WEBVTT 00:00.000 --> 00:19.780 Now that you have some basic understanding of blockchain technology, it's time to take 00:19.780 --> 00:23.060 a look at its first implementation. 00:23.060 --> 00:28.520 As cryptocurrencies, a cryptocurrency is a type of digital currency that is maintained 00:28.520 --> 00:31.400 by a decentralized blockchain. 00:31.400 --> 00:35.560 Currencies are a part of the monetary system, and money is a system of transferring value 00:35.560 --> 00:39.480 between parties, especially for the purpose of trade. 00:39.480 --> 00:41.720 But what exactly is value? 00:41.720 --> 00:43.400 Value is a shared belief. 00:43.400 --> 00:46.480 If you think about it, there's no such thing as inherent value. 00:46.480 --> 00:52.600 Sure, something like a natural resource arguably has a value that's usually tied to its utility. 00:52.600 --> 00:58.500 How useful it is, but regardless, that the concept of value is an entirely human creation. 00:58.500 --> 01:00.980 People want things for all sorts of reasons. 01:00.980 --> 01:03.460 Money is simply a tool to exchange value. 01:03.460 --> 01:07.940 It is accepted as payment, because everyone shares the belief that it has value. 01:07.940 --> 01:12.820 In this sense, what we actually use as a unit of account for money is less relevant. 01:12.820 --> 01:16.180 Basically, any object could be used as money. 01:16.180 --> 01:20.780 And some cultures, even rocks and seashells, were used as money in the past. 01:20.780 --> 01:25.500 Today, inmates may use cigarettes or coffee as money in prisons. 01:25.500 --> 01:28.820 Money has value because our society believes it has value. 01:28.820 --> 01:32.180 Of course, some objects are more suitable for this than others. 01:32.180 --> 01:36.300 For example, gold was used as money before the creation of paper money. 01:36.300 --> 01:40.900 It worked well because it's scarce and durable, but it's also heavy, and it can be difficult 01:40.900 --> 01:44.820 to transport and divide, so it becomes inconvenient for everyday use. 01:44.820 --> 01:49.860 Then, coins and paper money were created to represent a fixed amount of a physical commodity, 01:49.860 --> 01:53.020 like gold, and a system called the gold standard. 01:53.060 --> 01:57.900 The gold standard solved the problem of portability and divisibility for bricks of gold. 01:57.900 --> 02:03.260 Today, coins and paper notes only account for a small fraction of the monetary system. 02:03.260 --> 02:06.140 Most of the money in the world is digital money. 02:06.140 --> 02:09.700 Recorded in the ledgers of banks and other financial institutions. 02:09.700 --> 02:15.100 No economy uses the gold standard anymore, although most countries do keep some gold reserves. 02:15.100 --> 02:17.180 That's where fiat money comes in. 02:17.180 --> 02:22.020 Fiat money is legal tender that isn't backed by a physical commodity, and derives its value 02:22.020 --> 02:27.220 from the trustworthiness of its issuer, usually a state through its central bank. 02:27.220 --> 02:31.660 While the value of fiat money is influenced by supply and demand, the state backing it 02:31.660 --> 02:34.380 has a much higher impact on its value. 02:34.380 --> 02:39.180 If the backing state becomes unstable, the if-so money may also lose its value. 02:39.180 --> 02:44.140 It's simply a piece of paper that has value because the state says it has value. 02:44.140 --> 02:47.020 That's what the word fiat means by decree. 02:47.020 --> 02:51.540 So, the strength of the issuing state is key when it comes to fiat money. 02:51.540 --> 02:55.980 It's more, since it isn't backed by anything tangible, the state can theoretically print 02:55.980 --> 02:57.820 as much as it wants. 02:57.820 --> 02:59.580 Printing money causes inflation. 02:59.580 --> 03:05.580 Finally, let's turn to cryptocurrencies, which work very differently compared to fiat currency. 03:05.580 --> 03:10.540 They are digital currencies in which transactions are verified and records maintained by blockchain 03:10.540 --> 03:13.500 technology using cryptography. 03:13.500 --> 03:17.860 Rather than by centralized authorities, this is what sets cryptocurrencies apart from 03:17.860 --> 03:20.500 the digital currencies in PayPal. 03:20.500 --> 03:24.980 And other digital banking apps that are operated by centralized organizations. 03:24.980 --> 03:30.340 A good cryptocurrency will be decentralized, meaning it has no owner, and no one person 03:30.340 --> 03:32.860 or entity has control over it. 03:32.860 --> 03:37.540 While governments can unilaterally change the underlying rules of fiat money, cryptocurrency 03:37.540 --> 03:42.260 should theoretically maintain an even playing field and consistent sets of rules. 03:42.260 --> 03:46.860 The unique properties of cryptocurrencies also make tracking users tied to their identities 03:46.860 --> 03:48.940 considerably more difficult. 03:48.940 --> 03:50.540 They'll not be impossible. 03:50.540 --> 03:55.820 Then, through digital fiat money, individual units of a cryptocurrency can't be duplicated 03:55.820 --> 04:01.180 or forged, and as cryptocurrencies exist entirely in the digital realm, highly suitable for 04:01.180 --> 04:03.460 worldwide transactions. 04:03.460 --> 04:07.980 Another core property of a good cryptocurrency is that the transactions happening on the 04:07.980 --> 04:10.900 blockchain are censorship resistant and immutable.