00:01 Hey everyone, here is an advanced video.
00:03 So, if you are not an advanced Bitcoin
00:05 user, you can just skip this one. But I
00:07 heard an analogy recently that I thought
00:09 was uh appropriate and I wanted to walk
00:11 through it for how the blocks in the
00:14 Bitcoin blockchain are are linked
00:16 together and how the difficulty
00:19 adjustment, which adjusts about every
00:21 two weeks, which is actually about every
00:23 2,000 Well, it’s exactly 2016 blocks,
00:26 but that happens on average exactly 2
00:28 weeks apart. uh unless the the Bitcoin
00:31 miners are finding blocks a little bit
00:33 too fast or a little bit too slow, then
00:35 it is slightly more than two weeks or
00:36 slightly less than two weeks. But that’s
00:38 part of what I want to talk about. Okay.
00:40 So, what is the Bitcoin blockchain?
00:42 Well, the Bitcoin blockchain are blocks
00:44 of transactions that are chained
00:46 together going back to the very first
00:49 block, which is the genesis block, which
00:51 was launched on January 3rd of 2009.
00:55 That is the genesis of the Bitcoin
00:57 blockchain was on January 3 of 2009.
01:00 Okay. So, the very first block was block
01:02 one. Right now, we are more than
01:05 884,000 blocks in the blockchain, which
01:09 means about every 10 minutes for the
01:11 last more than 16 years, the Bitcoin
01:14 blockchain has been adding a new block
01:15 to the chain. So, the way the Bitcoin
01:18 blockchain is set up, effectively, it’s
01:21 like a puzzle piece. It’s like Satoshi
01:23 Nakamoto put the very first corner
01:26 puzzle piece uh you know on the board
01:29 and we got to build a puzzle in one long
01:32 straight line where every puzzle piece
01:34 is connected to only one more puzzle
01:37 piece and then the on the front of it
01:39 and then on the back of it another
01:40 puzzle piece connects and then that’s
01:42 how the chain is chained together. So
01:44 nothing ever connects to the sides of
01:45 the puzzle pieces. It’s just a very long
01:48 chain of a single single row
01:53 of Okay, so imagine that Satoshi
01:56 Nakamoto put down the very first puzzle
01:57 piece and it has only one end that you
02:00 can connect anything to. So it’s
02:02 basically the anchor puzzle piece of the
02:03 Bitcoin blockchain and you got to figure
02:06 out what the second puzzle piece is and
02:07 all the chains are going to connect
02:09 together. So, it needed to be for a
02:12 bunch of reasons I’ve explained on other
02:13 videos that Satoshi Nakamoto, the
02:15 inventor of Bitcoin, wanted new puzzle
02:19 piece to be discovered about every 10
02:21 minutes because he wanted to
02:24 make Okay, sorry, my signal is having
02:27 issues here. Um, so anyway, so it’s like
02:29 Satoshi invented the blockchain and put
02:32 down the very first puzzle piece, which
02:33 is just a flat end on three sides,
02:35 meaning you can’t connect anything on
02:37 three sides. and he put down the very
02:39 first puzzle piece. And then he had to
02:41 figure out how do I make it where
02:42 everybody only finds a new puzzle piece
02:44 every 10 minutes because he wanted there
02:46 to be long enough for all of the
02:48 computers anywhere in the world,
02:50 including on satellites, including on
02:51 the moon, including on everything, to
02:53 synchronize and agree on the absolute uh
02:56 definition of truth. And so he set the
02:59 difficulty adjustment at one. And one
03:02 meant you had to try on the T. So it
03:05 dumps a bunch more puzzle pieces on the
03:06 table so that instead of trying 4.3
03:09 billion, you’ve got to try maybe 5
03:10 billion pieces in order to find the next
03:12 block. And then you got to try as more
03:14 computers join the network, you got to
03:16 try 10 billion pieces. But and it’s not
03:20 that more than one person can’t find a
03:21 miss a fitting piece. It’s just that on
03:24 average, one piece will fit out of every
03:27 4.3 billion pieces. So that’s the way
03:30 the Bitcoin blockchain worked uh right
03:32 out of the gate. And then every two
03:33 weeks, which was every 2016 blocks,
03:36 actually every I should say every 2016
03:38 blocks, it would detect how long it took
03:42 to mine, meaning to add to find those
03:46 2016 puzzle pieces to string in a row,
03:48 and then it would adjust the difficulty.
03:50 So what started as you find a puzzle
03:52 piece every 4.3
03:54 uh billion tries you have to try 4.3
03:57 billion puzzle pieces to add a a new
03:60 piece to the chain became an
04:02 astronomically larger number because
04:05 computers are good at trying puzzle
04:06 pieces. Uh and so as you keep trying and
04:09 trying and trying more pieces more and
04:11 more people joined the Bitcoin network
04:13 trying puzzle pieces and it kept
04:15 adjusting making it harder and harder
04:17 and harder and harder to find a piece.
04:19 So in a second here I’ll talk about how
04:21 hard it is to find a piece. But what is
04:24 in a puzzle piece? So a puzzle piece
04:26 which is called a block. First of all it
04:29 has the shape which is the nu the uh the
04:31 the cryptographic hash of the previous
04:34 block. That’s how you prove that your
04:37 puzzle piece fits with the the previous
04:39 puzzle piece. So that’s why it’s called
04:40 a block chain because all of the pieces
04:43 are chained together and every piece
04:47 references it has a cryptographic hash
04:50 which is sort of the shape of the
04:52 previous puzzle piece embedded in it. If
04:54 that was not the case, you would not
04:55 have a way of proving that you had found
04:57 a a piece that fit or that somebody had
04:60 not manipulated the puzzle uh by trying
05:02 to replace earlier pieces. So every
05:04 puzzle piece which is every bitcoin
05:06 block has the shape of the previous
05:08 piece embedded in it. It also has all of
05:11 the transactions from the last 10
05:12 minutes embedded in it. And it also has
05:15 a special uh transaction which gives
05:18 whoever finds the puzzle piece extra
05:20 bitcoin. And it started at 50 bitcoin
05:23 for the first four years. Then it was 25
05:24 for the next four years. Then it was
05:26 12.5 for the next four years. Then it
05:28 was 6.25 for the next four years. And
05:30 now it is 3.125 bitcoin. So, whoever
05:33 finds that puzzle piece about every 10
05:35 minutes, they get
05:37 3.125 Bitcoin. Now, the last piece in
05:40 the puzzle is a random number. And the
05:43 reason it has to be a random number is
05:45 because otherwise every puzzle piece
05:46 would be the same. So, once you tried
05:48 one piece and it didn’t fit, there’d be
05:50 nowhere to go because you have to modify
05:52 your puzzle pieces. You know, every
05:53 puzzle piece has to be different. And
05:55 so, everybody’s trying all these puzzle
05:57 pieces, each of which has the
05:59 transactions from the previous 10
06:01 minutes. It has the shape of the
06:03 previous puzzle piece. It has the
06:04 special Coinbase transaction which is
06:06 what the company Coinbase is named
06:08 after. It has that the Coinbase
06:10 transaction and it has a random number
06:12 so that all the puzzle pieces that are
06:13 being tried are a little bit different
06:15 from each other. Again, if you didn’t
06:17 use a random number and you just use the
06:18 same number over and over, then it’d be
06:20 like trying a puzzle piece that didn’t
06:21 work and then trying it again. Well, no
06:22 matter how many times you try the same
06:24 not fitting puzzle piece, it’s not going
06:25 to suddenly start working. So you have
06:27 to put a random number in any in every
06:29 puzzle piece to make them all different
06:30 from each other. Okay. So that is what’s
06:33 in it. It’s it’s the hash of the
06:34 previous block which is sort of the
06:36 shape of the previous uh you know puzzle
06:38 piece. It’s got the transactions from
06:40 the last 10 minutes. It’s got your
06:42 special Coinbase transaction that gives
06:44 Bitcoin to you. And if you try to get
06:46 give yourself more than the protocol
06:48 allows like more than 3.125, everyone
06:50 will reject it. So there’s no point in
06:52 mining a Bitcoin block that has more
06:54 than the allowable amount of Bitcoin in
06:56 it for you because the rest of the
06:58 network is set to reject anybody that
06:60 tries to cheat that way. And then it has
07:01 a random number in it. And the random
07:03 numbers can be basically infinite. Okay,
07:06 so let’s talk about difficulty again.
07:08 This is where it gets pretty cool. Okay,
07:10 so the difficulty was set to one, which
07:12 is one out of every 4.3 billion pieces
07:15 fits. And that went on for the first
07:18 two, you know, 2016 blocks, which was
07:20 about the first two weeks. And then it
07:22 kept getting as more people were mining
07:23 Bitcoin, more computers were guessing
07:25 puzzle pieces, it got harder and harder
07:27 and harder and harder and harder. Okay,
07:29 so the current uh network difficulty is
07:34 114 trillion. What that means, it is
07:38 114 trillion times harder to find a
07:41 Bitcoin bu puzzle piece today than it
07:44 was at the beginning. 114 trillion times
07:47 harder. So, how many puzzle pieces do
07:50 you have to try on average? Or does all
07:52 the world’s computers that are trying to
07:54 mine Bitcoin, how many do they have to
07:56 try in order before somebody gets a
07:59 Bitcoin block? And the answer is about
08:02 600 billion trillion. Now, that means
08:07 every second. So, 10 minutes has 600
08:10 seconds in it. It’s 60 seconds in a
08:11 minute times 10 minutes. So that means
08:13 there’s about out of 600 billion
08:15 trillion puzzle pieces that have to be
08:17 tried before somebody finds the next
08:20 Bitcoin block. It’s called mining a
08:21 block. Mining because it was named after
08:24 gold mining. You know, you have to chip
08:25 away until you find the block. And it
08:27 takes on average right now about 600
08:30 billion trillion tries. So um if you
08:33 break that down, divide it by 60 uh 600
08:35 seconds in a minute, it means every
08:37 second there is about 1 billion trillion
08:41 puzzle pieces tried. So my Bitcoin
08:44 miners at home, I have two of them and
08:46 each of them do about one terraash. One
08:50 terraash means they are trying about a
08:52 trillion puzzle pieces per second. So
08:55 even my Bitcoin miners at home can try 1
08:59 trillion puzzle pieces per second trying
09:02 to find the right puzzle piece. Now the
09:04 problem is there are 100 billion
09:07 trillion puzzle pieces that have to be
09:10 tried before or there are 600 billion
09:13 trillion puzzle pieces that have to be
09:14 tried every 10 minutes before somebody
09:16 mines a block. Which means the
09:18 probability that I will find one of
09:20 those is less than one in a billion.
09:23 Meaning I will mine a Bitcoin block with
09:25 my Bitcoin miners at home. Each of them
09:27 has a chance of mining a block about
09:29 once every 15,000 years. And the reason
09:33 it’s 15,000 years is because that is
09:36 about how long it takes to go through uh
09:39 with with me doing a trillion tries a
09:42 second and with the Bitcoin network
09:43 requiring a billion trillion, then my
09:46 chances of finding it are based on the
09:48 fact that it takes me about a billion
09:49 tries to get a Bitcoin block. And it
09:52 takes about 115,000 years. Sorry,
09:56 15,00015 15,000 years to try a billion
09:60 tries. But that assumes that the
10:01 difficulty adjustment doesn’t go up. And
10:03 the difficulty adjustment is going up uh
10:05 constantly every 2 weeks. So it means my
10:09 Bitcoin miners at home are purely doing
10:10 it for fun because they will never mine
10:13 a Bitcoin block. It is basically
10:14 statistically impossible that they will
10:16 mine a Bitcoin block. Okay. So why is
10:19 all of this necessary? Why are we using
10:22 onetenth of 1% of the world’s
10:24 electricity to do it this way? And the
10:27 answer is because the most important
10:30 thing in Bitcoin is that there’s only
10:32 one there’s only 21 million Bitcoin and
10:36 that there is only one version of the
10:38 truth. And if you do it any other way,
10:41 you cannot guarantee that there’s only
10:43 one version of the truth. So, for
10:46 example, if you said, well, why don’t
10:49 everybody with a computer vote on what
10:50 the truth is? The problem is someone
10:52 would spin up a bot farm on AWS or, you
10:56 know, Google Cloud or something like
10:57 that, and they would make a gazillion
10:59 computers each having a vote and they
11:00 would flood the network with votes
11:02 saying that the version of truth
11:04 involved them having more Bitcoin, uh,
11:06 or something like that. Now,
11:07 cryptographically, you can’t do that uh
11:09 because you can’t claim you have Bitcoin
11:11 that you don’t have. But they could try
11:13 to do a transaction and then spread the
11:15 word that they have not actually done
11:16 the transaction. So, they buy something
11:18 and then they try to reverse it by
11:20 spreading misinformation about the
11:22 nature of the transactions on the
11:24 Bitcoin blockchain ledger. So, the only
11:26 way you can get around that or the only
11:29 way you can solve for that is to solve
11:31 what’s called the Byzantine General’s
11:32 problem, which is what Satoshi Nakamoto
11:34 solved with the Bitcoin blockchain. And
11:36 the way the Byzantine general’s problem,
11:38 if you want to Google it to find out
11:40 what it is, uh it’s closely linked with
11:43 the genesis, the creation of Bitcoin and
11:45 the difficulty adjustment, which I’ve
11:47 described uh to some degree in this
11:49 video. Uh but the Byzantine general’s
11:51 problem is a problem where you try to
11:53 figure out where there’s only one
11:55 version of truth without requiring
11:58 anyone to trust anyone else. So that is
12:01 the big unlock of Bitcoin is there’s
12:04 only one version of the truth. There’s
12:06 only one version of who owns what
12:08 Bitcoin and there’s only one version of
12:10 the fact that there’s, you know, that I
12:12 should say that an infinite number of
12:14 people can check to make sure there’s
12:15 only 21 million total Bitcoin and that
12:18 nobody has, you know, cheated the system
12:20 somehow. So in order to have only one
12:22 version of the truth, you have to have a
12:24 huge amount of computing power deciding
12:27 what that one version of the truth is.
12:29 And here’s the thing. Every time you add
12:33 one of those puzzle pieces to the
12:34 Bitcoin blockchain, you know on average
12:37 that somebody did enough work that they
12:40 would only find a puzzle piece once once
12:43 every 600 billion trillion tries. So
12:47 right now when a block gets added to the
12:48 Bitcoin blockchain, you know that the
12:50 total amount of work that went into
12:53 finding that version of truth was on
12:56 average 600 billion trillion tries of
12:59 that. So if you show up and somebody
13:01 says my version of the truth is better
13:04 than your version of the truth, it’s a
13:05 very simple question which is who’s got
13:07 the longer blockchain? Because whoever
13:10 has the longer blockchain did more work
13:13 to create it. And the way Bitcoin is set
13:15 up, the absolute version of the truth is
13:17 whatever is the longer chain. And
13:20 because you can’t fake the longest chain
13:22 because it has the most proof of work
13:25 embedded in it, it guarantees that the
13:27 Bitcoin blockchain will only ever have
13:29 one version of the truth. So again, you
13:31 can’t fake it because there’s no way to
13:33 fake I tried a gazillion, you know, 600
13:36 billion trillion puzzle pieces. Um, so
13:39 you know the the there you know I can’t
13:42 say well hey my puzzle’s longer because
13:44 people are going to say yeah but look
13:45 you said it where the difficulty
13:47 adjustment was easy and then you added
13:49 puzzle pieces and the way the Bitcoin
13:51 blockchain works is the the longest
13:53 chain which is defined as the chain with
13:55 the most proof of work in it is always
13:58 the absolute and only version of truth
14:00 that exists any world in the world and
14:02 that is replicated across more than
14:04 100,000 computers around the world that
14:07 keep a full and complete version of the
14:11 entire Bitcoin blockchain, including me.
14:13 I run uh two Bitcoin nodes at home um in
14:17 addition to two Bitcoin miners, even
14:18 though you can do there’s no reason each
14:20 one needs to have one. You could mine an
14:22 unlimited amount of Bitcoin with just
14:23 one node, but I just happen to run two
14:24 nodes. But anyway, so I have two nodes,
14:26 both of which have the entire complete
14:29 Bitcoin blockchain from the Genesis
14:31 block to the present. And the device
14:33 that runs those, which is
14:36 umbrell. It’s the first uh five or six
14:39 letters. I guess the first u m r. It’s
14:41 the first six letters of the word
14:43 umbrella.
14:44 Umbrell.com. Like umbrella except it’s
14:47 missing letters, so it’s only the first
14:48 six. umbrell.com is um is a Bitcoin node
14:52 implementation that costs less than
14:53 $500. So if you want to run your entire
14:56 own Bitcoin node with an entire copy of
14:59 the Bitcoin ledger from the very first
15:01 transaction in the past to the current
15:04 so that you are a participant in
15:07 guaranteeing that there is only one
15:08 version of truth. You can do that and it
15:10 costs $450 450. So for less than $450
15:15 you can have an entire copy of the
15:17 entire Bitcoin blockchain on your own
15:19 computer sitting at home and it’s pretty
15:21 awesome. So, um, anyway, that is how
15:24 that works. It started as you got to try
15:26 4.3 billion puzzle pieces to mine, you
15:29 know, to find a puzzle piece that fits.
15:31 Now, you have to try 600 billion
15:33 trillion puzzle pieces in order for it
15:35 to fit. And you can trust the Bitcoin
15:37 blockchain because there’s only ever one
15:40 version of truth because whichever chain
15:43 has the most proof of work in it,
15:44 meaning you can prove that they had to
15:46 try the most number of puzzle pieces to
15:48 get it is the absolute record of truth
15:50 on the Bitcoin blockchain. And
15:53 nobody before or after Satoshi Nakamoto
15:56 figured out how to create an absolute
15:60 single
16:01 unalterable record of proof without
16:04 having to rely on a central party to
16:06 just tell you what the tr the truth is.
16:08 So you can go to your bank and ask the
16:09 bank how much money you have, but they
16:11 can change the numbers. You can go to
16:13 the Federal Reserve and ask them how
16:14 much money you have and they’ll tell
16:16 you, but they can change the numbers.
16:17 They can also change how much money
16:19 there is which makes your money less
16:21 valuable. So nobody other than Satoshi
16:23 Nakamoto has ever come up with a
16:25 mechanism by which you can absolutely
16:28 guarantee there is only one record of
16:29 truth anywhere in the world and that
16:32 everyone agrees on that record of truth.
16:34 And that record of truth is absolutely
16:36 completely unalterable. And that was
16:38 done through the blockchain which is
16:40 effectively now
16:42 884,000 puzzle pieces all chained in a
16:45 row. every one of them perfectly linked
16:47 to the puzzle piece before. The chain is
16:49 unalterable because if you broke the
16:51 chain anywhere, you would have to redo
16:53 that proof of work. Meaning, you’d have
16:54 to refind all of the puzzle pieces past
16:57 the point that you broke it. And it has
16:59 created one absolute irrefutable oracle
17:01 of truth for the world, which is how
17:03 Bitcoin works. Um, but probably the most
17:05 shocking thing is that we went from it
17:07 used to you used to be able to find a
17:09 Bitcoin block one every 4.3 billion
17:11 tries to now you find a Bitcoin block
17:13 every 600 billion trillion tries. That’s
17:18 how hard it is to mine a block on the
17:19 Bitcoin blockchain, which is how
17:22 important it is to know that there’s
17:23 absolutely positively only one record of
17:25 truth. Because anybody that tries to
17:27 generate any other record of truth would
17:29 have to compete with 600 billion
17:32 trillion tries every 10 minutes, which
17:35 is what the Bitcoin network is currently
17:37 creating. So, uh, hopefully that trivia
17:39 is fun, even though it’s pretty
17:41 advanced. And if I can help anyone on
17:42 their Bitcoin journey, let me know.
17:44 Thanks
