What is Bitcoin? Explaining highly volatile cryptocurrencies


– Well we’ve heard a lot
about Bitcoin lately. It’s the digital currency
that’s starting to soar on the market, actually been
soaring for a while now. Joining us now this morning
is online security expert David Papp to discuss what exactly are cryptocurrencies, such as Bitcoins? Good morning, David.
– Morning, Mike. – Happy New Year.
– Yes, Happy New Year. – Yeah you’re gonna answer a question that many people have been asking. Even a lot of people who have invested in Bitcoin don’t really
understand what it is. – That’s right. – So it’s a cryptocurrency, that’s the general term for this. What is a cryptocurrency? – A cryptocurrency is something that’s mathematically backed, like it’s calculated using hashing algorithms. If you want, the best analogy I have is thinking like an e-Transfer, right? Nowadays, what is money, right? You don’t actually have to physically take your loonie and say,
“Here Mike, here’s the loonie.” You can actually say, “Oh can
you e-Transfer that to me?” Same idea with Bitcoins. We have these digital wallets, I can send money from
this one to the other. Now here’s the interesting, – Except we know where the money is. We know what the base of the money is. We don’t know where that Bitcoin comes from or where it goes. – Well (laughs) on the, you’re,
true, most people don’t. On that note, the idea behind Bitcoins is that, don’t think of
it as like one Bitcoin. Like one Bitcoin hit 25,000
dollars Canadian last year. But you can do fractions,
like .0001 of a Bitcoin I can send you, Mike, so $5 worth. You could buy a coffee with it. Now, you hear about these people that mine Bitcoins, so
they’re creating Bitcoins using their computers that
are doing calculations. The idea behind it is that Bitcoin is like a public ledger system. So it’s decentralized, there’s no government or bank controlling Bitcoins. It’s just out there in the world. – [Mike] Who does the mining? – People with their computers. I’ve been doing it for like,
for over four years now. And so what you do with mining is you use your computer,
well it used to be you could use your regular computer, to basically help contribute
to the calculations of what we call the public ledger system. So when you send money, all the computers in the world need to
agree and it writes it in stone in the public ledger system, we call that the blockchain,
and it’s permanently there that people can see money
went from here A to B. You could also go and buy some. Like there’s Bitcoin ATMs in the city. There’s at least a half a dozen of them. But what’s interesting
is now there’s other cryptocurrencies that have come out. So I like to call Bitcoin
kinda like the gold standard. Everything gets measured against gold. Same thing with Bitcoin. Everything gets measured against Bitcoin but we’ve got Bitcoin
Cash, Litecoin, Ripple, Ethereum, a whole bunch of other like there’s about 1400
different cryptocurrencies. – So I’m very confused. So, and yet it’s been
explained to me 20 times. – Yeah. – So other than those who mine Bitcoin themselves, where do you buy Bitcoin? Can you buy them from brokers, could you buy them online,
how does that work? – Yeah, just like New York Stock Exchange, there’s online cryptocurrency exchanges and they value the
worth of those different cryptocurrencies
typically against Bitcoin. And you can buy them
and you can sell them. It’s very much like a stock. I would not do anything
with life savings in this. This is very volatile. It jumps up and down all the time. It could tank the next day. They claim that the markets can be manipulated, you know, all of that. But if you wanna have some fun, you know, I mean it’s out there. You can use computers to
mine things like Ethereum. And Ethereum, you can use
high end graphics cards. And the reason for that is
they’re very good at math. They could do lots of calculations. – [Mike] So if you follow this, and I know it’s very
easy to follow online, and like you say, it goes
up and down like crazy. – [David] It does. – And let’s say Bitcoin or Ethereum, whatever cryptocurrency you’ve invested in reaches a point where you
say, okay I’ve had my fun, I have huge growth on this,
are they really easy to sell? – There’s a lot of demand right now, so you can sell them online. The problem is, depending, just like a brokerage account,
there’s limits on how much you can sell at once, how
much you can buy at once. So if you think that you’re gonna need to sell a certain amount,
you gotta make sure that you verify, you know set things up. – Do you see this at one point, I know it’s hard to predict at this point, this replacing the currency
that we’re familiar with? – I don’t think it’ll
replace it, but I think it’ll be very generally
accepted anywhere you travel. It’s gonna be a portable currency that you can just have with
you anywhere in the world. – Alright, thanks David.
– Yeah. – I think I’m a little bit
closer to understanding. – (laughs) A little bit. – But not really. You can follow David on Twitter or check on his blog, it’s @DavidPapp. Stay with us, we’re back after the break.

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