Got a laundry list of questions that have gone unanswered when it comes to blockchain, Bitcoin, and the myriad of cryptocurrencies out there?
Questions like the following: What’s going on with the boom and bust cycles? Are cryptocurrencies really here to stay? Are there really a myriad of applications for blockchain? And how can one get started playing around with the technology when Bitcoin has such an expensive price tag, and blockchain is so challenging to develop on?
Well, we’re going to answer all these questions for you and more by kicking off this month with today’s Build episode that debunks a number of myths related to blockchain, Bitcoin, and cryptocurrencies. In next week’s episode, we’ll share some of the cool applications that are making an impact in the market and prove the staying power of these technologies.
To help us out I’ve invited Audrey Chaing, who is a crypto trader as well as a blockchain analyst and consultant, and blogs on Blockchaing.
Here’s what you’ll learn from today’s episode:
Listen to the episode on iTunes!
Audrey Chaing: So congrats. How far along are you?
Poornima Vijayashanker: Thank you. Yeah, seven and a half months.
Audrey Chaing: Great.
Poornima Vijayashanker: So just 10 more weeks to go.
Audrey Chaing: Awesome, awesome. Are you ready?
Poornima Vijayashanker: To be honest, no. Kinda spent junior’s college savings on Bitcoin.
Audrey Chaing: Well, you never know. By the end of this interview, it might be totally back up.
Poornima Vijayashanker: That is true.
Welcome to Build, brought to you by Pivotal Tracker. I’m your host, Poornima Vijayashanker. In each episode, innovators and I debunk a number of myths and misconceptions related to building products, companies, and your career in tech. You’re probably wondering what’s going on with Bitcoin and Blockchain, the boom and bust cycles, and whether cryptocurrencies are here to stay.
Well, in today’s episode we’re going to unearth some of the common myths, and in a future episode we’ll dive into some of the applications to let you know what’s really here to stay.
And to help us out, I have invited Audrey Chaing, who is a crypto trader as well as a Blockchain analyst and consultant. Thanks for joining us today, Audrey.
Audrey Chaing: Thank you for having me.
Poornima Vijayashanker: Yeah. So, let’s first talk about what’s the major differences between these three: Bitcoin, Blockchain, and cryptocurrencies?
Audrey Chaing: Sure. So there is a common misconception that Blockchain is the same thing as Bitcoin, and that’s actually not true. The reason why people get confused is because they were kind of invented at the same time. So in 2009, someone named Satoshi Nakamoto…now, this is a person or a group. We don’t know. They’re kind of anonymous. They came out with a white paper that describe the Bitcoin protocol. And so that was how Blockchain technology was born. But Blockchain is much bigger than just Bitcoin.
So Bitcoin is a cryptocurrency but Blockchain refers to this technology.
Poornima Vijayashanker: Got it. And what got you interested in this?
Audrey Chaing: So basically, it has everything to do with everything I’ve done in my career. I studied computer science at MIT but graduated in the dotcom bust, so I ended up on Wall Street for about a decade. And then after that I founded two startups. So the technology, the finance, the startup entrepreneurial part, Blockchain kind of encompasses all those things.
But specifically how I got started was back in 2013, I decided, “Hey, I might want to start my own companies.” In order to do that, it would be good to refresh my programming skills because it had been a little while. So I took a Stanford online [MOOC 00:02:44] startup engineering, taught by [Balaji Srinivasan 00:02:47], who’s pretty well known in the Blockchain space. And so our final project was to build a Kickstarter clone. And there was a leaderboard and you moved up on that by tweets and Bitcoin funding.
And so friends and family, they’re like, “Great. We want to support you. What the heck is Bitcoin?” And I’m like, “Don’t worry. Just tell me in dollars and I’ll trade it for you.” And so that’s how I got into doing that. And then I realized, “Hey, it’s really volatile. I can trade this like anything else and try to make some money off of it.”
Poornima Vijayashanker: Yeah. Awesome. And so now, you are independent and you blog on Blockchaing.
Audrey Chaing: Mm-hmm. Yeah. So it’s Blockchaing, and it’s basically Blockchain and add a G, dot org. I just…my name actually is perfect for this.
Poornima Vijayashanker: Yeah. Wonderful. So, on this show we love to debunk a number of myths and misconceptions. I am sure Bitcoin and Bitcoin and cryptocurrencies are just ripe for this. So, let’s start with the first myth, which is Bitcoin users are anonymous.
Audrey Chaing: Yeah, it’s actually pseudonymous. People have that idea because there are these wallets that are this big string of numbers and letters, but since everything is on the Blockchain you can trace at any point. You know X wallet paid Y wallet at this time, this and that. So even though you don’t know who necessarily who owns X wallet or Y wallet, you know that that happened and you can trace that. And actually, law enforcement has already started doing that.
Sometimes it’s really easy to out yourself as well, so there’s public keys and private keys. If you post your public key somewhere, then that now is associated with you. Even if you don’t think anyone can track you, then maybe they can actually. But that’s why there are now privacy coins where that’s much more of an anonymous thing.
Poornima Vijayashanker: Let’s backtrack a little bit. What’s public key?
Audrey Chaing: So, in cryptography there’s a private key, public key. They’re mathematically related, and they can be used to…For instance, I’m sending you an email and I don’t want the whole world to see it in transmission, so what I can do is if you send me your public key and the public key’s OK to share, I can take my message, encrypt it with the public key, send it over and it’ll just be garbled, and then you can take your private key and decrypt it that way.
Poornima Vijayashanker: Nice. So it’s a way to encrypt signals, messages, any sort of data?
Audrey Chaing: Mm-hmm.
Poornima Vijayashanker: OK. So let’s get back then to talking about some of these myths. Now, what’s perpetuated this myth that Bitcoin users are anonymous?
Audrey Chaing: So, I think people think it’s anonymous because there are transactions that are wallets, but there are no names or identities necessarily associated with them. So it’s a long string of numbers. However, that’s not fully true at least in the case of Bitcoin because, yes, you have these numbers that are not associated with people, but you can trace the movement of funds and kind of what happened with what.
So, if wallet X decides to send 5 Bitcoin to wallet Y, you don’t know who owns wallet X, you don’t know who owns wallet Y, but you do see that it was sent. And there are many ways that you can kind of out yourself by accident, therefore someone knows that I own wallet Y for instance.
Poornima Vijayashanker: Yeah. So, another myth: Bitcoin is beyond the law and it’s for criminals.
Audrey Chaing: Yeah. So there’s a lot of people that talk about Bitcoin along with drug deals and things like that. There’s good reason for this because there are things like Silk Road, which was a black marketplace that got shut down. But you know, having said that, the black market will always…it’s been around a long time, will persist, and no matter what sort of medium you use, it’ll still be there. I don’t think that the levels have increased due specifically to cryptocurrency. And actually, the largest source of money laundering is the U.S. dollar.
So there’s that, but also on top of that there are a lot of legitimate companies getting very interested in Blockchain technology, not just Bitcoin, that’s one thing which a lot of companies are actually invested in, but Blockchain technology as a whole, a lot of Fortune 500s, names that you would hear are investigating into Blockchain.
Poornima Vijayashanker: Yeah. And we’ll get into that in the next episode for sure. So, let’s talk about another: Bitcoin has no value. It’s not backed by anything.
Audrey Chaing: This is true. It is not backed by anything. Some people like to point to, “Well, you know, there was electricity put in, and that’s proof of work, calculations.” But you know what? A lot of things don’t have intrinsic value like the U.S. dollar. It’s just that the government says it’s worth something, and we have all collectively agreed it’s worth something.
Poornima Vijayashanker: OK. So that’s actually not a myth. That is true. It is-
Audrey Chaing: It is not backed by gold or anything like that, yeah.
Poornima Vijayashanker: Got it. All right. The next one: Bitcoin is not secure.
Audrey Chaing: So, secure could mean a lot of different things. In one sense, Bitcoin is more secure because the whole…it’s a distributed database, so a lot of people have copies, therefore you have no one point of attack. So in the Equifax half for instance, they were holding a lot of people’s data. I know I was definitely affected. You were probably affected. But there’s [nodes 00:08:15] everywhere. You can’t just take down one and get everybody. You actually have to get over 51% to trick the system.
In one case it’s kind of more secure, but one thing that I do want people to understand is that we’ve become used to things being reversible, so if someone got your credit card number, they made a bunch of transactions, you can call your company and say, “You know what? That was not me. Can you reverse it? Can you credit me,” right?
Poornima Vijayashanker: Right.
Audrey Chaing: And we’re all very used to that. That’s not how it works in cryptocurrency. It’s like cash. If someone steals it from you, it’s gone. You can’t be like, “Oh, can you just reverse that back.”
Poornima Vijayashanker: Right. OK. So it’s basically…it’s sunk cost. You’re not gonna ever get it back.
Audrey Chaing: Basically, yeah, like cash.
Poornima Vijayashanker: OK. Next myth: Bitcoin will replace credit cards and cash.
Audrey Chaing: So, I don’t think most people think that is the point of Bitcoin. So, the point of Bitcoin is that it’s a store of value, and it’s done a good job doing that. Having said that, there is potential for other cryptocurrencies to potentially be more of an everyday transactional…you go buy your coffee with it. Some include maybe Bitcoin cash or Litecoin. They’re a little faster, a little cheaper.
But one thing to keep in mind right now is that scalability is a huge problem. So if you’re talking about these Blockchain systems, right? We’re doing eight to 30 transactions per second, credit cards handle about 5,000 transactions per second, so it’s like a really big difference.
Poornima Vijayashanker: Yeah. So actually, that brings up a good point. A lot of people have said that given how intensive each transaction is, Bitcoin can be a huge energy consumer. Is that true?
Audrey Chaing: Yeah, I think that’s…there’s people that have been running mining rigs in really cold places and it heats their home.
Poornima Vijayashanker: Oh, OK.
Audrey Chaing: Yeah, which is kind of clever. So yes, there is an energy cost. People are aware of it. There are a lot of other consensus mechanisms. So proof of work is just the first one, right? If we think about email when it first came out. You can complain, “Oh, this is not efficient,” or whatever, but it was the very Version 1, so that’s Bitcoin and proof of work and these whole calculation things and using up electricity.
But there are a lot of other ways to reach consensus. Examples include proof of stake, and there’s a lot of other ones in the works now where you’re not actually calculating. And there’s actually an interesting idea of what if you did proof of work but it actually did something? Because right now you’re doing calculations but it’s not really adding to anybody. If you did almost like a Mechanical Turk in that we’re doing calculations but it’s actually helping us solve something, then you could be doing two things at the same time.
Poornima Vijayashanker: Got it. All right. And last one, which we talked about in the beginning: people think Bitcoin is the same as Blockchain.
Audrey Chaing: Mm-hmm. Yeah, and I understand why because in the media people usually talk about Bitcoin because of the price moves. People are interested in that, right? A lot of people haven’t even heard of the term Blockchain, and when they do they think it’s the same thing. But yeah, Bitcoin is one cryptocurrency. There are now over 1,500 cryptocurrencies. They are all using the Blockchain technology, but it’s very possible to work with Blockchain and not even have a currency.
Poornima Vijayashanker: OK. So what is the Blockchain technology, then?
Audrey Chaing: So that’s basically…if you’ve heard of distributed ledger—
Poornima Vijayashanker: Mm-hmm.
Audrey Chaing: That might be driving you. But at the very very base, it is a large database that everyone has a copy of.
Poornima Vijayashanker: Got it. All right. So, what other cryptocurrencies are out there?
Audrey Chaing: There are a lot, and I would recommend if you wanted to look into them, CoinMarketCap has a list of all of them basically. But some of the ones you may have heard of, like Ethereum is a really big one. Some quarked off of Bitcoin so there’s Bitcoin cash, Bitcoin gold. There’s any number of coins that exist and sell through ICOs, which I think we’ll talk about later.
Poornima Vijayashanker: Yeah, great, thank you. So, for our audience out there who…they’re gonna want to arm themselves and be able to tell fact from fiction, how can they explore Bitcoin, Blockchain and cryptocurrencies and know that they’re getting the right information?
Audrey Chaing: Yeah, it’s really hard because there is information out there but it is hard to say what’s real and what’s not, and the people really deep in the community, you look at things like Reddit and Twitter, but if you’re just starting out…This is actually why I started writing because I didn’t think there were very many good resources out there. But one that’s quite good is Blockgeeks.com. They do introductory stuff all the way down to explaining zk-SNARKs.
So there’s stuff out there. I think the best way to get learning is actually to just go buy some cryptocurrency, because once you have something on a line, you’ll want to learn how it works.
Poornima Vijayashanker: Nice. And hopefully there’s something that’s cheaper than Bitcoin that we can all purchase.
Audrey Chaing: So here’s another thing…another common misconception is that you need to buy one coin at a time. You really don’t. You could do like .001 on any of these things.
Poornima Vijayashanker: Oh. Very cool. Well thank you so much, Audrey, for helping us bust all of these myths and sharing your expertise on Bitcoin, Blockchain and cryptocurrencies. I know our audience out there is gonna get a lot of value out of this. If there’s a question or a myth that we didn’t answer today, be sure to let us know what it is in the comments below this video. We’ll be sure to answer it. And subscribe to our YouTube channel to receive the next episode, where Audrey and I will talk about a number of applications that are hopefully going to stick around that you can get involved in when it comes to Blockchain and cryptocurrencies.
Ciao for now.
This episode of Build is brought to you our main sponsor, Pivotal Tracker. We’d also like to thank our Platinum Patreon Patrons: Corgibytes, the Develop[Her] Show, Dee Gill, and Jamie Hand.
Build is produced as a partnership between Femgineer and Pivotal Tracker. San Francisco video production by StartMotionMEDIA.
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