WEEKLY WHEATIES #2423
Crypto, TikTok, Google, AI, Pictures
In this newsletter:
Post: Understanding Bitcoin and Other Cryptocurrencies
In Case You Missed It: TikTok, Google, and AI
Pick of the Week: Pictures of our Past and Present
Featured Product: Digital Picture Frame
Understanding Bitcoin and Other Cryptocurrencies
Before we can get too deep into the specifics of Bitcoin and other cryptocurrencies, we must understand the major premise behind it — computing power.
The best way I can explain this is to use an example from the movie Hidden Figures. If you haven’t seen it, please go watch it! No major spoilers here. Essentially, the main character(s) are math whizzes. They can complete major math problems very quickly, but more importantly — accurately. The characters in the movie assisted with problems that needed to be solved, which aided in the landing of the space shuttles. A huge safety factor, I’m sure you can imagine.
You may have heard the statement before, but it’s been said that the first iPhone (from 2007) had more computing power than it took to land man on the moon. While that is true, it’s wayyy more powerful than just that. Again, I am taking liberties as I haven’t done the math, but that first iPhone probably had more computing power than at least half of the world’s computers combined, not just NASA’s. And when I say computing power, I mean the time it takes for the CPU to compute one problem.
Think about your normal calculator. Simply inputting 2+2 doesn’t require a lot of time to compute. However, if you tried to multiply some 100,000-digit number by another 100,000-digit number, it would take even the slightest tenth of a second longer. You may even get an error when the digits start to climb too high. Now, imagine you want to solve math problems to help them land on the moon. Referring back to the Hidden Figures movie, it took hours in some cases to solve a problem that today’s calculators could spit out in mere nanoseconds.
With today’s businesses, the problems have escalated greatly. A simple calculator couldn’t find the billionth digit in Pi. But with the proper computer program, you could. And depending on your computer, this answer may take the CPU minutes to solve, or in some cases, weeks, months, or years. A popular program today to do just that is called Python for those curious.
Another movie that hints at this is from 1999 and features Angelina Jolie — Hackers. In this movie, we hear about oil vessels traveling overseas. When the waters get rough, computers calculate where to move the oil to in the boat to help stabilize it. Pretty ingenious if you ask me. But this takes immense computing power. So, these businesses purchased huge supercomputers to solve these problems.
Well, please believe me in that many businesses (or individuals in some cases) can’t afford to buy a supercomputer, but desperately need to solve these crazy math problems. Many universities have supercomputers that can be “borrowed” for students, but businesses must rent their time on such machines. As this happens worldwide, the exchange of fiat becomes an issue. Paying a company upwards of $500,000 to rent a computer takes a minimum of 10 days in some cases and has a pretty hefty fee tied to it. Paying someone with Bitcoin (or other cryptocurrencies) can take as quick as seconds with fees under a dollar (more on this later). So how do we get there?
Let’s say ABC Corporation wants to solve some problem. They can pay me that $500,000 from above. Rather than having one supercomputer at my disposal that may take a week to solve a problem, I could use 10,000 personal computers from all over the globe. For example, this includes Johnny’s computer in San Francisco and Suzy’s computer in India. Imagine the others are dispersed all accordingly. Upon completion of the problem, rather than sending each user fiat local to their country (which would cost more as the fee may be more than their payout), I can pay them in something that’s called a Bitcoin. Yes, it is “made up,” and its value is very much indicative of supply and demand.
When this idea first started, many people did it for fun, and 1 Bitcoin was essentially worth pennies. As the need for computing grew, many people jumped on, Bitcoin gained traction, and here we are today. However, as more people allow their computers to help solve problems, the amount of Bitcoin handed out diminished, thus causing its value to grow. The algorithm that allows all computers to become part of the “blockchain” to solve problems limits the number of Bitcoins handed out.
Each “block” (or problem) is completed every 10 minutes. When Bitcoin first started in 2009, 50 Bitcoins were rewarded at the completion of each block. Every 4 years, this number is halved. As of April 20, 2024, 3.125 Bitcoins are rewarded every 10 minutes. On April 17, 2028, the reward will half again to 1.526. These Bitcoins are rewarded (or split) based on the computers currently on the blockchain (helping to solve the problem) when the block is completed. They are divvied up based on how computing power is allocated. With this, you can imagine it’s a race to have the most powerful computer possible on the block chain — this is what’s called mining.
Many users have since purchased very expensive and powerful computers to do this, and to put it bluntly, even a $2,000 custom-built PC is just about useless today. It doesn’t make fiscal sense to start mining Bitcoin as many businesses that are invested hold most of the computing power. However, many users can “combine” their computing power together in what’s called a “pool,” but after everything is split, it’s still almost useless. To sum up, the more computers on the network, the less chance and value or Bitcoin you’ll earn. However, it’s worth more as this escalates.
Let’s talk about security. As the blockchain gets more robust (more users with powerful computers) the algorithm is exponentially more difficult to solve. With this, it makes it almost impossible to hack. If someone possesses a computer powerful enough to hack the Bitcoin blockchain, they could almost essentially hack the stock market. Basically, they would be wasting their computing power as it would cost more to build the computer than what they would earn by hacking it. The security is exponentially higher than almost all other security protocols (your bank password, for example). This is another reason businesses are buying into the premise of Bitcoin.
As the value of Bitcoin rises, it can be used to purchase things. ANYTHING is worth what two parties agree on. The first recorded transaction of Bitcoin included a man in Europe paying 40 BTC for a pizza. Many of you today are thinking, “Oh wow, that’s worth a few million dollars today!” And while you’re absolutely right, at the time, you probably thought that guy was an idiot.
Since the value of Bitcoin has risen so much, many people are now selling them for fiat — in person or online. The black market has also taken a liken to Bitcoin as the transfers are untraceable (to some extent). With more and more people willing to buy a piece of a Bitcoin for US dollars or other currencies, the value again rises. To repeat, it’s worth what two parties agree on — just like your American dollar.
However, there are issues with Bitcoin, too. Since Bitcoin is not regulated like the US dollar or other fiat, it has issues. As you can see — many major players have the ability to hold the market hostage, if you will. They can buy or sell large quantities at a time (think in the millions and billions), causing the market to fluctuate accordingly. When businesses announce accepting or not accepting Bitcoin, the value can change. If all the computers went off the market tomorrow, the value could plummet — arguably, the value of other fiats would plummet, too.
Generally speaking, Bitcoin is very similar to you using credit cards, PayPal, and the like. There’s no physical exchange of money, only digital. You can always choose to use cash. In the Bitcoin world, there is no physical aspect. It’s all digital. Your Bitcoin is stored in a digital wallet that requires a login, password, and two-factor authentication. If you forget your password or no longer have access to a verification process, you’re up the creek. There are millions of coins that are believed to have been lost for this very reason. On that note — Bitcoins ARE limited. There will only be 21 million Bitcoins ever created, with the last one mined in the year 2140. Hence affecting the value as we get closer to that year as well.
What about other cryptocurrencies?
First off, why do we even need something other than Bitcoin if it’s so great? Just like in the fiat world have Visa, Discover, American Express, Money Orders, PayPal, Apple Pay, etc, there are other cryptocurrencies that have specific traits that may be better for certain aspects and transactions. As you can see from above, Bitcoin is limited, and its value is predicated on market penetration and user base. While it is much faster than bank transfers when moving money across the globe, it still is slower than what consumers would like.
Transactions can take anywhere from 5 seconds to 24 hours. It is dependent on how many transactions are being completed across the chain. In its secure and robust blockchain, it is also its own worst enemy. Transaction fees are also pretty pricey, in some cases 2–4% or a flat rate. At one time, it would have cost me $24 to move $5 on the blockchain because it was so overwhelmed. This fee does and can change, though, and I’ve also seen thousands of dollars of bitcoin sent for less than $0.10. The need for other currencies will rise as more and more people invest in Bitcoin and want to use it on a daily basis.
While Bitcoin is the first to market cryptocurrency and the current major player, it has its faults. So, what other cryptocurrencies are available? And how may I go about acquiring some? Check back next week!
ICYMI: TikTok, Google, and AI
Although I reported back in #2418 that ByteDance would rather torpedo TikTok than sell it off, it appears now that they are preparing a US copy of the app’s core algorithm. This means they would have a clone of the app that could be housed on US servers and meet the guidelines of the ban.
If you use plugins on your Google Chrome, Microsoft Edge, or any other Chromium browser, be ready for some updates this week. Google will be changing the code to the backend on how these browser extensions function, and many will no longer work properly until updated.
As Google search has started embedding more AI responses in results, users are seeing some weird outputs. Some examples include suggesting putting glue on pizza and eating rocks. There are a lot more examples from a Twitter thread here, but caution: some responses are kid-friendly.
With the Apple event happening next week, we’re starting to hear more leaks. I typically won’t report on things until announced, but Mark Gurman with Bloomberg typically hits the nail on the head. He notes Apple will not develop an in-house AI and instead will partner with OpenAI or Google’s Gemini. They already use Google for search, but it looks like OpenAI may take over for Apple’s AI bot, or some form of a mix of the two.
Not to be outdone by the big players in the space, xAI is picking up pace. They announced a series B funding round of $6 billion at a $24 billion evaluation. We’ll see what updates they have in the coming weeks.
POTW: Pictures of our Past and Present
Pictures are an interesting thing. They can show our past, help with our memories, and even show things from across the world we may have never seen otherwise. It’s an awesome opportunity to live in a world where everyone has access to an amazing camera in our pockets that we take with us everywhere. Check out the following pictures coming back from 1912 to things you can travel to see today.
Featured Product
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