What is Bitcoin?

  • By Bella Solanot & Ari Daniel
  • Posted 02.07.18
  • NOVA

Bitcoin and other cryoptocurrencies—the future of money or hype? Here's what they are and how they work.

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Running Time: 02:14

Transcript

What is Bitcoin?

Published February 7, 2018

Onscreen: Bitcoin and other “cryptocurrencies”—some say they’re the future of money. Others say they don’t deserve the hype. But what exactly are they?

Let’s take it one piece at a time. First, currency.

Neha Narula: At different points in time, in history, we've used different things for money, we've used stones, we've used shells. It means something because we've all decided it means something.

Onscreen: Today the government says that dollar bills have value, and we all agree. But they’re just paper. So if we can represent value with paper…

Narula: Then why not do that with ones and zeros?

Onscreen: In other words, digital currency. Now, crypto.

Narula: The crypto comes from cryptography.

Onscreen: (The use of a mathematical code to share information securely.)

Putting the two together: cryptocurrency.

Rob Baker: A cryptocurrency is a digital currency that resides entirely on a network.

Onscreen: Which means it has no physical form.

Baker: It uses algorithms to generate the currency itself as well as verify all the transactions on that network.

Onscreen: The value of cryptocurrencies is created by the people using the network, not governments or banks. Think of this exchange: Bob wants to buy a llama from Sally for $10,000 USD. Bob relies on his bank to confirm he has the funds and to transfer them to Sally’s bank, which could take a few days to verify and might cost him a fee.

But with a cryptocurrency like Bitcoin, Bob sends $10,000 in Bitcoin to Sally directly from his digital wallet. No bank, no credit card company, not even something like Venmo (which transfers money between banks).

Narula: Digital payments, digital transfers without any institutions in the middle.

Onscreen: No mandatory gatekeeper to slow things down or take a fee. Just Bob and Sally. And often an online platform called an “exchange” that handles the transfer.

These exchanges can be vulnerable to hacks and have resulted in thefts of hundreds of millions of dollars in cryptocurrency.

So why would Bob & Sally — or anyone — put their trust in a digital currency? Because it’s built on something called a blockchain.

What’s a blockchain? Watch our next video!

Credits

PRODUCTION CREDITS

Digital Production
Bella Solanot & Ari Daniel
Editorial Review
Julia Cort & David Condon
© WGBH Educational Foundation 2018

MEDIA CREDITS

Visuals & Videography
Greg & David Kestin
Noun Project | Creative Stall & Xinh Studio
Flickr | frankieleon
pexels.com
pixabay.com
shutterstock.com
wikipedia | AgnosticPreachersKid, Yellowhummer
Music
­APM
Sound Effects
­freesound.org

POSTER IMAGE

(main image: bitcoin and burning money)
shutterstock.com

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