How Bitcoin Works - Computerphile

Digital currency, how does it work, what's a data miner and will Bitcoin last? We asked Professor Ross Anderson of the University of Cambridge Computer Laboratory.
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This video was filmed and edited by Sean Riley.
Computer Science at the University of Nottingham: bit.ly/nottscomputer
Computerphile is a sister project to Brady Haran's Numberphile. More at www.bradyharan.com

[@Ju135]

"A 10th of a bitcoin, which is £25 or so..." Oh how I wish I knew more when I first watched this video.....

[@Fritzafella]

Imagine being the guy who spent a few thousand Bitcoin on a pizza in 2012. That pizza better have had like, diamond encrusted toppings cuz YIKES

[@khf3940]

Honestly, most of us would've sold at a 50-100% profit thinking we're geniuses.

[@andrewmichaelschaefferXIV]

DECEMBER 2023 and we're waiting for a Blackrock ETF to get approved

[@edin123123]

Drugs are the cats for bitcoins

[@St0RM33]

+Edin Citaku black transactions more specifically

[@hellterminator]

Not really. Everyone's seen _that_ coming.

[@joseph10097]

+Edin Citaku Drugs and guns. #deepweb

[@KittyBoom360]

mostly medicinal plants actually. nearly all of the bitcoin on dark web goes to cannabis.

[@rehmsmeyer]

+Edin Citaku Aww, yesh. Dat sweet, sweet *_Bitnip_* ™.

[@Telliax]

We need Tom Scott to explain Bitcoins. Or at least Morgan Freeman. The current explanation leaves a lot of questions.

[@noahhounshel104]

+Telliax Whats your question? I think I can answer it.

[@marywilliams3034]

+Telliax Or Andreas Antonopoulos!

[@U014B]

+Mary Williams The "Ancient Aliens" guy?

[@hitarophoenix]

+Telliax +Enyay

[@Telliax]

+Noah Hounshel I guess, my main questions after watching this video are: if mining is an essential part of the system, what happens, when mining becomes unprofitable? Will people still mine? Why would they? What happens to mining, when the total bitcoin count reachs its maximum and mining is no longer rewarded? Why would people mine then? Where and how is this "public ledger" stored? Will it grow infinitely in size as the number of transactions grow? How does the system ID the user, are there some kind of personal accounts or wallets? How and where are they stored? :)

[@MasonDavies74]

"A tenth of a bitcoin, which is about 25 pounds." :'(

[@wearedoingsomething]

Wow... Look at this now ahahahah

[@samredmond9929]

thats one expensive taxi

[@huddie71]

This is interesting. However, I'm not sure if I agree with his argument that video on demand has failed to materialise as the Internet's true application, an argument made in a video... posted on KZbin... on the Internet. Not totally convinced mate!

[@Computerphile]

I have a feeling that was tongue in cheek >Sean

[@veloxsouth]

+Paul Anderson Professor humor is a special humor.

[@HappyBeezerStudios]

+Paul Anderson Actually I think it is not the type of video on demand he thought about

[@Duncan_Idaho_Potato]

+Paul Anderson That was my immediate thought as well. Then again, there are an awful lot of cat videos on KZbin so he still has a point. ;)

[@HappyBeezerStudios]

There's a reason the GIF format was/is so widespread. You can sort of have videos, while still maintaining a smapp filesize.

[@PixelPhobiac]

Glad to see computerphile /finally/ made a video about Bitcoin. Two notes: Bitcoin miners want to be sure their blocks are valid and broadly accepted. Therefore they also check every new transaction for validity before they incorporate it in the block they're hashing on. How is the halvening a problem when the date of it is already known by everyone? The halvening of 2016 is not the first one in the history of Bitcoin.

[@noahhounshel104]

+jeroeniskoning Because some people are only barely breaking even or making a profit off of this so if its halved then they don't make any profit.

[@untitledname5183]

Actually, bitcoin mining is currently being abused, people use electricity in malls/hotels/dorms/other places where they don't have to pay for electricity to mine, but since they are ALLOWED to use it there, and there was no agreed limit, it causes problems.

[@KittyBoom360]

+jeroeniskoning And the value of Bitcoins changes too

[@noahhounshel104]

Mirror's Edge So does the value of the dollar, and the euro, and the yen, and every other currency on the planet.

[@KittyBoom360]

Noah Hounshel imagine mining is more difficult but the exchange rate is higher

[@herp_derpingson]

I still dont get it.

[@insu_na]

+Herp Derpingson derp.

[@IcyyDicy]

+Herp Derpingson magic internet money that you don't need anyone's permission to use (like a bank/government)

[@JanMiles]

As much as I like this channel, it wasn't well explained. I only understood it because I learned about Bitcoin earlier. There are better explanations on KZbin, try searching for Bitcoin non technical explanation or something like that

[@spiritusinfinitus]

+Herp Derpingson Try the video "Andreas M. Antonopoulos educates Senate of Canada about Bitcoin". Andreas manages to explain Bitcoin to them pretty well.

[@epicwhat001]

+Herp Derpingson i'll try explaining it. 1. hash is a string of character(letters, numbers and symbols) think of this as your money you have. 2. block chain is a collection of transaction waiting to be processed. 3. miner is a persons(could be for all i know)that process the block chain for a reward. a client with bitcoin buys goods and services from someone they create a transaction. the transaction gets put in a pool called the block chain. the transactions gets processed by miners which gets a new hash as a reward thus creating more bitcoin. all the while the client barely notice the whole process. you might ask: if anybody can make bitcoin just by mining then the value of bitcoin goes way down until bitcoin becomes so common that it loses its value all together? the ans is the reward gets lower until the reward is almost equal to the cost. when this happens it has reached a stable state.

[@AlltimeConspiracies]

Very informative. Thanks Computerphile.

[@ZygfrydJelenieRogi]

+Alltime Conspiracies How could you understand it? Understanding this video requires understanding it's terminology, which seems to be very specific to me (unless it's actually a general IT terminology)

[@ZygfrydJelenieRogi]

***** I'm talking about this video. It is not "noob-friendly" and doesn't really explain anything.

[@Soosss]

+ZygfrydJelenieRogi yeah its more of computer terminology then anything else, he didn't really explain hashes though

[@felipevareschi7773]

nice vid brady (and the rest of the team) !

[@jhaaglund4518]

“One tenth of a bitcoin, which is about £25...” Well that dates this a touch.

[@JayCyrZak]

Couldn't help but notice that "Al Quaeda" book in the back :D

[@jeanrenetournecuillert2449]

Can you pur subtiles in this video

[@Computerphile]

Yes will work on this today >Sean

[@bibekgautam512]

+Computerphile Watched the video like thrice and everytime I get lost at 1:45 "finding the next hash with special property...." . Thought it was his accent. But turns out it wasn't dumbed down enough. Gotta find some articles.

[@jacksainthill8974]

+jean rene tournecuillert _pur subtiles_ Can you put subtitles in your comment?

[@beeble2003]

+Bibek Gautam A hash is just a number with a special property.

[@bibekgautam512]

beeble2003 I infered the same but I didn't quite get the special property he described.

[@BrotherCreamy]

If you bought bitcoin at the time this video was published, you’d be up 50x right now.

[@Stars-Mine]

I regret not mining back in 07/08 when i first hear do of it, I just dismissed it. Now its to late.

[@insu_na]

+Matthew Jackson Ah yes... I remember how naive I was :P

[@Stars-Mine]

There were talks of bitcoin earlier then that.

[@WilliamSkafast]

Or buying a few when they were cheaper.

[@RealCadde]

+Matthew Jackson Regret is one thing. I seriously considered it but decided not to take the risk. It's like considering buying 1,000 lottery tickets but deciding against it because the odds of winning the big prize is still one in a million.

[@axiezimmah]

+OurUniverse even though they are much more expensive than they used to be, they are still much cheaper than they should be if we assume bitcoin is a technology comparable to the internet. Don't be that guy who n the next few years will say: "Oh, I wish I invested back when a bitcoin was still only $400 instead of $5,000,000"

[@piprod01]

Bitcoin is a great way to double your dorms electricity bill for a few penny shavings.

[@SpacedudeGFX]

This comment aged terribly lol

[@spoonikle]

bitcoins are going to be used to incentivise cats to pose for funny pictures and act silly on camera.

[@spiritusinfinitus]

Not really sure who this video is aimed at, but it does a fairly good job of explaining the basic process. That said, most people who don't already have at least some level of understanding of what Bitcoin is probably won't see why it matters though. I think it's far more important to explain WHY Bitcoin is important rather than how it works. Compare it to buying a car. Most people have absolutely zero knowledge of how the internal combustion engine that makes it run actually works, but they absolutely need to know how to put fuel in, what type to use, and how the steering wheel, gears, and the pedals work allowing them to drive to where they want to go. And just a thought about the odd jokey comment Professor Anderson made at the end about people thinking that the internet would be used for "delivering video to the home" and how "that turned out not to be its real application". Er, hello? What website are we all using right now? KZbin probably serves more hours of video content every single day than "your favourite video rental service" probably ever did in an entire year. In fact, just the cat videos alone on KZbin probably exceed the levels of video distribution from Blockbuster the 90's. KZbin is currently the third most used website on the planet. ;)

[@kalebbruwer]

Film companies laughed at digital storage. album publishers thought CD's were to stay. Blockbuster thought Netflix would fail. Banks think Bitcoin is pointless.

[@Thamstras]

Since a lot of people are asking, and no one seems to be answering, here's what Bitcoin mining actually is: 1) Gather up a list of all transactions waiting to be added to the block chain into a big pile of data. 2) Add to that pile of data a transaction granting you 25 bitcoins 3) Add a random number to the pile. 4) Hash the pile (I'll come back to that in a sec) This produces a hexadecimal string. 5) Check to see if the hash has a certain property (for example it starts with 5 zeros) 6) If failed goto 3 else profit! A hash is a function which is a little like a summary of a pile of data. If you change one bit anywhere in the pile the resulting hash string is totally different. If you have a pile of data it's very easy to find the hash, but if you have the hash the only way to find out what the pile of data is/was is brute force. Because of this, it's very easy for all the other miners to verify that the one who found the correct random number is right, but very hard to find the random number. As was sort of alluded to in the video, this only works because everyone agrees on what the rules are.

[@MephistoRolling]

i still have no idea what a hash is and its purpose, who gains from matching these hashes? whats their purpose, why would someone reward someone for finding these things?

[@b4ux1t3-tech]

+engelteir Why would we reward someone for going out and digging up a shiny metal? Because the work was done. It's an arbitrary tautological system. Bitcoin is no different from any other currency. Nothing is inherently valuable. It is valuable because a bunch of people agree that it is valuable.

[@MephistoRolling]

Christopher Pilcher no, we use the metal for things. what do we use hashes for? the metal has a purpose beyond purely being. what do the hashes do. as in what does someone use them for and hence wants them.

[@b4ux1t3-tech]

engelteir I was referring to gold, which didn't have many practical uses back when it was used as a currency.

[@insu_na]

engelteir Nobody wants the hashes. People want the bitcoins created from finding blocks. They're used to facilitate trade, like dollar bills for example. You don't care about the material the dollar bill is made of either, you care about what the dollar bill stands for.

[@MephistoRolling]

Christopher Pilcher but people trade gold, it can be converted from gold to currency and back again. mining hashes, you cant convert the mined hashes back into unmined hashes or whatever. people get paid for a completed service, that completed item cant be converted into anything. it has to have some use in itself even if that use is just trading it for something else. so ther is a guy who has paid all these bitcoins for this pile of mined hashes.... and then what, he has all these things for??

[@kylehazachode]

What's up with those books behind the professor? Al Qaelda, Super Powers, The Deception Planners

[@insu_na]

+George Moore psst, don't tell anyone, he may just be behind all the conspiracy theories...

[@erricomalatesta2557]

+George Moore Al Qaeda was originally the name of a very large database.

[@boxfan9679]

"A tenth of a bitcoin, which is about 25 pounds" *Curb Your Enthusiasm theme*

[@Ngan.marianguyen]

The ONLY trustworthy source about bitcoin on KZbin! More videos on bitcoins pleasee😩😩!! We need it more than ever!! 😩

[@xway2]

Could you do a video on Proof of Stake? For those who don't know it's a bit like how Bitcoin works (Proof of Work) but only requires a tiny amount of computing power. I could never get my head around how that actually works and remains secure.

[@heliosjiee]

+xway2 > how that actually works and remains secure. It doesn't. The problem of PoS being as objectively secure as PoW is fundamentally irresolveable.

[@mattlm64]

+xway2 Proof-of-Stake utilises the ownership of coins as a means of generating blocks. The more coins you have, the more likely you are to generate a block. To attack the network permanently you would need over 50% of the coins which are being used to generate blocks, as the amount of blocks generated (minted) corresponds to the amount of coins owned. How does one generate blocks using coins? Well to generate a block you need to win a kind-of lottery (an analogy). The more coins you have the better the odds are at winning the lottery and therefore generating a block. The system allows anyone to re-try the lottery once every second, but no more. Because the lotteries are limited to once a second, the system is more efficient as there is no need to calculate anything more than once per second, as opposed to trillions of times a second as like with bitcoin. The details of the system are more complicated but that's the gist of it.

[@xway2]

Matthew Mitchell Right, but how does it generate the actual blocks? Like, under the hood? What confuses me is that I feel like you'd still need to generate the hash regardless of how you determine the winner, which feels like you're not gaining anything (unless you have some sort of central authority that generates it, but I'm pretty sure that's not the case). Basically I don't understand how coin ownership is translated into hashing power, without actually using you processor that much. Unless PoS doesn't have hashing in the same way, in which case I don't understand how it can be considered secure. Edit: I just re-read it, and I guess my reading comprehension isn't great right now since I completely missed the bit about being limited to once a second. That'd do it, I guess.

[@xway2]

Jorn C That actually makes sense. I guess that was sort of my though as well, but I think I just assumed that, since people were using it (and I never heard anything about it being less secure), it was about as safe. Keeping this in mind might help me understand it better.

[@DOC7ORT]

[@elysel9424]

And this man has successfully predicted CryptoKitties 🏆

[@FoneStar78]

OMG!! SATOSHI WE LOVE YOU!!!

Would like to see more detailed explanation from you guys :)

[@Commando303X]

Wow - around December of 2015, one Bitcoin is stated to equal roughly 250 pounds; and, two years later, near the end of 2017, this figure rose to ~15,000.00 pounds... Holy trajectory, Batman.

[@Nick-lx4fo]

43k dollars now

[@Commando303X]

@@Nick-lx4fo, conversion: 31,276.05 pounds.

[@mastershooter64]

@@Commando303X damn bro...that's like 14 tons...crazy heavy this bitmoney thing

[@Waremonger]

Great video. I hope we get more videos with Professor Anderson :-)

[@victornpb]

Nice

[@ProfessorPolitics]

Interesting! I wonder what's going to make stability come about first: The pre-planned decreases in reward or people quitting since the rewards are no longer profitable.

[@BuddhikaWeerasooriya]

finally, thank you! more bitcoin and blockchain videos please :)

[@chiefcookiez9829]

please tell me you bought some when you made this comment???

[@IIIDarkWorlDIII]

Hahahaha

[@animakuz]

We're coming up to that one year right now...

[@DivineOmegatron]

At 3:10 the speaker states the reward is received about every half hour or so. The block reward on the Bitcoin network is actually designed to be received (on average) every 10 minutes.

[@cbrpnk]

+Jordan Hall And, in practice the average is even lower because the network keeps getting faster everyday while the difficulty is adjusted every 2016 blocks (about every two weeks).

[@cbernier3]

+Jordan Hall That's 10 minutes for the whole world. There are three groups, so 30 minutes for each group.

[@cdbcbd4930]

1:34 so the sum of a random and last hash on ledger and this gives the pending transaction a special property. Is his like that spc following, in which case i guess 3 and need 25 btc. Would btc exist without SEPA? like i understand decentralized but in leu of a single euro pay area - would btc ever be possible suffice one.

[@hamzaelouakili2438]

This awesome professor looks like Brady's father!!! :D

[@krishnansrinivasan830]

Thank you :)

[@petertimowreef9085]

I love how even the experts agree: The internet is made of cats.

[@chuuke]

Hah ... "Cats for Bitcoin," the CryptoKiddies competitor

[@shortcutDJ]

i asked for this 3 years ago on the channel. Quest completed.

[@shortcutDJ]

***** i'm guessing i'm one of the special ones like the prime numbers. nah i'm just lucky.

[@shortcutDJ]

yeah, there are more and better sources out there

[@TheHoaxHotel]

No one really understands how Bitcoin works, they just mine more and more of the original explanation with each new video that is allowed to be made on the subject, which was predetermined by the Gibson supercomputer at the inception of the knowledge blockchain.

[@insu_na]

+The Hoax Hotel pff, gibson supercomputer... aliens is what it was!

[@insu_na]

***** Pretty sure he was joking, m8.

[@noahhounshel104]

+The Hoax Hotel Its not that hard to understand, it just takes a while to understand it fully

[@-_Nuke_-]

Actualy its pretty easy to understand how bitcoin works!

[@AnupDhakalSharma]

The Hoax Hotel to those who didn't get it, the comment op already described how it actually works with an analogy 😂😂

[@Defender2516]

This guy looks like he was about to have a heart attack when asked to explain bitcoin.

[@jutau]

SO in the future anthropologists look back into our digital history, they'll assume that cats are our living gods that we worshiped. Maybe that's why we say Ancient Egyptians also worshiped cats.

[@MisterMajister]

I had to read some of the comments to even have a clue what this "hash-mining" is and still I'm confused. Is it your computer power you're "renting" to the net and it's random if you get a reward for it (regulated by the hash-finding probability)? Maybe you should make a video about that as well, since this channel really would be the best place to learn more about it and this tells me nothing if I don't know the basics.

[@profeturulz8373]

+MisterMajister In the beginning people were mining with CPUs then GPUs but now you need specialized hardware called ASICs to mine. Basically your device will try to find the solution to the current block puzzle in order to get a reward. You will not mine alone, you affiliate to a pool and get a share of the loot each time the pool finds a block solution. So if you have a device that hashes at 1Th/s, it is incredibly hard to find a block by yourself, but in a pool of say 2000Th/s you will get a small amount of bitcoins for each block. The devices just try to find the next hash by checking solution over and over. the solution is incredibly hard to find, but insanely easy to verify. The current Bitcoin Network hashrate is 7.388.559 petaflops. The fastest supercomputer on Earth is Tiane-2 and has 33 petaflops

[@brianpso]

I swear that I thought this guy was Brady's father or something when I first saw him.

[@C12DDK]

i still have more qestions, who funds the bit coins? to what purpose is mining bit coins, what beifit does this have to anyone? how can you pay for items where are they stored

[@brandonlewis2599]

200 Channels: nothing but cats.

[@alissonagroo5061]

I want to ask a question? Does this system need updates or improvements I see many people say it's perfect?

[@jackduncan-br8sx]

Many Layer 2 applications can be built under the bitcoin system

[@bentoth9555]

"The internet is for disseminating photos of cats." This is the truest thing ever spoken on KZbin.

[@compilation_exe3821]

wish i watched this 7 years back

[@JimPlaysGames]

Could you use quantum computers to get bitcoin hashes much faster?

[@Mandragara]

+JimPlaysGames Yes.

[@pedrofayolle]

+JimPlaysGames Not yet, but potentially it could happen. Still, the bitcoin mining difficulty is self-adjusting, so unless quantum computing completely trivializes hashing, all it would mean is that the mining difficulty would go way up. Also, the hashing algorithm could potentially be replaced by one that's more quantum computer resistant.

[@PixelPhobiac]

+Kevin J. Dildonik a quantum computer could can't uncover all remaining coins tomorrow. The dynamicly adjusting difficulty would prevent that.

[@mateovega9528]

+JimPlaysGames Right now Quantum computing is much less efficient than ASICs at mining , but if ever one was invented 20 years from now that was more efficient than no bitcoins could be directly stolen but the BTC blockchain would essentially become half as secure and we would need to modify the code from SHA256 to something stronger to increase security which isn't that big of a deal.

[@IcyyDicy]

+Kevin J. Dildonik +Jeroeniskoning is right. If someone were suddenly able to find a block every 5 seconds or so, the difficulty will be adjusted in a couple of minutes. The difficulty adjusts every 2048 blocks (or about two weeks time if everything is stable, which it almost always was.)

[@Toramt]

Bitcoin miners are also paid via transaction fees, and the theory is that transaction fees will supplant the block-reward in paying miners.

[@dfortaeGameReviews]

Yeah, this is a major part of the system, which the speaker didn't even seem to know about. Otherwise he wouldn't have said a big problem is coming...

[@MikaelLevoniemi]

Also banks are developing blockchains for money transportation between them, not bitcoin - just the blockchain part of the technology. In bitcoin during every transaction it's possible to donate a small sum to the miners handling the next transaction to make sure yours is included in the very next transaction queue. Otherwise it might take much longer time to get processed.

[@insu_na]

The reward-halving will surely punch some people in the teeth initially, but it's not guaranteed to make mining unprofitable. If the adoption rises, so might exchange-rate and transaction volume. And with either of those the profitability rises (exchange-rate: less bitcoin is the same amount of dollars; transaction volume: more transactions = more transaction fees, which are also mined and included in the reward)

[@mateovega9528]

+d3rrial The reward halving will have little to no effect upon mining except increasing profits for them temporarily when the prices runs up and before the ~2 week difficulty re-adjustment. Most of this is calculated into the prediction markets however and the price will likely bubble in expectation before the halving.

[@RealCadde]

+Mateo Vega So what you are saying is people should buy bitcoin now and sell right before the bubble pops?

[@mateovega9528]

Cadde I'm bullish longterm and don't recommend people day trading in bitcoin or stocks, but yes if you were an investor buying now, and selling half of your btc between 5x-10x during a bubble would be wise to take profits. You never want to sell all as you may be kicking yourself as it continues to appreciate. Most people should just use bitcoin for its benefits and stay away from speculation though.

[@rogerwilco2]

+Mateo Vega Bitcoin will behave like a pyramid scheme. It will bubble and then crash. This is fundamentally because it doesn't allow for inflation. Any scenario with deflation can not sustain itself.

[@mateovega9528]

RogerWilco "This is fundamentally because it doesn't allow for inflation." -- Bitcoin "itself" is highly inflationary at the moment with around 9% inflation. It isn't deflationary but disinflationary until 2140 and than it will have 0 inflation. The fact that it has appreciated tremendously in value is because adoption is outpacing high inflation. You are confusing cause in effect with your insinuated concern of deflationary spirals. You cannot conflate deflation as a side effect because of dangerous and reckless monetary policies with disinflation in a controlled and planned manner. Additionally we have data to back up the Austrian school theory and disprove Keynesian fears. During bubbles of rapid appreciation(BTC deflation caused by adoption) There isn't less spending but a sharp rise in purchases of real goods and services and charity (not just tx volume)

[@Jellooze]

What value does these bitcoin hashes have other then the arbitrary agreed on dollar sum that is currently have. Like is the hash used for anything?

[@plasticman2011]

+Leone yes, it is actually used to secure the bitcoin blockchain since the work put into finding it can't be faked. That is what makes bitcoin secure.

[@sanisidrocr]

+Leone Bitcoin is like any other asset or currency ... it value is determined by supply and demand.

[@EnglishLaw]

Love the prices quoted considering current prices lol

Hal created the Bitcoin? "I'm sorry Dave I'm afraid i can't do that"

[@emperorSbraz]

i like the proximity between books, "umts security" and "the giant black book of computer viruses". XD

[@tommartin9643]

very interesting. can we assume then that eventually bitcoins will become linked to the cost of electricity. At some point in the future when you don't get a reward for mining, the parties in the transaction will have to "tip" the miner in bitcoins for doing the transaction the value of the cost of the electricity to do that transaction.

[@cbrpnk]

+Tom Martin The amount of fees might, as you said, be linked to the cost of operation, electricity is one of the variables. But the value of a bitcoin is different from the transaction fees, those are not related. The value of a currency depends on the supply and the amount of economic activities that relies on that currency.

[@tommartin9643]

+cbrpnk yes you're correct. I mistakenly thought that the value of finding a hash was a fixed amount to the block chain when in fact it is the total of all the pending transactions which is variable.

[@Jone952]

If miners are used to secure the network, would halving the reward of a new block make the system less secure? With a smaller reward, the total processing power (rather the amount of money invested in processing power since computers continually become more efficient) should decrease, making it potentially easier for a single party to gain majority control. What is stopping complete centralization in the future when the reward is minuscule? Thanks in advance. I really want to know :)

[@mateovega9528]

+Jonah Groendal The network security has been dramatically increasing year after year and now represents over 1000 times greater hashing power than over a billion of googles servers combined. Even though miners will only be rewarded 12.5 bitcoins per block next year the value of those bitcoin will be worth much more due to limited supply(econ 101 - supply and demand) so initially during the next bubbles miners will have a brief window of higher profitability assuming the market hasn't pre-priced the expected bubble in and than difficulty will re-adjust and the security will continue to increase. The increase in security is more related to moores law and more efficient ASIC's being developed than the distribution rate as difficulty is self adjusting.

[@kentbrantly8183]

Could you do an interview with Richard Stallman?

[@sanisidrocr]

Professor Ross Anderson does an ok job with a complicated topic but needs to read up a bit more upon difficulty re-adjustment/ reward and the market pricing in scarcity beforehand into the mining profits. Many miners will actually have greater profit margins for a brief window during the disinflationary bubbles due to lag in infrastructure being put in place and difficulty re-adjusting.

[@hebl47]

In this world, where everyone is so concerned about every nanogram of CO2... has anyone thought about calculating the emission footprint of Bitcoins? Seems to me it's quite a dirty currency with all the mining. (decide for yourself, if it's a pun or not :) )

[@hebl47]

sanisidrocr Using the first link, if we were to convert all the money in the world (~ 6×10^12 $) into Bitcoins (and I'm assuming here a lot and probably erring in both ways a lot, but it's at least an order of magnitude estimate, so let's say we freeze all the parameters), I've come to numbers: 6,4 Gt of CO2 and 10^7 GWh of power. Which is about 1/5 of entire world's carbon footprint in one year and 1/2 of entire world's power production in one year. I can't really compare these numbers to how much CO2 and power have been consumed for conventional currencies, but you can't deny those numbers aren't still extremely huge.

[@sanisidrocr]

Hebl von Heblowitz The flaw in your math is that you are scaling it in a linear fashion. It doesn't need to scale in a linear fashion with payment layers like the lightning network. This essentially means that trillions of txs can occur in a caching layer that automatically settle on the bitcoin blockchain for security in a secure manner . So all those tx can be taken care of with far less electricity than you propose.

[@hebl47]

sanisidrocr But then again each next bitcoin is more expensive to mine than the last one, which essentially makes it an exponential or at the very least a polynomial growth. So with all that, I just decided to go for linear scale while accepting I might be erring a lot.

[@sanisidrocr]

Hebl von Heblowitz "each next bitcoin is more expensive to mine than the last one, " -- No, you have a fundamental misunderstanding of how bitcoin works. Mining difficulty can go up or down and is self regulating. This means that the amount of electricity used will be more closely related to 80-90% of the current bitcoin price x amount of bitcoins minted + tx fees on the chain and not off the chain in caching layers. This is because the miners are incentived to mine profitably up to the limit -- the amount of txs has very little relation to electricity used. This means that if bitcoin grows to 5k usd per coin in 2016 a safe estimate would be 1800 coins a day x 5k + ~6000tx fees per day x 0.8 = 7,204,800 in electricity "wasted" per day. Be aware that as block reward goes down miners will be paid in tx fees instead and much of the tx fees will be paid in NON Proof of Work-(no electricity) caching layers and sidechains that hook into the bitcoin blockchain. Additionally, miners will have to soon start recycling all that "wasted" electrical heat and using it for something useful to increase profitability due to market demands.

[@felixdolderer942]

Can you do a video that talks in detail about how mimblewimble works?

[@asgallant1219]

When the bitcoin payout next gets halved, the miners with the highest electricity costs and/or least efficient mining machines will drop out of mining, which will reduce the global hash rate. The difficulty algorithms that determine the conditions for finding a successful hash are dependent on the global hash rate - they auto-adjust the difficulty to keep the payouts at a roughly constant interval (approximate 6 per hour, if memory serves). A drop in the hash rate will decrease the difficulty, leading to less work per unit of computing to solve the hash. Miners with cheap electricity and power-efficient mining rigs will continue to turn a profit on mining.

[@Azivegu]

only 120 subs to 500,000! Are you going to do a special episode???

[@elviswjr]

So, does anyone know what happens to this open ledger when Lightning Network is implemented? From what I understand it will speed up transactions and allow lower fees. Will it do that by grouping a bunch of transactions together off-chain and then publishing them to the blockchain in one large transaction, or by some other means? Also, how will I know if I'm making a transaction on the Lightning Network or the blockchain itself and will it be possible to choose which one I want to use?

[@SAL-fs1mr]

Lightning works by having a network of payment channels. So when any particular channel closes, all the net difference of that particular channel has to be broadcast as 1 regular sized transaction (even if that channel did thousands of transactions). Also, yes, it is possible to tell a lightning transaction verses a slower on-chain transaction.

[@KoalaAwad]

"What will be cats for bitcoin" Now thats a quote

[@christianmoss9196]

Finally

[@IceMetalPunk]

If the hash needs to be combined with the current transaction queue, and that transaction queue is constantly growing as more transactions take place, is there really any guarantee that a given hash will be found?

[@cbrpnk]

+IceMetalPunk Yes, the difficulty of the hash is not a function of the amount of transactions flowing through the network. A hash can always be found based on a property of the hashing algorithm. This property is: A hash cannot be predicted from it's output, in other words it appears to be random. That means that you have 50% chance that the first bit of the hash will be zero, 25% chance that the first 2 bits will bit zero, 12.5% that the first 3 are zero... If the difficulty requires that a valid hash must begin with 10 zero, you can calculate how many tries on average you'll have to make before finding a valid hash. It's probabilistic and have nothing to do with the volume of transactions.

[@IceMetalPunk]

cbrpnk But there *is* a relationship between the input and the output, even though it's not reversible, right? So if the input changes, wouldn't that force the output to be different as well?

[@cbrpnk]

IceMetalPunk This is true. What do you think is the consequence of that?

[@IceMetalPunk]

cbrpnk My point then is that if the input is constantly changing, then doesn't that mean the "correct" output is constantly changing as well? So let's say you're one attempt away from finding the correct hash, and then a new transaction is added. Doesn't that mean you're no longer one attempt away anymore? And couldn't this hypothetically occur infinitely many times, making the next hash never found?

[@cbrpnk]

IceMetalPunk Oh I see, no. Your chances of finding the hash does not go up the more you mine the same input transactions, it's purely probabilistic. Just like lottery, if you play the same number every time, you don't get more chance of winning. Your "input" numbers doesn't affect the probability of you winning.

[@Garbaz]

I would like to see another video about Bitcoins with more in-depth explanations. For example why you get money for calculating useless hashes Or how a transaction works.

[@Garbaz]

About the useless hashes: Every currency needs something to base its value on. For example the dollar was based on gold. They had X kilos of gold in a safe and printed dollars which represent the gold. Before the paper money they had to carry the gold around to pay, which were quite tedious. Hence instead of that, they carried pieces of paper, of which every single one stood for a certain amount of gold. Why gold? Why not bottle caps? Because there is a finite amount of gold, which gives it a constant rarity. To distribute the money the government bought gold from the citizens with the freshly printed money. The gold doesn't have any use, it's just there as a reference. Today money is no longer based on gold, but on the promise that someone will accept it as a currency. The idea with the hashes is similar: There is only a known finite amount of them, which (should) make the currency very stable, since each bitcoin represents a certain amount of hash (e.a If you get 25 BC per hash, a BC is worth 1/25 hash. If there are only 100 possible hashes, there will never be more than 250 BC). The bitcoin system basically buys these useless hashes for BC to distribute the coins somehow. The whole part about the mining is just a way to give each hash again a real value: computer performance & electrical power. How hard it is to mine a bitcoin defines how rare it is, thereby how valuable it is.

[@Garbaz]

About the useless hashes (Another analogy): Lets say I collect pokemon cards. You on the other hand don't give a shit about pokemon. A shiny pokemon card is worth a lot to me, since it is rare and I collect all of them. To you it is just as useless as any other card. But I offer you a Batcoin (A coin with a nice batman logo in it) for each shiny card, promising that other people will give you a nice sandwich or a pack of gummy bears (or something else) for this coin. You start buying a lot of card packs, even though you don't care at all about the game, hoping to get a shiny one, to exchange it for a Batcoin, to buy a sandwich (or something else). So in the end you invest into something useless for the chance to get another useless thing, to get a sandwich. The pokemon cards are the hashes (The shiny ones the hashes you get Bitcoins for); The investment into card packs is the mining and the sandwich stays the same. You can imagine the bitcoin system as some dude collecting pretty looking hashes, for which he offers you a currency, which you can use to buy stuff.

[@Garbaz]

Why all this useless hashing? Mainly because they are a reliable way to control the amount of money there is in the bitcoin economy. The currency flows slowly at a approximately constant speed and there is a limit, giving them a more predictable value. Plus the people getting the fresh coins have to invest something to get them, thereby giving them a real representative value.

[@SeleniumGlow]

The first thing I notice in the background of this video is a book labeled "Al Qaeda" and another book labeled "Secret Power" sitting next to it...

[@zamf]

"What would be cats for bitcoin?" - NFTs, although temporarily.

[@andywright8803]

So who provides the money that bitcoins are exchanged for and why?

[@ZygfrydJelenieRogi]

Questions, so many questions.

[@ZygfrydJelenieRogi]

***** But what about the person who receives it "first"? The one who's computer finds the new hashtag. Where does this bitcoin come from?

[@ZygfrydJelenieRogi]

***** Coming back to your previous comment: when government prints more money it doesn't really "come" from anywhere. However, I've heard that there is a strict limit on how much bitcoins can exist at any given moment.

[@moileung]

guy named sakamoto

[@CarsNemoFan]

It's all fun and games until your barely computer-literate friend downloads a bitcoin miner trojan on their new laptop and wonders why it's so slow.

[@sanisidrocr]

+CarsNemoFan Do those still exist? Botnets haven't bothered mining bitcoin for years since the difficulty became so high. I'm sure its possible ... but extremely unlikely, since ASICs became popular.

[@CarsNemoFan]

sanisidrocr It was from a 2013 installer of VLC. They didn't know VLC was free and got a 'cracked installer' from uloz.to. It may have been an amateur attempt; I agree that botnets are no longer in common use for mining.

[@adreiiaii510]

Clicked this video, had it in a different tab when it started playing. Swear to god for the first thirty seconds i thought they grabbed Liam Neeson to explain Bitcoin.

[@vicr123]

"The problem with Bitcoin: COMING SOON" It's been about 11 months. :)

[@Computerphile]

+Victor Tran its there on just forgot to edit the link! >Sean

[@Computerphile]

kzbin.info/www/bejne/qWO7eaywhaZskMU

[@Computerphile]

youtu.be

[@muizzsiddique]

KZbin displays it on the Up Next tab.

Good explaination, thanks

[@AV1461]

Now I understand the thumbnail :D

[@paronzoda]

Ross Anderson is AWESOME. Please make more vids with him :)

[@darcyarzate4602]

I'am confused about one subject. Yes, the amount of bitcoins received decrease every (x) amount of years, thereby making it more costly to compensate for amount of electricity. However, if more and more people use the cryptocurrency then that increases the value of the coin, meaning, miners end up making more money. For example. Last time I checked, Bitcoin was hovering around BTCUSD 4000 for each coin. Even if the amount of coins were to decrease every so often wouldn't that also mean the value of the coin skyrockets if people continue to buy the currency, thereby incentivizing miners. 12 1/2 coins = $50,000. It's a finite resource.

[@SAL-fs1mr]

Miners earn the fees from all the transactions - so even if there are no more coins to mine, they still have the incentive of earning the transaction fees.

[@darcyarzate4602]

SAL exactly! However, Bitcoin is becoming slower and slower at processing transaction simply because of a backlog and the technological capabilities of the coin. ETH would be a better investment simply because the technology behind it is more efficient and more secure than bitcoin. Right?

[@ndgoliberty]

so will the mines one day go dry or can the amount of rewards never equal exactly zero?

[@plasticman2011]

+Liquid.Song Transactions actually have very small fees, so many decades from now, the reward will have to come from fees for the transactions instead of brand new bitcoin.

[@sanisidrocr]

+Liquid.Song Shortly before 2140 minting will stop and way before than miners will have to be supported by high volume of tx fees.

[@mrjoa96]

Economics does not seem to be Professor Andersons strongest side. The reward halving is not a problem for bitcoin. Miners will merely have to adjust to the lower payout rate, which means the hash power of the network might temporarily drop until more efficient mining chips are produced. Again this is not a problem for Bitcoin as a whole, only for miners who are barely profitable. Also did not mention transaction fees, which will adjust, and increase revenue for miners when more people adopt bitcoin.

[@wlfbck20]

The Problem with BitCoin: It's a scam. There, saved you some time on the next video.

[@insu_na]

+wlfbck20 Very openminded of you.

[@PixelPhobiac]

+wlfbck20 The fact that you spell Bitcoin as BitCoin potentially already reveals a lot about your knowledge about it. But please, elaborate. Who is scamming who on the Bitcoin network?

[@insu_na]

***** He copied the "The Problem With BitCoin" thing from the video description, I wouldn't hold that against him.

[@sadfox9294]

Please do a video on Monero

[@dominikstolz9097]

How dies the mining rewards work? If they are normal transactions then who is the sender? And is ensured that these rewards cannot be faked?

[@PixelPhobiac]

+Dominik Stolz Blocks have a special transaction that don't need to refer to the "location" of existing bitcoins, called the coinbase transaction. Miners are allowed to put their own address in the destination of the coinbase transaction.

[@insu_na]

+Dominik Stolz The reward is a transaction the successful miner sends to himself in the "winning" block. This block then has to be distributed to EVERYONE else to be added to the blockchain. If this block does something invalid (like sending 5000000000 bitcoin instead of 25 to the winner), the block is not valid and will be dismissed until a valid block is found and distributed to everyone else. Because every transaction is public, so are the rewards and if someone tried to cheat, the system would just not accept it.

[@neiletnyre950]

So this guy has never heard of Netflix or youtube I gather.

[@boldizsarbajnoczi7586]

I felt like bitcoin was some kind of sorcery, so I watched this. Now I am quite sure it is sorcery.

[@thekinginyellow1744]

who could have know back then that the value of a bitcoin would appreciate faster than than the mining reward would depreciate.

[@JoshuaBarretto]

Rather than pre-set rules, the crypto-currency should alter block mining difficulty & payout based on the volume of bitcoins in circulation, the number of transactions between miners and some standardised principles of economics. Build a consensus on the current time in seconds, and the blockchain can be used as a reference point for deciding when the currency should artificially deflate or inflate based on the transactions occuring.

[@willspeakman2461]

Nah it works fine now, The program can alter the difficulty so that a block will be mined every 10 mins. If people do it faster then the difficulty increases.

[@Seegalgalguntijak]

So would it still be possible to buy bitcoin, say, for 50 bucks (Euros in my case) and have them go up in value so you'd get thousands of your $currency back for it, like it was in 2012?

[@jackd42o]

3:41 should be "reward for finding a block", not "reward for finding a bitcoin." I fail to see how block reward halving is "significant problem for bitcoin". There is a variable built into mining called 'difficulty' which is automatically adjusted based on the duration it took to find previous blocks. If it becomes no longer profitable to mine due to decreased reward, global hash rate will drop (due to market pressure) and the duration to find blocks will rise causing difficulty to go down. Also, if fewer bitcoin are being added to the money supply (every ~10 minutes), deflationary pressure is likely to push the value of bitcoin up... possibly making mining profitable again, etc..

[@RebirthFlame]

Internet = cats? The man knows his stuff. :P

[@MasreMe]

"What will be cats for bitcoins we don't know. And who ever figures that out might stand to make a few shillings." -Professor Ross Anderson

[@exedeath]

>caring about Digital money >on "NSA era" pick one

[@Renssu]

However makes cats for bitcoin?! now you got crypto kitties. that is an amazing prediction!

[@dancoman8]

Would be nice to have a video on Ethereum.

[@sebbes333]

Doesn't that mean that the bitcoin-file itself (the digital representation of 1 bitcoin) becomes larger and larger until 1 bitcoin is several GB (or more) large?

[@plasticman2011]

+Sion The bitcoin file is many GB large yes. But this file contains all bitcoins and transactions, not just 1. this is known as the blockchain. you have to manage a private key that represents the bitcoins tied to the representative bitcoin address.

[@sanisidrocr]

+Sion Bitcoins exist on a public ledger, your private keys in your wallet are what allow you to spend them, thus you don't need to store the blockchain at all to have a wallet and use bitcoin

[@AnalyticalReckoner]

"Hasn't quite found a killer application." You mean the hiring of assassins doesn't count?