WEBVTT 00:00.000 --> 00:19.320 Transparency is a part of the monetary system and money is a system of transferring value 00:19.320 --> 00:23.520 between parties, especially for the purpose of trade. 00:23.520 --> 00:26.120 But what exactly is value? 00:26.120 --> 00:27.920 Value is a shared belief. 00:27.920 --> 00:31.600 If you think about it, there's no such thing as inherent value. 00:31.600 --> 00:37.720 Sure, something like a natural resource arguably has a value that's usually tied to its utility, 00:37.720 --> 00:39.520 how useful it is. 00:39.520 --> 00:44.360 But regardless, the concept of value is an entirely human creation. 00:44.360 --> 00:47.160 People want things for all sorts of reasons. 00:47.160 --> 00:50.000 Money is simply a tool to exchange value. 00:50.000 --> 00:54.920 It is accepted as payment because everyone shares the belief that it has value. 00:54.920 --> 01:00.640 In this sense, what we actually use as a unit of account for money is less relevant. 01:00.640 --> 01:06.640 Basically, any object could be used as money, and in some cultures, even rocks and seashells 01:06.640 --> 01:08.920 were used as money in the past. 01:08.920 --> 01:14.280 Today, inmates may use cigarettes or coffee as money in prisons. 01:14.280 --> 01:17.960 Money has value because our society believes it has value. 01:17.960 --> 01:21.720 Of course, some objects are more suitable for this than others. 01:21.720 --> 01:26.120 For example, gold was used as money before the creation of paper money. 01:26.120 --> 01:31.040 It worked well because it's scarce and durable, but it's also heavy, and it can be difficult 01:31.040 --> 01:37.000 to transport and divide, so it becomes inconvenient for everyday use. 01:37.000 --> 01:41.880 Then coins and paper money were created to represent a fixed amount of a physical commodity 01:41.880 --> 01:45.400 like gold in a system called the gold standard. 01:45.400 --> 01:50.720 The gold standard solved the problem of portability and divisibility for bricks of gold. 01:50.720 --> 01:56.760 Today, coins and paper notes only account for a small fraction of the monetary system. 01:56.760 --> 02:01.320 Most of the money in the world is digital money, recorded in the ledgers of banks and other 02:01.320 --> 02:03.600 financial institutions. 02:03.600 --> 02:09.760 No economy uses the gold standard anymore, although most countries do keep some gold reserves. 02:09.760 --> 02:12.160 That's where fiat money comes in. 02:12.160 --> 02:17.480 Fiat money is legal tender that isn't backed by a physical commodity and derives its value 02:17.480 --> 02:22.800 from the trustworthiness of its issuer, usually a state through its central bank. 02:22.800 --> 02:27.840 While the value of fiat money is influenced by supply and demand, the state backing it 02:27.840 --> 02:30.680 has a much higher impact on its value. 02:30.680 --> 02:35.400 If the backing state becomes unstable, the money may also lose its value. 02:35.400 --> 02:39.880 It's simply a piece of paper that has value because the state says it has value. 02:39.880 --> 02:43.240 That's what the word fiat means, by decree. 02:43.240 --> 02:47.520 So the strength of the issuing state is key when it comes to fiat money. 02:47.520 --> 02:52.360 What's more, since it isn't backed by anything tangible, the state can theoretically print 02:52.360 --> 02:54.640 as much as it wants. 02:54.640 --> 02:56.760 Printing money causes inflation. 02:56.760 --> 03:02.400 Finally, let's turn to digital currencies built on blockchain, which work very differently 03:02.400 --> 03:04.880 compared to fiat currency. 03:04.880 --> 03:10.240 These are digital currencies in which transactions are verified and records maintained by blockchain 03:10.240 --> 03:15.160 technology using cryptography rather than by centralized authorities. 03:15.160 --> 03:20.840 A good digital currency will be decentralized, meaning it has no owner and no one person 03:20.840 --> 03:24.320 or entity has control over it. 03:24.320 --> 03:29.520 While governments can unilaterally change the underlying rules of fiat money, decentralized 03:29.520 --> 03:34.720 digital currencies should theoretically maintain an even playing field and consistent sets 03:34.720 --> 03:36.240 of rules. 03:36.240 --> 03:41.720 The unique properties of these digital currencies also make tracking users tie to their identities 03:41.720 --> 03:46.120 considerably more difficult, though not impossible. 03:46.120 --> 03:50.960 Individual units of such a currency can't be duplicated or forged, and as they exist 03:50.960 --> 03:57.160 entirely in the digital realm, they are highly suitable for worldwide transactions. 03:57.160 --> 04:02.680 Another core property of a good digital currency is that the transactions happening on the blockchain 04:02.680 --> 04:04.920 are censorship resistant and immutable.