What is Cryptocurrency? – A Super SIMPLE Explanation For Beginners

we’re not guys baby Gabe Ekemezie here and
welcome to my channel what is cryptocurrency why’s everybody like up
and about about this kind of stuff if you are a beginner and you have no idea
what’s going on in this space I’m gonna help you understand what’s going on so
you could have the knowledge that you need in order to figure out what you
want to do and whether you want to be a part of this or not so in this video
what we’re going to be covering is the very basic question which is what the
heck is cryptocurrency in the first place why is cryptocurrency this global
phenomena that has people rushed into it and arose and uh half of them don’t even
understand themselves what’s going on now my goal by the end of this video is
to break it down so well that you’re gonna understand it without a doubt so
let me know in the comment section after this video how I did let’s jump right
into it if you were to google cryptocurrency right now on Google what
would you find on Google it pulls up a definition that sounds something like
this cryptocurrency is a digital currency in
which encryption techniques are used to regulate the generation of units of
currency and verify the transfer of funds operating independently of a
central bank what what does that even mean the way my friend you’re in the
right place if that sounded like gibberish let’s break this stuff down so
I wanted to properly define what could go crises let’s take it back way back to
when it was first created by a guy named Satoshi Nakamoto that’s atashi when he
first created cryptocurrency and he kind of did it by accident he actually
released a PSA basically saying hey I created a peer-to-peer electronic cash
sharing system so what does that mean well it means basically what it sounds
like peer-to-peer meaning that he created some kind of system where a
person could share money with somebody and you don’t have to go through a
middleman or some other organization or agency in order to do that so for
example if you wanted to send money to your friend or if you’re in that area
like me and you need to send money back home to your family and relatives
instead of having to wire money and go through Western Union or go through some
kind of Bank or go through these third-party apps like PayPal and all
that kind of stuff you can literally just send the money directly to them
which actually sounds pretty good but most importantly what Stassi did was he
created a decentralized caste system okay so
what does decentralized mean so essential eyes system is basically what
you’re used to in the centralized system there’s basically a entity that helps to
regulate and make sure everything is going smoothly and to plan and we’ll say
for this example banks or a centralized system let’s say for example you want to
give me 50 bucks thank you very much and a centralized system or a bank what you
would do is you would take that money from your account and send it to me and
it would be approved and the centralized system is able to keep track of what’s
going on they’re able to see that you had 50 books and then now you gave me 50
bucks so now my account is 50 bucks richer
you’re 50 bucks pour the transaction went through and everybody’s happy and
we go our separate ways a centralized system can also regulate in the sense
that say I had a hundred dollars in my account and I wanted to take that to go
buy some shoes and those shoes cost a hundred dollars so once I purchase those
shoes that cost $100 the centralized system tells me hey you now have zero
dollars in your account good job you’re broke as well but in a decentralized
system it’s decentralized so there’s no governing entity that’s there to really
regulate and make sure everything is going as planned and that’s what’s
actually created now I know it kind of sounds like why would we want to do that
that kind of sounds very chaotic but here we go I’m gonna explain just a
second see the problem that needs to be solved with this new decentralized
frontier was how do you regulate people who don’t have anybody regulating them
right and one of the major problems is how do you stop from double spending
meaning let’s take that example of me having a hundred dollars and wanting to
buy some shoes when I purchased those shoes in a centralized system the bank
for example it tells me that I now have $0 but in a decentralized position
there’s nobody there to tell me that I have zero books in fact there’s no one
there to really tell me I even spent the money so I can buy the hundred dollar
shoes and they say no I didn’t spend a bunch of dollars and I’ll just go buy
some more shoes and buy some more stuffing and really there’s no law and
order to the whole thing in the same sense how do you regulate transactions
between us like say for example I want to give you 50 bucks you’re welcome but
an essential system when I give you the 50 bucks the
transaction is approved there’s a history of activity there’s – 50 bucks
in my account 50 plus on your account everyone goes away happy but in a
decentralized system I could just give you 25 bucks and say I give you the 50
bucks and there’s nothing you can really do about it like waiting that I do to
come to my house and beat me up for the other 25 no you can’t cuz you don’t know
where I live you see where this see what the problem isn’t this like that’s why
it’s kind of like the wild wild west out here so how do you solve this problem
this this is all sounding bad like very bad so in a centralized system where the
bank is kind of like judge and jury and a decentralized system we as the peers
or the members do that job and how that works is in a decentralized system
everybody knows everything all transactions all accounts it’s common
knowledge and it’s out in the open so everybody in this decentralized system
can see transactions and see future transactions and can really keep a count
of everything going on because everything is out in the open because
there’s no one thing that keeps all that information but the problem with that is
if me and you are supposed to be the ones regulating me and you that’s
probably not good either because how do you keep somebody from
cheating the system or how do you keep a law in order because if one person
disagrees on a transaction like the earlier example when I said I was gonna
give you $50 but I only gave you 25 the whole system will collapse on itself
because there’s no entity that really step in and say no I was wrong like with
other 50 bucks or not even let the transaction go in the first place
because I don’t have to be bucks to give you so the question is how do you keep a
consensus of people or pierced honest in a system where there is no central
authority some dumber and everybody that’s what’s the Tosti discovered and
actually fixed with cryptocurrency okay awesome so what is cryptocurrency now
hold on we’re getting that we’re getting there before I can break down what
exactly cryptocurrency is we have to actually break down the terms crypto and
currency and trust me I’m doing this for you because like we’re beginners here
I’m not stalling I just need to break this down so you can over
understand this and I want you to get this so let’s start with what exactly is
currency so when you boil it down to its pure essence of what currency really is
to the very bottom of the pot all currency really is is limited entries in
a database that can’t be changed unless certain requirements or specific
conditions are met and I know that didn’t make any sense so let me explain
so the three main components when it comes to currency accounts balances in
databases and to break this down let’s talk in the centralize world so you kind
of understand what I’m saying for us before we bring it to the digital crypto
world right so if you have a bank account or even if you don’t we have a
couple of things in common we have accounts we have balances and we have a
database think about the money in your bank account right now whatever it is
all that is is a bunch of numbers right there just entry points entry points in
a database my bank is a database that holds my account and my account holds my
bound just like your bank if that one has your account as well as your balance
now when you think about the money in your account what is that really all
that is is just a bunch of numbers right and you just hope that number grows
every day all those numbers are entries in a database or a numbers in a bank
that can only be changed when certain specific conditions are met meaning your
number and your bank account is only gonna change unless you ask for
withdrawal deposit some money have some money sent to you or get charged
overdraft fees by the bank cuz you’re broken you just you don’t have that
right now trust me mine Stan we’ve all been there and that’s it when you boil
it dances very basic they’re just entry points in the database that can only be
changed when certain specific conditions are met so you can’t have $100 in your
account and then one day wake up and have $10,000 in your account if you
didn’t deposit nine thousand nine hundred dollars in there because it
doesn’t meet the specific requirements your bank account will stay the same
hopefully if you decide to do nothing with it so all money is or currency is
verified entry into a database it’s permission
enter your bank account let’s make this even more simple take my wallet for
example my wallet or my database has accounts either my credit cards debit
card or cash and these are just entries in my database and the only way my
entries are gonna change are if specific conditions are met those conditions
being I take out a dollar and give it to you you give me a dollar I find a dollar
on the floor and put it in here and now the entries in my account in my database
have changed and that’s all currency really is now when we come to the
digital world that’s all digital currency really is they’re just limited
entries in a database that can only be changed by specific conditions now
granted it’s not physical cash that’s why it’s digital currency but the same
principles apply I hope that makes sense I hope haven’t lost you yet and if I
have pause then go back a couple minutes and hopefully it makes sense now that we
understand what currency is and in a centralized system of bank is the one
that kind of regulates this stuff and make sure everything is going okay and
working the way it’s supposed to who plays Bank in the decentralized market
well we’ve already agreed that if me and you are supposed to play Bank huh yeah
that’s that’s funny right like that’s not gonna happen I’d love to have more
faith in people but not so back to this problem of how do we regulate this
decentralized system well like I mentioned before città she figured this
out by using cryptocurrency so the answer to who plays Bank
in this decentralized cryptocurrency digital world is us the peers and crypto
both crypto and the peer network both together help to regulate the
decentralized system so now that we would find what currency is let’s move a
few letters to the left and figure out what crypto really means but before I
can do that I have to explain how cryptocurrency is actually made
cryptocurrency is made from a process called mining now for all you crypto
gurus and pros that are out there that might be watching this video just heads
up I’m gonna dumb this down a lot so don’t be in my comments like oh
like I’m just trying to make a point so you can understand this conceptually
right anyways so crypto currency like Bitcoin is made within the peer-to-peer
networks from a process called mining and for this video
we’re just gonna take Bitcoin for example but there’s a bunch of other
coins out there I’ll get more into that later
every pier has a record of all completed transactions since the dawn of the
beginning of the coin to present moment so let me use a similar example that I
used earlier but in the digital world so let’s say I want to give you 50 bucks
once again you’re welcome so what I would do with this cryptocurrency is say
hey I want to give you 50 bucks so what that is is a transaction right a going
to be what happens is with that transaction and I sign with my
electronic signature and it’s sent to you the transaction is now broadcasted
throughout the network because remember within this decentralized system
everybody knows about all the transactions and all that kind of stuff
so it’s sent out through the network but it’s pending okay now when a transaction
is pending all things can happen to it people can mess with it because it’s not
complete yet it hasn’t been solidified yet in fact this transaction does not
happen until it’s absolutely confirmed when it’s confirmed it’s locked tight
it’s sealed it’s irreversible it’s a done deal
you get the 50 bucks I sent you I can’t refund or ask for it back unless you
want to send it back like it’s complete so in a way you can say crypto is all
about confirmation because once I say I want to give you 50 bucks of digital
cash and I sign in with my digital signature and it goes out to the whole
network saying hey gais wants to give you 50 bucks of this guy or gal it’s
still pending and the only way it can be confirmed is by miners miners or people
who do mining as in crypto mining or the only people who can confirm transactions
and basically they walk around with a big stamp in their hand and they stamp
and approve transaction and once a miner approves a transaction they are rewarded
with a token or a cryptocurrency which in this case bitcoins so remember only
miners can’t transactions and transactions don’t mean
diddly squat unless they’re confirmed all – do their job is to just confirm
transactions and anytime they confirm a transaction they get a Bitcoin their job
is to take a transaction step their approval on it and let the network know
now once a transaction like me and you decided to give or take money is
confirmed that transaction becomes a block link to this block as like
indestructible it’s it’s done it’s written that stone transaction is
approved it’s completely can’t be reversed and that block is now added to
the block change now if you don’t know what a blockchain is I’m just giving you
a very general definition just for the purposes of this video but all the
blockchain is is a history of transactions that people have made with
this point because remember how I said everyone in this decentralized network
has access to all the transactions well think about all these transactions all
connected to each other and they form a chain a blockchain and anytime that
transaction is confirmed by a miner that transaction becomes another block added
to the blockchain so it’s basically a history of the lifespan of the coin as
well as the activity that’s happened with that coin amongst the peers within
the network so everybody’s after the Bitcoin and miners get rewarded Bitcoin
just by approving transactions then I mean why can’t me and you become a miner
and all honesty you can in fact anybody can be your miner because see in this
decentralized world there’s no governing authority that says you there are gonna
be a modern you they’re just gonna be the people who trade and collect and
spend the Bitcoin this there’s no you know building printing out dollar bills
in us and establishing it throughout the society it’s it’s kind of like everyone
doing their thing it’s decentralized there’s nobody really governing anything
except us governing ourselves the only problem with being miners that’s really
hard and really expensive and is this it’s a lot of work in that sense
everybody can be a miner if they really wanted to in theory
so what’s atashi the creative bitcoin decided to do was he decided to set some
rules and the rule was if you want to be a miner and
for Bitcoin meaning that if you want to be a miner who approves transactions and
as a result and reward earned a certain amount of Bitcoin then you have to
invest some computer power a lot of computer power and once again dumbing
this down a lot if you want a mind for Bitcoin you’re gonna have to invest a
lot of computer power and play a game now this game is a very algorithmic
intense game that basically only computers can figure out and the whole
purpose of this game is to find something it’s think of it as like a key
this kind of reminds me of that movie ready player one if you if you watched
it you know what I’m talking about if you don’t just ignore that but sitaji
created this computer game basically saying if you can find this key which is
called a hash then you can approve transactions and if you approve a
transaction you get a Bitcoin I don’t know all the details about the game or
the algorithm or all that kind of stuff all know is that it’s very hard it’s
very mathematical the game is a crypto logic puzzle that miners compete the
salt and anytime this puzzle is solved it gets harder and harder and harder so
you need more and more computer power so you basically need these huge servers
like there are literally buildings out there of just computers hooked up to
wires and servers that are so noisy and all these computers are doing this a
menteng a massive amount of energy to play this game to find these keys to be
able to confirm transactions to add to this blockchain to be rewarded a Bitcoin
or whatever cryptocurrency that they’re mining for at the time have I lost you
yet I hope not but if I did I understand go back and
watch it again this is the only way to create valid Bitcoin the only way is by
playing this Cryptologic game that’s a lot of computer power now you can always
buy for somebody else or you can always trade bitcoins but to create them this
is the only way to do it is by playing Satoshi’s game with a lot of computer
power completing the missions basically so the tie this all up in one big finale
the heck is cryptocurrency remember my definition of currency that just entries
in a database that can only be changed if certain parameters are met like the
dollar bill in my wallet basically cryptocurrency are entries in
a decentralized peer-to-peer database where the governing banking power of
this decentralized system is very secure strong cryptography crypto currencies
are built on cryptography they’re not built by people or they’re not made by
trust they’re made by hard solid cold calculated math and that’s it really
hard algorithmic math that can only be solved by supercomputers and you have a
greater chance of having an asteroid come from space and smash on your house
blowing into a thousand pieces than having somebody find a Bitcoin address
and compromising it based off of this cryptological game that miners have to
play in order to get approved bitcoins after approving transactions whoo
that’s a mouthful Wow and it doesn’t stop there I mean the rapaho just goes
deeper and we’ll be talking about this in other videos like there different
types of crypto currencies there’s Bitcoin man aetherium and litecoin and
ripple and there’s thousands of them out there basically by now and the whole
thing about this cryptocurrency like which one is the best
which one should I invest in all that kind of stuff which we’ll be talking
about later videos the thing is these cryptocurrencies have different
properties and different components that they all run on think of it like credit
card rewards programs right like you know there’s some credit cards that
they’ll give you 2% cash back or 5% cash back at certain restaurants and other
credit cards give you travel points or or miles there’s a bunch of different
credit card companies each have different perks and you just pick one
that you kind of like the best would be the one you’re gonna take more advantage
of same thing kind of goes for all these coins they all have different properties
and they all have different benefits then they all have different stuff that
people believe in and people want to see more of our people like and they that
why they want to invest in that because they’re investing in the technology and
the benefits that that cryptocurrency is backing but we won’t get to all that
right now all right that’s basically it but here’s a final thought just to have
you think about this whole Bitcoin decentralized thing and you know what’s
the big deal if you really think about it cryptocurrency is more accurate and
more currency than the stuff that we have in our bank account because think
about it think about the money in your bank account oh that is our numbers in
an account but these numbers in your account are in a database that’s
controlled by people you don’t know never seen before that are controlled by
rules that you may not even know that could possibly change at any time you
know and don’t get me wrong I’m not saying you know bring down the banks and
all this kind of stuff like obviously they’re there for a reason but just to
help you think about these things with Bitcoin and crypto cars Ian what’s
becoming of this whole decentralized thing we are the peers are the people of
that kind of control of everything but that’s the guys thank you so much for
watching I hope this video is helpful I hope it gave you some insight on what
cryptocurrency really is breaking down some of the history and really kind of
just helping you tie it all together so hopefully you kind of understand it in a
better way and hey if you don’t understand it still can’t get it go back
we watch this video but do me a favor before you go out and do whatever else
do you about to do here now if you like this video give me a like it’ll help my
channel grow I really appreciate that and also don’t forget to leave a comment
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missed something that was important or not I don’t know but leave it down in
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send them this video and finally don’t forget to subscribe to my channel where
I’ll be bringing you more tips go back to the beginning of this video listen to
that definition again and see if it makes it look
more sense I hope it does once again guys my name is Gabe Ekemezie thank you
for watching and I’ll catch you on the next video

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