In 2013 a man named James Howells threw out a hard drive that had 7,500 Bitcoins on it At the time, those Bitcoins would have been worth around $500,000

Fast forward 4 years and those same Bitcoins are now worth around $50 million dollars Poor guy Most of us have heard of Bitcoin But how does it work? It might be helpful to first learn how money works Interested? Just click this link

The easiest way to think of Bitcoin is to think of it as a currency – just like the US dollar You can give your dollars to anyone who will accept them as payment for goods or services And you can do the same thing with Bitcoin

Want to help fund a campaign calling for the assassination of Mr Trump? Well guess what You can donate to that campaign via Bitcoin No joke The only catch is that the storage, transfer and control of Bitcoin is much different from a traditional currency like the U

S dollar First how are Bitcoins stored? Bitcoins are stored in something called a – wait for it – wallet But this is no regular wallet It’s actually a file on your computer called wallet

dat In that file are two key-codes These key-codes act a lot like your username and password One is public and the other, private These key-codes allow you get access to your entire transaction history

But Bitcoins are not coins at all They are just a calculation based on your key-codes that figures out how many Bitcoins you have based on each and every transaction you’ve ever made It’s like when you go to wellfargocom and see a number in your bank account This number theoretically represents dollar bills

But really they are just numbers based on your transaction history Every time you use a Bitcoin, a computer is going through your transaction history to calculate your current balance And if you try to use more than what you currently have, your payment will be rejected Pretty simple, right? But who regulates this and makes sure that transactions are legit, so that you know the true balance of your Bitcoins? To do this Bitcoin uses a technology called blockchain Which is simply a huge *ss database of all transactions that have ever happened in the Bitcoin network

And as soon as you join you get access to it All of it Yours and everyone else’s The block in blockchain refers to a kind of digital ledger This is something that business’ and banks used to keep track of on paper and then on programs like excel spreadsheets

The chain in blockchain refers to a kind of digital link between all blocks – or digital ledgers of -transaction data Each time a block gets filled up with all the transaction data it can handle, it moves into the “chain” and a new block is created It’s a bit like when an accountant fills up a ledger with transaction data and has to use a new one He puts the ledger on the shelf full of other ledgers and of course chains them all up so no one can mess with them So to keep it simple a blockchain is your (and everyone else’s) transaction data

You know The data that records the fact that Jon gave Sally $20 last night for a back massage The difference between Bitcoin’s use of blockchain and the tech that banks like Wells Fargo use is that blockchain is open to anyone who wants to see it And anyone can participate in the work that goes into verifying that each block of transaction data is legit Those participants are called miners

A miner is a person that uses the processing power of a computer to do calculations to make sure that a transaction is valid And people waste their precious time doing this – not out of good will – but in the hopes that they will strike “Bitcoin” You see each time a person verifies a block of transaction data they get rewarded with Bitcoin for it Just like mining for gold or other natural resources, there is only a limited amount of Bitcoin in the universe The maximum amount that will ever be created is 21 million

I say “ever” because they are still being created Every time someone successfully verifies a transaction, Bitcoins are created and then given to the miners as a reward This is how Bitcoins are born For now at least But in the end Bitcoin is just like any other currency

It’s literally worthless After all it’s just complex mathematical equations that are basically impossible to crack What makes us believe in its value is simply our mutual trust in it And it seems as if many of us are beginning to trust Bitcoin more than the good ol’US

dollar Thanks for watching my video! Please like share and subscribe It’s not hard to do and it really helps Also I’ve created a Thought Monkey website which you should check out too On it you can sign up to get a personal email each time I post a new video