Transcript

Let's take a look at a few more bitcoin and blockchain attributes. So the symbol for bitcoin is BTC. So every crypto asset has a symbol, which is similar to an akin to the symbols that we think of with stocks and securities. Now, each coin has million units or 8 decimal places. Now, in the case of ethereum, it has 18 decimal places. So talk about divisibility, right? So ethereum is far more divisible than bitcoin is. But nonetheless, when you consider that one bitcoin represents million units and we think of a dollar is only having units, it has a high divisibility of proposition. So an example of a bitcoin amount is, and this is typical that you could see in that every bitcoin transaction has 8 decimal places, but this is an example of one that does, BTC. It's a cryptographic predictable and fixed monetary supply of 21 million. And that's just the beautiful part about it is it's pre programmed into the DNA such that you can actually graph what the monetary supply looks like and know almost to the day and not exactly. But you can essentially know when all of the bitcoin supply will be mined and that can be put on a graph. So you have reliability on what the supply is versus again, looking at central banks where they can simply print money freely. And so there's quite a contrast there. Now, not every blockchain has a fixed monetary supply. That's, again, when we talk about dozens of attributes, view as a financial professional needing to develop your acumen in this area. That's just one of many that you need to look at. So not every blockchain has a fixed monetary supply. You need to look to see where do the developers or the other influencers have control or they may be able to increase the monetary supply of future point in time. So approximately 18 million BTC were in circulation as of December So you can see that if there is a 21 million possible supply of bitcoin and you have 18 million that have already been mined in 10 years and we only have about 3 million to go. And then most of that is going to be mined within the next few years. Although there's a long tail before it's actually fully mined. So no one owns bitcoin the public blockchain. However, anyone can own bitcoin the crypto asset. So that's an important distinction there. No one owns bitcoin, that's the blockchain. Again, the terminology is bitcoin refers to the network, but it also refers to its native assetalso called bitcoin. So anyone can own bitcoin the crypto asset. So we're going to recap hashing and the characteristics of the bitcoin blockchain. Hashing and blocks, transactions are grouped together in blocks. Blocks are linked by hashes, which basically means that the entire ledger is mathematically fused together with cryptography. And it's infeasible to reverse engineer the hashes, which is why we talk about bitcoin and some other ledgers having a high degree of immune ability and the value proposition with that. So here's some additional characteristics. Peer to peer transactions. Now, not every transaction is peer to peer, but it can be peer to peer. So ironically in a decentralized model like bitcoin, most of crypto asset trading, which means buying and selling, actually happens on third party exchanges. 90 to 95% still happens with third party exchanges, which are akin to third party financial institutions essentially. But you can still, on the edges, you can still create a wallet on your own, download a wallet. You can still have another peer send you bitcoin and you can send bitcoin to another peer without relying on any third party. So it's still a peer to peer network where there are no intermediaries or trusted third parties. That's one of the keys, elements of bitcoin. And you also have to look to what degree of cryptographic auditability do you have. Again, as a form of financial professional's perspective, that's a question you constantly have to ask yourself. Public ledger transparency. So the transactions in the ownership can be independently verified using a block explorer or think about like a blockchain browser. And we're going to actually go through an exercise with that. So this sets the new standard for immutability, perhaps the best that we have so far. Bitcoin whatever that standard was, has been shifted to the left and bitcoin is now the best example of that. Eliminate some types of fraud. So when we look at credit cards and we think about the chargebacks, which is the reason that credit card fees are so high. Especially when you think about an international credit card fees and online commerce and fraud that happens online, especially international fraud that way. That is all essentially, that type of fraud is eliminate with bitcoin and we're going to explain why when we get to the push versus pull example. So there is essentially, you really don't even have the PCI compliance, it doesn't really apply, and you don't have any chargebacks. Essentially, that type of fraud really goes to zero when you use crypto assets like bitcoin. So you can, as I said before, you can send a transaction 24/7 without permission to anyone in the world. All right, now, here's another important distinction. And this is a big takeaway in this introductory section here is that there are often many misnomers and myths and articles that are written about hacks. And they often refer to blockchains being hacked. So when we talk about the immutability proposition of the ledger and how the blocks are cryptographically fused together and you can't reverse engineer a hash, that really demonstrates how the ledger itself is a very powerful thing. A powerful mechanism as far as the record of transactions. So in that case, what happens is when you hear these articles about hacks, it's actually not the blockchain being hacked. There may be a situation where there is some blockchain that hasn't gained traction, but just talking about it from a bitcoin perspective especially, the blockchain is not hacked. What's actually getting hacked is the crypto assets are getting hacked and the reason for that is because the security is now pushed to the end user. So whereas in a centralized model, you have, whether it's a central server or whatever the case is, centralized actors who are in control or a centralized database, you basically have one giant attack vector, and that's the reason that these things get hacked. So you have one hack and it's worth the hackers time and effort because it's like a honeypot essentially. So in this blockchain model and especially with public blockchains, the bitcoin, the security proposition has been pushed out to the end user. It's like you gotta push it somewhere. In this case, it was pushed to the end user. It's almost like you can eliminate it, it's gotta go somewhere. In this case, it's been pushed to the end user. So that now, you have millions of tiny end points that are attack vectors rather than one giant honeypot. So when you hear about these hacks, that actually is the crypto assets that are being hacked because either an individual or an organization essentially has poor security practices. It could actually be from another reason. They could actually have good security practices and still get hacked, but often it's as a result of poor security practices. So again, even when you hear about exchanges being hacked, again as I said, most exchanges are third party exchanges. That's not a blockchain. An exchange is a third party entity that simply facilitates trading, it has nothing to do with the blockchain. And if that's hacked, that's like any other party that's getting hacked essentially, but it's not the blockchain getting hacked. So it's really the securities got pushed to the end user. So it's the crypto assets is really the thing that's being hacked. So I just want to make that distinction as we go along that the ledger is a very strong system fused together, the crypto assets pushed to the end user. Your responsibility for managing those and securing those is where you really have a lot of risk. And that's where the financial professional comes in to be able to not only for their own understanding, but to guide clients as well.