Baffled by bitcoin? Confused by the concept of crypto-currencies? In 190 seconds The Guardian explains what bitcoin actually is, where the idea came from and the impact it's having around the world.
Self-study activity:
Watch the video and answer the questions below about it. The activity is suitable for (strong) intermediate 2 students.
1 What is Bitcoin and what is its main aim?
2 What problems of the current online payment system are mentioned?
3 What is the 'double spending system'?
4 What was Satoshi Nakomoto's proposal in 2008?
5 What can you do with Bitcoin in the UK?
6 What problems of Bitcoin are mentioned?
7 What do people who support the idea of Bitcoin and those who are terrified of it agree on?
You can check your answers by reading the transcript below.
Bitcoin is a digital currency which aims to do away with all the problems we have paying for things online (1). You may think that the system we have is pretty good. But everything we buy today has to go through a bank or credit card company who take a cut of the transaction and who rely on our trust that they'll do everything right. After a while those payments start to build up and added to that is security: you have to trust your card company to keep your details safe (2). Many people have tried to work out how to have a payment system without that middle man but then there's another problem: how do you prove that you've paid for something or even if you have that money at all without someone vouching for you? It's so serious it has a name: the double spending problem (3).
Then, in 2008, a solution was offered by an anonymous programmer going by the name Satoshi Nakomoto. Nakomoto left a paper on a popular cryptography blog which proposed a system of currency that solved all of these fiddly problems. His proposal was that instead of a bank or credit card company recording every transaction in one central ledger, all of the users would record all of the transactions at the same time. As a result, any attempt to fool the community would be noticed and the payment rejected (4). No one user, government, or bank can force a fee on a payment or control its flow. The result is a cheaper, quicker and easier way to spend money, even across national borders.
So this is Bitcoin and it's already starting to have an impact on people's lives. Within months of the proposal it was being used to buy and sell goods. Although not always from the most scrupulous of traders. But it's not all shady businesses. Some shopping sites take it, you can buy pints in London and even pay for your university tuition (5). As you might have heard, there are problems. While some are profiting from getting involved early, others are losing out from this volatile and young market. And people are founding companies to buy up lots of Bitcoins but as it's designed to have a limited amount ever in circulation that might cause problems down the road (6). There's so much uncertainty around Bitcoin some people genuinely think this is the future. Others are terrified it could destroy our economy. But many from both sides agree that if we could get Bitcoin to work or something like it, if we can trust a digital currency to work without the middle men, then the way the world economy functions could be transformed for the better (7).
