling and went straight into editing which was interesting when you jet lagged and anika i know you were pretty interested in that because i was in japan filming a documentary yeah i think that's super cool that you got to go to japan to film this documentary what was the documentary about i was out there with a team of scientists from the united states who were doing something with essentially a massive laser that's
several kilometers long and they're firing that at some crystals that are only just visible to the naked eye and they're doing that to try and find out the structure of these crystals and they have a whole load of data analysis in there that's quite a novel application and no one's ever really done anything like what they're doing until now it'll be interesting to see how the documentary turns out there was a lot of drama when they were firing the laser and lots of things that happened along
the way that make it really interesting so i'm excited to see what the producer and the editing team come out with for that very cool i'm excited to watch it myself yeah maybe we'll talk about that in a future episode because there's a few members of the team that have been involved in documentaries in some way so i guess we should get on with the main focus of this episode which is about cryptocurrency so anika can you give us a fact that you know about crypto so i
know bitcoin is a type of crypto and that's a recognized country of two countries um i think el salvador and the democratic republic of congo and i also know that crypto is decentralized and can be used to buy nfts which is something we might be talking about a bit later yeah i think we'll come back to that so i know very little about any of this so i think i'm gonna be asking lots of really obvious questions jennifer what can you add to those facts uh yeah i can expand on what you said
earlier uh yeah so what anika just said yeah it's a decentralized ledger which means that these transactions are stored on multiple computers or servers in a large network so these servers are connected together in the network what makes it interesting is that all of these transactions are stored not in a centralized location but on all of these computers in the the same network this means that you can't just go into one of these computers or one of these servers
and change a transaction that's not possible because all of these transactions need to be validated across the whole network so that's what makes it secure in a sense these cryptocurrencies they use blockchain technology and whenever you make a transaction or need to make changes to a blockchain you need to use a verification method and depending on which cryptocurrency it is it uses a different type of verification method okay so i'm i guess i'm familiar with
verification from things like two-factor authentication like when you're trying to sign into a website and then it sends a code to your mobile phone exactly yeah yeah kind of similar so you would use either like proof of work or proof of stake yeah i guess we can discuss the difference and the impact of the the two different verification methods later as well you also mentioned blockchain and that's a term that i've heard but i don't really know what blockchain is
can either of you give a definition of blockchain i think blockchain is just what jennifer mentioned is the record or the ledger of the transactions between the different servers or the computers so it's basically just like a ledger of all of these transactions is the blockchain okay that sounds really simple i always thought something really complicated there must be more to it than that though they try and confuse you with all of these words and also to add that
these transactions are also public anyone can technically go in and see these transactions you don't need someone in charge who has to be responsible yeah so i guess the word cryptocurrency to me suggests there is encryption in some way that's obviously nothing to do with the blockchain thing really i've just learned oh do you guys know anything about the encryption that's involved other than that two-factor authentication type thing i think a cryptocurrency is just kind of like
any other currency like uh pounds dollars etc but first of all it's digital so it's not like a physical kind of piece of money and it does use encryption techniques like you mentioned to control the creation of those units of of money whether it's bitcoin whether it's ethereum or these different types of cryptocurrencies and also to like verify the transfer of those funds between different computers i'm not really i don't think this is where the crypto part comes from but for proof of work
these so whenever you want to make these transactions in the blockchain there's like a competition between these miners or the people like a bunch of people that want to pick the transaction because they get compensated for it so there's like a competition between how quickly they can solve these cryptographic algorithms or some equations and the one that solve it the quickest gets to validate the transaction and they get some reward for it so basically the people or the group the person who
has the most powerful servers are obviously going to be able to solve these the quickest so it's often the more wealthier or like the more resourceful groups of people that get to do the mining the most so the other verification method proof of stake they're not called miners anymore they're called validators the people that do the or create these transactions or make the changes in the blockchain in the proof of stake verification method they're chosen randomly so it's not based on how powerful
servers you've got okay so i've heard of bitcoin mining and all i know is it involves quite a lot of computational resource like you just said like i remember hearing about it probably 10 years ago and you pretty much needed lots of processes networked together all working on a bit of the problem to do it but i don't know anything about the validation method you just mentioned normally talks about that is that a bit more niche or is it just not talked about because it's not so competitive
um no i think it's probably because it's more of a recent technology and i mean bitcoin uses a bit older blockchain technology the more how to say recent cryptocurrencies use proof of stake so yeah obviously it's just because this proof-of-stake method is newer it's more recent okay i've also heard of something called non-fungible tokens or nfts in relation to the whole cryptocurrency thing i say a thing i'm not entirely convinced by it at the minute it's something i i
tend to avoid because i don't understand it so what's in the nft what's a non-fungible token i think we can define fungible which i think has got like some legal ramifications the point is that it's non-fungible which means that it can't be like copied i think that's correct it's non-fungible it's a unique thing and no one else can copy it so a bitcoin is fungible because you can like make many bitcoins and they all have the same value etcetera but a specific nft
is unique and you can't make millions of them once it's made it's it's made i think an nft can be pretty much anything it can be a picture it can be a music it can be a screenshot of our podcast that we're recording today that that could be an nft as well i think that kind of outward-facing bit isn't as important as the kind of receipt or the code behind actually you owning the rights to it or you being the unique owner of the nft um itself that's what gives us the value so
the receipt is what gives us the value the proof of ownership is what gives its value rather than the actual thing itself and you need to use cryptocurrency typically ethereum i think for nfts um which is a type of cryptocurrency but yeah you purchased them using ethereum i may have confused everyone with that explanation what i understood was that it's a virtual object it's something you can see on the screen or you can listen to something you can interact with in some way but
it's registered on this ledger that uses blockchain and you can't buy it using normal currency only this currency that's generated through either mining or validation yeah and so it's it's on that blockchain that there's a track of who's holding the nfts or who who owns like a specific nft that's stored in that blockchain on the ethereum blockchain between all of those different servers that's where the information is that someone owns an nft that's why you have to use ethereum i
think at the moment okay so one important feature is so with ethereum you use something called smart contracts and i think these are also the ones that are part of what anika i just said it kind of shows the ownership of the nft so it's like any other contract it's just that it's a digital format yeah it will be recorded in the ethereum blockchain so i can see that the virtual object i can interact with i can show that off to people in some way right yes but there's nothing to stop people from
making a copy of that virtual object and trying to claim that it's the nft yeah i mean they wouldn't have they wouldn't be able to prove it they wouldn't have that certification but they can show off to people and go look at my nft and try and trick people no so that's a really good point so the nft is meant to give you something which can't be copied which is the ownership of the work so if you try and think about it in like real inverted comment terms anyone can have like a
copy of the mona lisa for example but whoever owns the mona lisa only one person can own the original mona lisa so i think it's a similar kind of concept with nft is that only one person can own the nft whatever it is but anyone can yeah of course take a photo of it or take a screenshot of it just like any other type of art so in that case what's the point of the nft as a whole because it seems to me like it's split into two parts the record of who owns it and then the virtual object
itself what the hell's the point having those two things good question laura um i guess this is similar to like yeah as we were talking before the podcast what is the point of gucci what is the point of prada what is the point of all of these things to show off to people that you own this thing i think that is part of it for some people like saying that yeah they own this thing just to show off but i think in some cases you can make money like people are making money
from it and doing really interesting things like i know some artists are using ai for example to make art and to make different sounds so one dance group i like they make nfts they're called quick style and yeah they've been making these nfts using ai that's pretty cool i'm not saying that are you saying that they make our piece of music that is only valuable because it's registered on this ledger and it's bought using cryptocurrency and no one else can own a version of it is
that right yes so because they use ai they're all slightly different all of those kind of outward-facing parts of the nft as well as well as having the unique ownership code which gives it value the other thing i've been seeing as well is some people are trying to link the virtual world with the real world as well to give people perks to having the nfts so whether that's like having a a say in the direction someone might take with a project or or things like that that's another thing i think
that's being explored at the moment okay so say i for some reason okay first of all i guess how do you get hold of cryptocurrency you can mine it right but you can also buy it because it's it's worth monetary value i think it's is it about one and a half thousand dollars it's current worth i think i was looking the other day per bitcoin you can buy it and kind of like any other asset you know stocks in shares i think it's a pretty similar principle it can go up it can go down in
value so yeah you can directly buy it as well as mining it he would have to get like a special account and like a a digital wallet that only holds cryptocurrency so there are certain platforms for that that you would have to get registered in and then buy these currencies and then i guess i have to go somewhere else to buy an nft i get the impression this is like some sort of virtual bidding space yeah it's like a marketplace specifically for nfts i think yeah openc is one of the biggest
ones is it kind of like ebay where you can either buy it at the price that's been set or you can bid for it yeah it is there's like some options that helps me understand what it is and what i might want to do with it although i think i can see the value of like a gucci handbag or a pair of shoes that are well made and hold their value over a virtual object that i can only really prove that it's mine because someone goes and looks at the ledger i find that a bit odd it makes me think about you
know these people that owned like loads of a bitcoin and then they lost their password and then the you know you also have like this secret passphrase as well and they lost it as well and then because you've lost these things you can't i mean there's no way to show that you own these assets so then you know you've lost all the money because this is how you're identified through these passphrases and your password so if you lose these things then you know that's
it that's why it's like really anonymous they call it bitrot this phenomena of what jennifer just described of whether you forget your password or um file formats might change or the image might get like just like another piece of art might lose its quality over hundreds of years data storage media doesn't last does it it's always prone to errors especially if you keep copying it yeah what happens if some of that data gets corrupted somehow something keeps popping on my newsfeed about a person
that had some bitcoin on a hard drive and he threw the hard drive out this is years ago when it wasn't particularly worth a lot of money and now it is worth it he wants to drive back and he's not allowed to go and look in his local dump for it because it's too dangerous i don't know if it's the same story but i think it's because he stored his the secret passphrase or something there and if he has access to it then he can get i don't know how many millions of
dollars or whatever right because i kind of assumed that it was like losing your wallet with a load of money in it but the bitcoin isn't actually stored anywhere necessarily is that right decentralized that's the point that it's not on one thing so it's on all of these other servers but yeah as jennifer said probably he had his password or phrase that's the only way they can identify you it's like i mean if you lose your bank card you can just go to your bank
and say i lost my bank card uh this is my identification and then there's okay cool uh we'll send you a new one or whatever it is but with cryptocurrencies so you have a password and then you have this secret phrase which is like 20 words or something like this and if you forget your password then you have this long phrase that you can use but if you lose both of them that's it you'd have to use the account and you lose whatever assets you have there that would definitely be me yeah i forget
passwords and loose things all the time so i stand no chance of getting rich from having bitcoin or nfts from the sound of it are we all going to be doing stuff with cryptocurrency in the future or do you think traditional banking is here to stay i think both of them are here to stay for a while at least just from my perspective as someone who understands neither traditional banking nor cryptocurrency and this is just from my very naive kind of perspective i think there there will be
both i think there's advantages of cryptocurrency in the decentralized bit because i think in principle that's pretty fair that there's not one person like or one organization controlling what happens to a currency whether it'll go up or down because i feel like especially at the moment with the cost of living crisis and the crisis the world is going through how the economy is controlled can be really unfair to a lot of people so having something that takes that control
out of a few elite sounds like a good thing from my perspective but that's not to say it's without its disadvantages so like one thing we've not really discussed is that to mine cryptocurrency can be really really energy intensive and really bad for the climate and again that's another huge crisis that we're going through in terms of climate change and the environment so i think neither are ideal but both have some good points and bad points yeah we kind of touched on it takes quite a lot
of computational power to mine bitcoin i still find that phrase weird i guess it's kind of like you get visions of mining for gold don't you and it's nothing like that at all i just picked it in my head you know it's snow white and the seven dwarves like with their little pickaxes inside computers just finding bitcoin maybe it's a good word for it considering how energy intensive it is just like traditional mining right yeah but i wanted to add to the decentralized currency
bit versus these regular bank backed currencies and that is you know when you uh make payments from your like through your bank or from one bank to the other or when you want to buy something um there's this process that takes place uh with multiple middlemen or intermediaries and like anika just said cryptocurrencies kind of eliminate that because it's peer-to-peer transactions so there's no one that's there to mess a metal around or anything in which case who controls the the
network that the cryptocurrency is stored on is that the right term i guess all the these uh servers that are part of the network basically for traditional banks it's kind of like the central bank of the country that sets up the kind of railway for the payment system so all these transactions go through through there and then you have this kind of whole process where you have to do the clearing and the settlement and that can take some time and i know like cryptocurrencies there are some
transactions that take time but for example if more of these cryptocurrencies move over to proof-of-stake they can be much quicker than our traditional transactions that go through our traditional banks yeah is this more kind of advanced technology and without the climate right with the proof of stake yeah exactly so it would be able to have middle people and you wouldn't have that impact on climate of the proof of work concepts that came before because it's actually quite slow
proof of work as well i read that it would do like 15 transactions per second so that would cause some bottlenecks or slow downs here and there do you mean like a financial transaction or do you mean the actual mining no no just a transaction also making an entry in the ledger i guess i guess that would be in one transaction but now if they move over to proof of stake they will be able to do several thousands of transactions per second okay i guess that's now got me thinking
about how many banking transactions happen around the world at any one time uh in comparison yeah i know it's not something i've ever really thought of but i guess it must be quite a lot but apparently there are some banks that want to use blockchain as well are there transactions yeah i don't know how but they somehow want to implement that kind of technology is that something like um monzo or revolut or these kind of non-traditional banks no even traditional banks yeah
is that because you mentioned that it's quicker to do the transactions and it's also publicly visible so is that because maybe it would take the computational effort and the management away from the bank so it'd make their job a bit easier yeah it could be i actually don't know the reason for it but that that does make sense from from my side and i guess it also makes me wonder about we've talked a little bit about the energy intensity of mining cryptocurrency but how much money are
centralized banks spending on running their resources it's not a question we can answer here i don't think but i keep hearing that mining cryptocurrency is really bad for the environment because it's so energy intensive and there are some companies that pretty much buy coal-fired power plants just to run their server farms yeah and they they use the coal because it's cheap because there are instances of data centers that i think a lot of them are based in i want to say it's um
finland or something because it's quite cold and they need cooling but it's also a country that has a lot of renewable energy sources so the environmental penalty is a lot lower than burning coal in the desert say yeah i feel like this links back to some of the conversation we were having in a really early podcast episode about the carbon footprint of your internet use because that's what we're talking about right it's all just data moving around and being processed it's interesting that you
mentioned these servers i think traditionally a lot of banks or they manage their own servers but now more and more many of these banks are trying to move over a lot of their applications or workloads to the cloud some of these cloud providers their servers they also consume a lot of energy but i know some of these companies have also tried to use more sustainable energy sources to power up their servers yeah so it sounds like we've sort of been reading the same
thing the data centers do what they can to minimize their environmental impact because it's in their best interest to do so i also get the impression that bitcoin and nfts are only for the rich i don't think cryptocurrency is just for rich people and in fact there's been a lot of people from developing countries have done a lot of stuff involving cryptocurrencies and they've worked really hard they've managed to earn like a a lot of money from them by being really as jennifer saying at the
beginning being quite resourceful and finding different ways to mine but that isn't to deny you do need like a kind of startup fund to have enough money to have enough service to do the the mining especially with proof-of-work concept where you do need all of that energy so you do need enough money to build a farm is i'm talking about mining and farms and i don't know if some is the right word but your initial kind of equipment that you need in order to do the mining does
require quite a bit of money to start conventional money as well yes exactly from centralized banks yeah and buying actual hardware in order to do it and then also paying for the electricity to run them which is really expensive unless you can run it through you know if you have solar panels for example that could be a good way to bypass those electricity costs but yeah so you do need money to start with this proof-of-stake concept might change things in terms of the amount of money
you need to start mining plus there's also the traditional investments if you don't want to do mining you can buy 0.0001 of a a bitcoin or or whatever not that it's worth um too much but yeah you can invest you know as little as you want the nfts i've seen have been really expensive from my perspective that might just be i've not researched it that much but i think yeah you do need a bit of money in order to be able to buy an nftp yeah yeah there's also see some really outrageous figures from
but there's like there's been a lot of criticism in regards to like crypto investments that many of them are like pyramid schemes that's why i wanted to ask is it all a pyramid scheme cryptocurrencies and nfts there's one person somewhere that made it seem really appealing and stuck a lot of people in because i mean it's the ones that come in early that benefit the most and the ones that come in late that have to pay for everything i mean we've seen it a lot with uh some of the newer
cryptocurrencies and they sometimes call them stable coins these sort of currencies that are yeah it's in the name they're supposed to be more stable and but then the people that kind of create these currencies they are not the people but some people they you know promote this coin tell everyone to invest the value goes up because of the demand and that's when they pull out and then all of a sudden the value goes to zero and those money have been lost by you know the people that enter
uh later and those that left earlier they've you know made a lot of money out of these other people so it's kind of almost like a scam they call it like pump and dumb but that's kind of how a lot of economics works from my very rudimentary understanding is something is only as valuable as people make it out to be so if a lot of people are talking about it and want it if it's more desirable the value goes up yeah yeah and then if if the the influences i guess if you want to go down that route
suddenly say no we're not doing that anymore then the value just drops right out of it yeah again i might be wrong but i feel with like conventional banking and with cryptocurrency both of these kind of rely on making money from money if that makes sense like it does i wanted to say like can you really invest in a currency yeah you can trade a currency i think but can you invest in something that's just used to buy things well i think that's what they do and
that i think that's really messed up in my mind like i have no issue like if you're you know investing in some plants or some food or water or resources that actually you know have some objective use but i think people forget that money is just as something that we can trade or only gives it value because we give it value to something that is useful and i think in both these cases people are making money from money which removes the the useful bit from both of them which i just think
ethically is very messed up in in my mind like that doesn't quite sound right to me yeah no i get what you mean i would rather have a warm house and food on the table these tangible things than either a watercash sitting under the bed that i possibly can't do anything with or something in cyberspace that if i lose the password too then i'm stuck yeah pretty much so i was going to ask would you guys try and get rich from nfts or cryptocurrency in general i suspect the answer to this is
no no but i wouldn't from conventional like currencies and trading either just but like i said i'm very scared of these i'm just scared of money like this i don't understand it it's very confusing i don't understand how you can make money from money so yeah my answer is no i don't trust it it seems too high risk to me what about you jennifer you seem really well versed on all this i've learned quite a lot from listening to you talk no i i wouldn't invest in cryptocurrency
either i think i follow too many like crypto critics so they always like yeah criticize it but i know quite a few people that invest in it but i wouldn't do it myself i think it's way too risky it's almost like gambling to me actually because of the like how volatile it is would you should invest in traditional commodities would you ever buy like stocks or shares yeah well i'm a hypocrite i wouldn't i wouldn't mind buying these things or like funds yeah this is okay stocks yeah
sort of but then i guess that goes back to anika's point that they're tangible things that have a benefit whether it's a company that employs people or production of food or minerals that we use in all sorts of technology yeah is that the difference for you that if there are tangible things that can be useful and cryptocurrency is just kind of this this weird bubble that people are making it seem appealing when maybe it's not so great yeah i try and make informed investment decisions and i try
and do some good research and make sure i don't invest in any like weapons manufacturing companies or anything like this also like i feel i'm a hypocrite as well because i have a pension and they invest in all of these things including i think probably weapons and all of this stuff because i think they don't care as long as they can make money but they're doing that for your own benefit if it's a pension in the future they say that i don't trust them i see every i'm i'm gonna be like a tin hat
gang in all of these apocalyptic movies i'm just like i don't know what's gonna happen by the time i think i'll still have i think that we'll just have to work until we die that does seem to be the way we're going in the future so uh is is any of this sustainable is any of what we're doing financially at all sustainable sounds like we're saying no i don't think so i think capitalism is not good but we don't know anything yeah even these investments like what do you
expect it to go up indefinitely it's like really really crazy when you think about it yeah because i always think about like you know if we go to shopping to the supermarket and i don't know like toilet rolls gone up in by by however much like it did at the beginning of the pandemic when it all started out but say like the price of toilet roll goes up by 500 no one's celebrating that the price of toilet roll has gone up by 500 but like for houses or other investments
they celebrate when it goes up so i just don't understand the double standard is a podcast that's about science and engineering which is kind of about discoveries and new developments and the good they can do for the world we're all saying we don't want these discoveries in these developments we want to live in the past [Music] and it's not a no to cryptocurrency i still think that like it does have some like if we can sort out the climate thing and the like
or just in general yeah the whole impact on the environment i don't think it's a bad idea to have a decentralized yeah and i think even the technology itself can probably be used for something although there are some critics that said you know they don't think so because it's been around first for a while and it hasn't been used for anything useful but you know you never know is that because it's not mainstream enough and there are just certain people saying it's this really good thing to
get into when we talk about it being a pyramid scheme does it need to be more sort of everyday i think we need a proper education system in it because like as we discussed today we went through a lot of information and i think like because i mean i don't think we're really educated about traditional money either at least i wasn't in school yeah i explained how the economic system worked or why there was a huge financial crash or you know why these things happen so i
think in general this needs to be included in our education system so people that understand why these things happen and what decisions um affect this and i think it's the same for crypto because the people who understand it i feel that you know there are a strong advantage because yeah they know what makes sense and and what doesn't so i think there needs to be like a a program of education in uh both traditional currency systems or economic systems but also yeah the new
technologies and cryptocurrency as well very good point so i guess that's a good point to end on that we all need to be better educated about cryptocurrency blockchain and non-fungible tokens and the economy in general and although we've tried to discuss some of these themes between the three of us none of us as experts in these areas so we're all struggling a little bit we all have different parts of the picture here it sounds like um but at the very least i think i understand a bit better what
cryptocurrency is that it's essentially an algorithm with a certain number of solutions that you can use to buy things on ledger that no one person or no one state has control of but if you lose your password to your digital wallet then that's it you have no way of coming back from that so you have to be careful with how you go about it so if you enjoyed this conversation you can find us on twitter to ask us any questions we're also on instagram and reddit and if you really liked this
podcast as a whole we would be very grateful if you could support us and buy us a coffee a beer or a tea if you prefer and the link for how to do that is on our profile so thanks for listening [Music]