For centuries, cash has been used for transactions. It is the most common form of currency or value. With digitization, came credit cards and new models of online transactions, but they still relied on the traditional currency, and this currency was under the control of financial institutions and governments. Then, in 2009, came along Bitcoin, the world's first digital currency based on the blockchain technology that sought to provide a radical alternative to traditional currencies. In this video, we are going to see how Bitcoins differ from cash. Bitcoin is based on the view that money is simply an accounting tool that is used to abstract value, assign ownership, and facilitate transaction between people, and cash is the most common realization of it. It is a token, a physical token, that equals ownership. As long as physical cash is difficult to replicate or forge, there is little need to keep a complete account of how much each person owns of the monetary supply or who all possessed a particular $20 bill in the past. But if we were to keep an entire history of who owned that $20 bill at different points in time, then there will be very little need to have the actual physical currency. We would know who actually possessed the bill at different points in time and who gave it to whom, and so there is no need for a physical currency to exchange hands. Banks and payment processors are already using digital records in lieu of cash for transactions inside their private systems, but these systems are centrally controlled and closed to the public for security reasons. Bitcoin completely turned this model upside down. Instead of keeping systems closed and centralized, Bitcoin wanted to bring in the public to validate every ownership and transactions. Thus adding transparency while using cryptography to maintain security and immutability of transactions. For this, it uses a universally accessible distributed ledger that runs on the blockchain technology. So why is it called a chain? That's because, in blockchain, any change or new transactions can be realized only by adding new block of information to the historical transactional records. One doesn't erase or overwrite the past records, it adds transactions in a chronological order to a growing list. So if Chris pays Dan Bitcoin, that transaction appears at the end of a chain, and it points to a transaction in which Chris was previously paid that coin by Bob, which in turn points to the time before when Bob was paid the coin by Alice, and so on. Unlike the ledgers maintained by banks, Bitcoin's blockchain is replicated on network machines around the world and is accessible to anyone with a computer and Internet connection. That is why it is called a distributed ledger. So, with this kind of a distributed ledger, a class of participants in the blockchain technology known as miners, collect and validate transaction requests. When a miner successfully validates and adds the new block of transaction records to the end of the chain, they earn bitcoins in lieu of the computational power they have spent in the process. So, how do these miners validate the transactions? We will learn about this in the next video.
