TechStuff Cashes in Bitcoin

and Jonathan did an episode on bitcoin. Yeah, and in fact, bitcoin is another thing that you've probably heard about if you listen to our sisters show, a little known show called Stuff you should know. Yeah, I mean, you know, they're they're really up and coming folks. I think I think that you should give him a chance. But those kids are going please now. Josh and chucked an episode on how bitcoin works on June. We also spoke again about it briefly in our wrap up and Prediction episode. So,

so why are we talking about it now? Well, as it turns out, this is just one of the stories that is constantly in the news, and particularly as of the time we're recording this podcast and the second part because this is going to be a two parter, there's just too much to talk about for it. Want to be one episode. We're recording this at the beginning of March two thousand and fourteen, and at this time there are lots and lots of stories about disasters that are

befalling various institutions that are that rely on bitcoin. It has been a really wild ride for the past five months or so. Yeah, so we want to go and explain what bitcoin is, how it works, you know, give a refresher on all of that, and and talk a little bit about its origin because some interesting possible news has unfolded even as of the day we're recording this podcast, that being March six. Yeah, so we want to talk about some of the stories behind how it got started

and the people behind it. Uh to really set the ground for the next episode, which will be more about the controversies that are going on. So to start off, what the heck is a bitcoin? Well, it's clearly a digital cryptocurrency. Obviously, I meant beyond that, Yeah, it's a digital cryptocurrency, which, if you break that down, digital means of course it belongs in the digital realm. Ultimately, we're

talking about zeros and ones here lives on the Internet. Yes, crypto would mean some form of secrecy or encoding you would to put something in a cryptogram means that you have hidden it somehow in some form of you've done transformation on information, and unless you have a key to unlock that transformation, you can't get at what that original info actually is. Right, it's a security measure, yea. And so currency obviously that is something that represents wealth or

or value money of some kind. Yes, we we've actually talked a lot about money recently. Yeah, it turns out tax season really just weighs heavily on our minds. But yeah, so so this bitcoin currency now, and we should go ahead and say it is not the only digital currency out there. There are actually quite a few other ones out there, and maybe someday we'll do episodes on those.

The reason we're concentrating on bitcoin is again one it's the most well known, at least among the general public, and too, it's been the news quite a bit recently. So it depends on a really complex algorithm in other words, a very complex, uh mathematical system that tracks transaction. So technically every bitcoin contains within it a history of all transactions on the bitcoin platform. And this is this is for a couple of different reasons. One is it helps

define how difficult it is to find a bitcoin. Two, it tracks the transactions so that way no one can spend the same bitcoin more than once. Uh. And it's it's again one of those things that is kind of in genius, and that by building it directly into the structure of the currency itself, not only does it track it,

but it becomes part of it. So it's almost like if a dollar bill contained inside the dollar bill every record of every time that dollar had been used on something, so that way you would know, like when you got that dollar, you knew what it had been. You wouldn't necessarily know who used it, but you would know what it was used for. Uh. Personally, I think that would be absolutely terrifying, but uh, you know that that we'll get into some of that in our second episode. Anyway,

it's an interesting concept, uh. And it's also a little scary to people because since it's digital, and since digital means that you can manipulate stuff with computers, a lot of people questioned whether or not it is a viable currency because they're worried that you might be able to do stuff like a lot of happens. What happens if I just copy this dollar over and over and over and over and over again, so now I have many dollars instead of the one dollar that I started with.

Excepting stuff dollar, of course, we'd be talking about bitcoins, and uh, the cryptocurrency part of it is also meant to protect against that, to make sure that you cannot take a single bitcoin, copy it a billion times and suddenly become a bitcoin billionaire, and then simultaneously crash the value of bitcoins worldwide. This entire system was proposed by someone calling themselves to Toshi Nakamoto back in two thousand eight.

And I say someone calling themselves that, because actually this this is a really big controversy right at this very moment, like as of the morning of the day that we are recording this podcast, News Broke and News is kind of in big quotation marks. There on Newsweek, a journalist is saying that this Satoshi Nakamoto person, which was once believed very strongly among the community of bitcoin users to be a pseudonym possibly for an entire group of people,

is actually a a dude. Yeah, a sixty four year old dude, A sixty four year old Japanese American dude. So this, and not only that a sixty four year old Japanese American dude who's named Satoshi Nakamoto. It's actually his name, not a pseudonym. Uh. And as you were saying, news in big quotation marks, because when you read this story, you realize that there's nothing that directly connects Nakamoto of

the story with Nakamoto of the person who proposed bitcoin. Now, there is someone who used that that screen name of Satoshi Nakamoto to create a proposal for bitcoin and published it right right right, That's that thing in two that I was talking about. So there's this other person who actually has that name and also seems to have a background that would be compatible with someone who would create this kind of cryptocurrency, at least on a surface level certainly.

And also several members of actual Kamoto's family have said that it would make sense, and that furthermore, he will never confirm this, right, and then they themselves have no knowledge of it, so therefore they can't confirm it, right. And and this entire part of the part of the big quotes involved here also that this this Newsweek investigation, Um, it's just it's it's very it reads very uh, sensationalistically. Yeah,

there's a lot of circumstantial evidence and no hard corroborating evidence. Uh, it's it's it's compelling circumstantial evidence, certainly, it's and it's a very compelling story. William William Gibson of famous science fiction writer Fame UM called the story on Twitter pinsion esque, which referring to Thomas Pension of course another I guess

you could call him a science fiction writer anyway. But but but yeah, so so this was this investigation was done by one Lee or Leah McGrath Goodman, and it was published online on March six for the print version of Newsweek that I believe is come not coming out until March. Yes, we got a sneak peek, and it's set the world a Twitter, particularly on Twitter and also Reddit. People are kind of upset about this story. Well yeah,

and we can talk about the upset part two. I mean, some people are of course reacting in that good old Internet way where because the reporter happens to be a yeah, she committed that terrible sin on the Internet of being female. Um. Yeah, first of all, I know this is a tangent, but gentlemen, uh, here's just just something from me to all of you out there, never ever ever attack anyone based upon their gender. It just bespeaks more of you than anything else that

goes for the ladies as well. All y'all just just don't do that. Just the heck up. Okay. So anyway, beyond that, uh, the interesting things here, like they she uncovered that he had history working for some very important projects, many of which had top level secrecy involved. Oh yeah, yeah. He's a mathematician and computer scientist who has worked for the U. S. Military, the f a A, and several major corporations that we know of. I mean, he's a very secretive dude, Yes, he he seems to the word

paranoid has been used to describe him. And I think it's completely accurate. Uh, it's not, you know, unjustifiable necessarily, because if you're someone who's worked on these high level projects, then clearly you have a heightened level of knowledge about the stuff what goes on out there. I mean, if it's top secret, then very few people know about it besides you. Sure, sure, And and I assume that much

of that stuff is kind of scary, I I I imagine. So, I mean you're talking about stuff that is probably still to this day classified absolutely um, but Sonkamoto the figurehead at any rate, um was a really act a voice in the cryptography and in bitcoin communities in general until late So yeah, he ended up kind of It's funny he passed the torch to a person who didn't realize

he was grabbing a torch. It was a guy, a guy named Avan Anderson, who is one of the one of the kind of the spokesman for bitcoin these days. He became the spokesperson when Nakamoto put his email on Bitcoin's main web page. Yeah, contact info, right, Nakamoto said, do you mind, Look, you know you're helping me out with fixing the code for bitcoin to make it better. Do you mind if I put your email address up

on the website? And Anderson said, sure, go ahead, and so the Nakamoto puts up Anderson's email and then removes his Makamoto's email, So now Anderson is the only email up there. And that's when Anderson said, Yeah, that's when I found out that I'm kind of in charge. I guess I own this now. Yeah, kind of, yeah, it's it was definitely one of those I mean, the story in Newsweek when you read it, and you start reading about the personality of the person Nakamoto, who may or

may not indeed be this figure that Kakamoto. You start picking up on things. We're thinking, well, I can at least see from a personality perspective, this is very consistent. Certainly right. This is someone who who essues and he does not want any attention directed toward himself. He prefers to remain anonymous, so much so that some attention is given. Actually quite a bit of attention in the article is given to the fact the Nakamoto is not living in

a particularly fancy house. It's not a lush environment, certainly not. And and his family has even reported that he's had a little bit of money trouble with. He's had a few medical issues over the past few years, and stroke

and some other medical problems. Yeah, and and his family says, well, if if Nakamoto are like this guy that we know, is in fact this bitcoin billionaire or millionaire at the very least because because all of the early adopters and early workers in bitcoin have made out really well conveniently, well, yeah, because you know, in the early days of mining bitcoins, it was easier to mind them that's something part of

the system. Yeah, quick refresher. Course, bitcoins are released in blocks, and at least originally they were released in fairly large blocks of bitcoins. And the way you would get a block of bitcoins is you would quote unquote mind them by using your computer to solve mathematical problems. Now, those problems were based upon the information contained within the bitcoin itself, and the problems got harder the more computer power was

dedicated to try and find bitcoins. So, in other words, the more people are looking, the harder it is to find. Which kind of mimics the way a physical commodity works. If you think about gold and you are an old timey prospector out in San France, Cisco just before the gold rush, it's not it's not impossible to think that you with your pick ax and your and your pan and your donkey, are able to find a significant amount

of gold. But then as other people learned that gold is in them there hills, they swarm them their hills and it becomes a lot harder to find gold because now you've got people who have much larger equipment and much more sophisticated means of getting at the gold. Sure, sure, and it becomes a little bit more sparse as it is distributed across this larger population. Yes, and in fact, you get smaller and smaller deposits because you've mined away

that first Yeah. So the same thing with bitcoins, except instead of using physical mining equipment, you're using computer power. Right, and Sonkamoto the figurehead, with his digital pick axes and donkeys, has, according to reports, held as many as a million bitcoins, which is a few hundred million dollars in US exchange. And I'm kind of that that value in US dollars has has um has there's a variability and we'll talk more about that in the second podcast to absolutely but

so so so that's one strange thing. Um, there are several uh suggested reasons why Nakamoto the person might be living small that that could be completely plausible and not contradictory of the fact that he is, in fact Knockamoto the figurehead, but it could also just be part of a desire on on Nakamoto's part to draw attention away from himself and towards the currency. Well. Yeah, and and since since he's worried, here's the thing about those those

transactions being recorded in every bitcoin. If Nakamoto were to start selling off his bitcoins in order to get some other currency for it, uh, several things would happen. One, he would have to pay taxes on it to people would know, because those transactions get distributed across the entire bitcoin network. So you get this point where everyone's hey, look that bank of coins that we know belong to Nakamoto are now being are now entering circulation. Therefore he's

getting rid of them, he's selling. So it may and then, if, of course Knockamoto the man were to have a measurable difference, you know, his standard of living were to change dramatically, then you would say, okay, there's a smoking gun. Right. You saw the digital effect of these coins being sold off, and the physical effect of this this guy who was living a very private life suddenly having a turnaround in his lifestyle, you would say, all right, there's the connection.

Then this guy is definitely the Nakamoto of the story. Sure, and Anderson has said that that Knakamoto the figurehead once emailed him um and I quote, I wish he wouldn't keep talking about me as a mysterious shadowy figure. The press just turns that into a pirate currency angle. Maybe instead make it about the open source project and give more credit to your dev contributors. It helps motivate them. Yeah,

and uh, it's interesting too. I mean, first of all, Anderson says he never talked to Knockamoto on the phone or anything like that. It was always through an email, and it was through untraceable email. Uh. And also I believe there was a future um exchange between the two of them where uh Anderson or Anderson said, I'm going to go talk to the CIA. They've expressed interest in bitcoin, and I want to explain to them how this could be the future of currency and could be an amazing

thing that could change the world. And that's the last he ever heard from Nakamoto, which suggest that perhaps Nakamoto did not want the attention of any kind of governmental agency, having worked for them in the past. That's a possibility. I'm assuming that the person in the figureheads are in fact the same entity, because again we don't have any direct connection. There's a lot of very compelling, circumstantial evidence, so we don't know ultimately whether Nakamoto the man is

Nakamoto the person who came up with bitcoin. Uh, the the various stories kind of lend at least enough credence where it's it's it's a possibility that you can't just easily dismiss uh, certainly. Yeah. There is also part of the controversy about all of this, and part of why people are upset about the story breaking, is that it's been suggested that Nakamoto, the person's livelihood and safety are in danger if people know who he is and know

that he kind of holds the mental keys to bitcoin. Yeah, there's definitely that as well, and some people have directly criticized Newsweek and this reporter in particular for doing that. As I said before, not all of the criticisms are directed in a way that's actually uh yeah, yeah there, right, there may be valid criticisms. I'm not dismissing that, but there's a right and a wrong way of doing that, folks.

So anyway, Yeah, it could very well be that that this man's privacy has been uh violated in a way that could see harm visited upon him in the future. That that's a that's concerned. A lot of people have on the reporters side, they've said that all the information

they had was stuff that was already publicly available. It wasn't like they went and dug all this information up in places that that anyone could could not have done, Like any person could have had the same experience, any intrepid person who chose to contact this dude through his model trained communities and visit his house unannounced, um, making him feel threatened enough that he called the police before he before he uh engaged in any sort of comfort. Yeah,

that's yeah, just and anyone like that. And the conversation, by the way, did not once it got to bitcoin. He's like, yep, this this talk is over and he left. So it whether he has anything to do with bitcoin again, definitively, we can't say. But we've got a lot more to say about bitcoin before we do that. However, let's take a quick break to thank our sponsor. Okay, So Nakamoto, the man and the figurehead both have really try to

stay away from the public eye. Uh and in general, the it's there's this interesting conflict where you've got a community that really wants this currency to to exist, they want it to work and do, and they want this to be the future of currency. On the other hand, you have a lot of people who are responsible in some way for the currency's existence. Who don't really want to talk about anything at all. And this conflict also grows into the fact of what the currency is intended

to do. You see, it's it's not a centralized or regulated currency. The way most currencies work. There's something that are issued by a governmental body, right, and the weight of that government therefore is behind the currency. They're they're usually ensured in fact, by that government body. Yeah, so you've got some sort of government that is both responsible for the currency to to stay in value, uh, and that you know, ultimately if something goes wrong, bail you

out in some way or another. And bitcoin is different. It is not centralized. It's decentralized. The idea here being that because it's not dependent upon any one government, should any one government have major problems, which we've seen. I mean, there's problems all around the world where governments rise and fall, and as a result, the currency often takes a huge beating during those those times of turmoil. Oh yeah, and I mean we've seen that repeatedly in the past few years. Yeah.

This would allow you to have a global currency that you could use through you know, no matter where you are, and no matter where you're trying to purchase something that is not dependent upon any one government. So in theory it would remain it's its value would remain uh, unaffected by whatever you know, regional conflicts happen to be going on at the time, So you know, that's one of

the ideas. Another one is that because there's no governmental regulation, are quote unquote interference anyone who has a deep distrust for the government, no matter where in the world you happen to live, no matter what sort of government happens to be personally. Uh, then this would allow you an opportunity to work outside of that, to have a money that you could use that does not in any way, uh benefit outside of the system. And whatever anarchist fight

club style definition you want to take on that. And one more, one more quote from from this kind of ridiculous inflammatory news Week piece, by the way, on on in line with all of this, uh, the reporter tracked down one of nakamotives, the nacamotive. The person's daughters by the name of Eileen Mitchell, and she said of her father, I, quote again, he is very wary of government interference in general. When I was little, there was a game we used

to play. He would say, pretend the government agencies are coming after you, and I would hide in the closet. Yes, so we you know that, In general, we've had a lot of a lot of the folks who are big fans of bitcoins have been called many things, including anarchists. Some say that it's it's you know, it's largely in the United States anyway, largely a libertarian kind of fan base.

In fact, Nakamoto the person self identifies as libertarian. Um. Then there are other people who are interested in bitcoin who don't necessarily identify as either anarchists or libertarians. They are investors who are interested in bitcoin because it's a what potential way to make a heck of a lot of money. If you've ever looked at the value of bitcoin and versus the US dollar over the past uh, you know, it went from you know, a couple of bucks for a bitcoin to astronomical levels at one point

of over a thousand share. Yeah. So I mean they're the actual community is very diverse. Yeah. And in addition to it being called an an anarchists dream or a investment opportunity, it's also been used as an opportunity to conduct transactions that would otherwise be outside of the law. Right. We'll have a lot more to say about some of the the less respectable ways one can use one's bitcoins, or at least one could have used one's bitcoins in

the next episode. There's some other interesting little technical factors I'd like to to cover before we we wrap up on this one. The one of the things that is interesting, Like we've mentioned, you know, a physical commodity like gold, Ultimately there is a finite amount of that on earth, you know, So once you mind all the gold that is available on Earth, that's it. All the gold that is available has been mind. It's now out in the world in some other form, all right, same thing with bitcoins.

The idea was that there needed to be a finite number because if it was infinite, then ultimately that that's a meaningless currency. Yeah, how could you ever expect that to to maintain its value? So there are twenty one

million bitcoins, and that is all there ever will be. Now, not all of those are in circulation, right, Like we were saying earlier, these are released in batches, and in increasingly small smaller batches, right right, you you and only would you see fewer bitcoins per block once you once you get further down the line, eventually you get fractions of a bitcoin, and the bitcoin itself can be divided

up into eight decimal places. So the base unit is technically point zero zero zero zero zero zero zero one bitcoins or btc. So you could yeah, I've seen it referring to that, So you could you could have you know, that tiny amount of a bitcoin, and depending upon the value of a full bitcoin, it could still be a meaningful amount of money. And once you get toward the end of the cycle, the life cycle of all the bitcoins that are available, that's kind of the amount you're

going to get per mining operation. Now, in a way, this is also meant to make people back off of mining, because the amount of effort you put forth trying to get at that money is never balanced out by what you actually succeed in getting, all right, it's going to be a smaller return. Yeah, And so that's actually been one of the big big arguments against bitcoin is that the amount that you put forth, the return on your investment isn't equalled out, so you're investing way more than

you're getting back. Especially to be competitive, because like I said earlier. The more computing power you dedicate to this, the more likely you are to mind a bitcoin. Now, just because you're more likely to mind it doesn't mean you're going to be successful. So they're gonna be times where you're trying and trying and trying, and someone else minds the next block, and then you have to start

all over for the subsequent the or the following block. Rather, right, And it's not it's not as though it's some kind of slot machine. It's just whoever completes that code first. Yeah, So, and it's really you know, just think of like a very hard math problem where you don't have all the answers and you're trying to make lots and of guesses. Someone's gonna guess before everyone else, and sometimes that might be you if you happen to have enough computer power

to be able to guess really really quickly. So people have been putting together some some pretty hefty computer power in order to accomplish these tasks. Yeah, we're talking like, uh, the equivalent of what a supercomputer would be, although you're

not not your traditional supercomputer. Parallel processing is the key, that's the real important thing with this kind of approach, and sometimes people have said, well, you know, if I just downloaded a mining program on my little laptop and set to go in the idle time, I would never mind a coin, and just the chances are astronomically against me. So what if I joined forces and join up with

another group? And there are these little mining companies little some of them are quite large, but they're mining pools really that you can join, and some of them are pretty big. There's one that's called g h a s h dot io or g hash dot io that is particularly powerful. It has you know, it's it's been gaining

members steadily over time. And there's one major flaw with the way bitcoin works, which is that if anyone were to have fifty be contributing or more of the total computing power dedicated to mining bitcoins, that entity would then also have the ability to block or even reverse bitcoin

transactions across the network. So if you have either a computer that is that half as powerful as everything that's out there, so that you you have like the deep thought machine and it and it is just as strong as at least everything else it's out there, then you would be able to do this. Or if you had, say a mining pool that had about fifty of the getting power dedicated to trying to find these bitcoins, you

would have this power which could be very disruptive. I mean, clearly, if I had the ability to deny or reverse any kind of transaction in dollars, I'd be the biggest jerk in the world. I'd be like, yeah, you don't. You don't really want that latte, so that latte is not yours. Yeah. It's kind of like, uh, like like if you've ever had a lottery pool at your office, except if instead of just buying a whole bunch of tickets, your lottery pool bought a whole bunch of tickets and physically prevented

other people from doing the same thing. Yeah. Yeah, so it would be pretty ugly. Yeah, like everyone who tried to buy a ticket, their their purchase was rejected. Um yeah, this is kind of crazy and uh. And the thing is is that this g hash mining pool it doesn't technically have, at least as the recording of this podcast, it does not have the computing po no, but it is.

I mean, the fact that it has approached it's still pretty scary, and at certain times it has had effectively power so while you wouldn't say over the course of a day it had power, at certain times of the day, it kind of even out to that as certain computers

drop off of the network and others join on. So there have been times where it could do that, and you know, there have been instances of transactions being denied, largely to things like gambling sites, which again kind of falls into that depending upon where you are, can fall into that illegal activity activity. So it's one of those things that is among the many problems of bitcoin, it's one of the few that has to do directly with

the currency itself. Most of the problems we're going to talk about in our next episode have to do with the people who are using the currency, yeah, or the architecture that supports the use of the currency. So it's more like the banks and the exchanges that are the problem and not necessarily the currency itself. But that what

you're gonna say for our next episode. So to wrap up, guys, bitcoins, Uh, stay tuned because we're going to cover all the crazy controversies that have happened recently and explain what is up with them and why they're important. Uh, And if you guys have any suggestions for future topics of tech stuff, whether it's Bitcoin related, maybe you're maybe you're just tired of us talking about money and you say, please talk about anything other than money, let us know, Or if

you've got something specific, let's know that too. You can email us our addresses tech stuff at Discovery dot com or drop us a line on Facebook, Tumbler, or Twitter or handle at all. Three is tech stuff, hs W and Lauren and I will talk to you again really soon for more on this and thousands of other topics, because it how staff works dot com