How Does Crypto Work? What’s Bitcoin and the Blockchain?
If you want to be profitable with crypto….you have to know how it really works. In this video, we’ll learn a little bit about the underlying technology that makes crypto what it is. We’ll
start with the principles…then we’ll dive deeper in later videos…that’s my way of saying don’t forget to subscribe!
If we haven’t met, my name is David and I’m a crypto enthusiast. I own and operate a cryptocurrency services business called Italia State of Mine…and the purpose of this channel is to teach others what I’ve learned. Now before I bore you any more…let’s get into the video.
So let’s keep this one super practical. Let’s say you go to the grocery store and pick up some cheese. Why cheese? I don’t know…but we’re buying cheese. After the clerk rings you up, they swipe your credit or debit card. Let’s say it’s a visa card. The computer at the grocery store sends the transaction information to the visa computer servers to see if you have enough money. Assuming you can afford the cheese, the visa server says ok we’re good…and processes the transaction. Now you can go home and make fondue.
Let’s go through this same scenario…only this time, you’re paying with crypto. After the clerk rings up your cheese, you open your phone and show the clerk the QR code for your bitcoin wallet. Instead of the computer communicating with the visa servers, this time it’s going to ask the bitcoin network if you can afford the cheese. This network is what we call decentralized…meaning it isn’t owned or managed by one entity, and it isn’t located in one single location. This network is operated by people like me that do what we call crypto mining (subscribe for future videos on this topic!). Once the transaction is verified, the all clear is sent back to the clerk’s computer showing the authorization, just like with a credit card.
Now a potential drawback to crypto in this scenario is that it can take a few minutes for the transaction to be verified. This has improved over time and continues to get better…but can potentially be a pain if you’re in a hurry.
Now, behind the scenes, the network verified and confirmed the transaction and then recorded it in a public ledger called the blockchain. The blockchain is a whole video by itself, but the important thing to note is that every computer on the network has a copy of the blockchain, so it’s extremely accurate and safe.
Your identity is protected on the Bitcoin network. All of your transactions are verified using a private and public key. You use your private key as your “digital signature”…..and network users can verify this by using your public key. Both of which are encrypted. It is virtually impossible for cyber criminals to steal your identity and make fraudulent transactions…IF…you keep your private key….well…..private. Think of it like a password.
So crypto isn’t really that different after all! Ohh and by the way…if you live in the USA, did you know the dollar isn’t backed by gold anymore? It’s based solely on the guarantee of the federal government…AKA…its value comes from trust and demand…just like crypto.
That’s all for now. See you next time. and Please Subscribe Thank!