1 00:00:00,640 --> 00:00:03,420 Welcome to Part 12 of this module. 2 00:00:03,430 --> 00:00:09,490 This video is going to be a basic explanation of cryptocurrency what it is. 3 00:00:09,490 --> 00:00:17,080 A few of the different types and how it is commonly used before we begin I have to admit that when creating 4 00:00:17,080 --> 00:00:25,060 this class I painted myself into a difficult corner where this subject is concerned our focus is on 5 00:00:25,090 --> 00:00:29,610 ethical penetration testing not finance and investment. 6 00:00:29,620 --> 00:00:37,510 This lecture is not going to be a tutorial on how to invest in Bitcoins or how to measure market trends 7 00:00:37,570 --> 00:00:39,300 or anything of the sort. 8 00:00:39,310 --> 00:00:43,090 Such things are outside of the scope of what we are trying to learn here. 9 00:00:43,180 --> 00:00:50,260 However I have mentioned cryptocurrency several times as it is a form of cryptographic payment that 10 00:00:50,260 --> 00:00:56,740 is frequently used within the overall hacking sphere both ethical and otherwise. 11 00:00:56,740 --> 00:01:02,370 With that in mind we need to at least cover the basics of what it is and how it works. 12 00:01:02,380 --> 00:01:08,370 So this is going to be an explanation of these concepts like any other investment. 13 00:01:08,410 --> 00:01:12,130 Buying any form of cryptocurrency entails risk. 14 00:01:12,130 --> 00:01:20,260 The laws surrounding such currency also vary from country to country and seem to be ever changing at 15 00:01:20,260 --> 00:01:22,120 the risk of sounding like a broken record. 16 00:01:22,120 --> 00:01:28,570 Please always do your due diligence and make sure such things are legal in your area before you purchase 17 00:01:28,570 --> 00:01:29,980 them or make use of them. 18 00:01:29,980 --> 00:01:36,760 Also be aware that while Bitcoin is currently legal in the United States there have been changes to 19 00:01:36,760 --> 00:01:43,810 the tax laws concerning them and you will need to familiarize yourself with your tax responsibilities. 20 00:01:43,840 --> 00:01:45,930 If you buy and sell them all right. 21 00:01:45,940 --> 00:01:50,350 So in the simplest possible terms what is cryptocurrency. 22 00:01:50,380 --> 00:01:57,700 There are a lot of different currencies that are currently available and by a lot I mean a lot with 23 00:01:57,700 --> 00:01:59,000 a capital L.. 24 00:01:59,080 --> 00:02:05,830 To keep things simple as we start off I'm going to be focusing on the first and arguably the most popular 25 00:02:06,160 --> 00:02:08,110 which is called bitcoin. 26 00:02:08,110 --> 00:02:10,100 We'll touch on a few of the others after that. 27 00:02:10,150 --> 00:02:11,160 Bitcoin. 28 00:02:11,230 --> 00:02:16,090 Put simply isn't a stock it isn't a bond. 29 00:02:16,090 --> 00:02:17,960 It isn't a physical currency. 30 00:02:17,980 --> 00:02:25,480 It isn't a form of credit and it isn't backed by any government or real world resource such as gold 31 00:02:25,480 --> 00:02:26,750 or oil. 32 00:02:26,800 --> 00:02:34,420 If you bought a bitcoin in early 2016 for let's say a thousand dollars you could have sold it for over 33 00:02:34,500 --> 00:02:41,110 17000 in 2017 or as you can see just a little over 5000. 34 00:02:41,110 --> 00:02:48,520 Now at the moment this video is being made and tomorrow it might be over 10000 American dollars. 35 00:02:48,520 --> 00:02:51,830 Or it might be worth far less than it is now. 36 00:02:51,850 --> 00:03:00,280 The value of these coins and my total emphasis is intended to suggest quotation marks fluctuates wildly 37 00:03:00,280 --> 00:03:06,370 from day to day making it one of the riskiest and potentially most profitable investments you could 38 00:03:06,370 --> 00:03:07,960 ever make right. 39 00:03:07,960 --> 00:03:09,130 So what the heck is it. 40 00:03:09,610 --> 00:03:19,410 Well briefly stated a Bitcoin is a tiny string of letters and numbers No I'm serious. 41 00:03:19,440 --> 00:03:20,580 That's it. 42 00:03:20,580 --> 00:03:24,570 You have a bitcoin wallet and that contains these strings. 43 00:03:24,570 --> 00:03:30,750 Each one represents a certain value and looks kind of a lot like a P.G. peaky manager. 44 00:03:30,750 --> 00:03:36,740 You can create addresses for this wallet which also look like strings of letters and numbers and within 45 00:03:36,740 --> 00:03:40,360 your bitcoin wallet these would look something like this. 46 00:03:40,440 --> 00:03:48,780 The person who sends you coins copies and pastes this address which is basically anonymous into their 47 00:03:48,780 --> 00:03:55,440 manager and then simply selects the number of coins and clicks send which is fairly straightforward. 48 00:03:55,500 --> 00:04:02,430 You can then sell these little bits of code that represent a certain amount of bitcoin or fraction of 49 00:04:02,430 --> 00:04:06,940 a bitcoin on an exchange for real world money. 50 00:04:06,960 --> 00:04:14,820 In other words it is a way of transacting business online anonymously at least in theory but I'll talk 51 00:04:14,820 --> 00:04:16,740 more about the downsides in a minute. 52 00:04:16,740 --> 00:04:24,270 Bitcoin relies on something called the block chain a simple way to understand it is to imagine a ledger. 53 00:04:24,330 --> 00:04:32,280 Anytime someone buys or sells using bitcoin it is recorded in this ledger and then copied hundreds of 54 00:04:32,280 --> 00:04:36,840 thousands of times making it universal for all users. 55 00:04:37,050 --> 00:04:43,680 In order for a bitcoin wallet to function it needs an up to date copy of this block chain ledger which 56 00:04:43,680 --> 00:04:49,140 has continued to grow exponentially since bitcoin was first introduced at the moment. 57 00:04:49,140 --> 00:04:54,120 The current size of the chain is over two hundred gigabytes. 58 00:04:54,120 --> 00:05:02,280 So if you were to download the entire thing I'd recommend doing it via some sort of file sharing torrent 59 00:05:02,280 --> 00:05:05,970 client so that you can start and stop the process at will. 60 00:05:05,970 --> 00:05:12,840 I'd also recommend not storing it on your computer but perhaps investing in a small external hard drive 61 00:05:12,900 --> 00:05:17,290 encrypting it maybe with very crypto true crypto or anything else you'd like. 62 00:05:17,490 --> 00:05:19,920 Then downloading directly onto that. 63 00:05:20,040 --> 00:05:25,200 Once you have the block chain you can connect it to your wallet of choice exactly how you do this will 64 00:05:25,200 --> 00:05:26,640 vary from wallet to wallet. 65 00:05:26,670 --> 00:05:28,980 So I can't really show you. 66 00:05:29,070 --> 00:05:34,820 And then every time you load the wallet it will update the ledger by synchronizing to the network. 67 00:05:34,860 --> 00:05:41,220 If you load your wallet daily this might take five to 10 minutes but if you don't use the currency very 68 00:05:41,220 --> 00:05:48,000 often you could end up having to wait days weeks or months before your wallet is synchronized with the 69 00:05:48,000 --> 00:05:51,600 network and your block chain ledger is fully up to date. 70 00:05:51,630 --> 00:05:56,560 Or you could use an online wallet to store your coins. 71 00:05:56,700 --> 00:05:59,560 And this is done entirely at your own risk. 72 00:05:59,580 --> 00:06:04,310 All of these transactions are processed by what are called miners. 73 00:06:04,320 --> 00:06:12,300 Miners are simply computers that are dedicating their resources to processing transactions and keeping 74 00:06:12,300 --> 00:06:14,490 the block chain itself up to date. 75 00:06:14,490 --> 00:06:20,580 They are also the reason you can't try to tell the system that you have let's say 5000 bitcoins instead 76 00:06:20,580 --> 00:06:27,060 of zero point 0 0 0 1 bitcoins in order to trick the chain. 77 00:06:27,060 --> 00:06:31,280 You'd have to manipulate the numbers on all of those systems at once. 78 00:06:31,500 --> 00:06:38,850 It is essentially impossible since there is no localization in any one country so why would anyone dedicate 79 00:06:38,850 --> 00:06:42,180 their computer to mining bitcoin. 80 00:06:42,180 --> 00:06:48,840 Bitcoin Mining has become big business because every time a transaction is successfully processed and 81 00:06:48,840 --> 00:06:56,460 verified to be legitimate a tiny amount of bitcoin is generated within the chain as a reward for the 82 00:06:56,460 --> 00:06:57,770 miner that did this. 83 00:06:57,810 --> 00:07:04,590 When bitcoin mining first started out people were mining with their home computers and if you happen 84 00:07:04,590 --> 00:07:11,310 to be one of those people and held on to any coins you mined from that far back you might be a very 85 00:07:11,310 --> 00:07:13,270 rich person today. 86 00:07:13,590 --> 00:07:20,790 Over time as the block chain ledger grew in size and complexity the transactions became too much for 87 00:07:20,790 --> 00:07:28,710 any individual system to handle CPSU mining gave way to much more powerful GPO mining as well as what 88 00:07:28,710 --> 00:07:35,490 we're called mining pools mining pools were just large groups of people sharing their computers and 89 00:07:35,490 --> 00:07:40,320 then splitting the rewards of any successful process transactions. 90 00:07:40,320 --> 00:07:46,890 Nowadays mining is a big business and there are warehouses full of computers that are nothing but these 91 00:07:46,890 --> 00:07:55,410 high end graphics processors and cooling devices being used to process transactions daily and reap the 92 00:07:55,410 --> 00:07:56,580 rewards. 93 00:07:56,580 --> 00:08:02,220 So it's not really something you can do on your own anymore although it is still possible to mine with 94 00:08:02,220 --> 00:08:05,560 some of the other less popular currencies. 95 00:08:05,610 --> 00:08:08,010 The rewards for that would of course vary. 96 00:08:08,010 --> 00:08:14,460 If all this sounds preposterously complicated for a monetary system it is there is no regulation within 97 00:08:14,460 --> 00:08:19,030 the system no central bank no way to reverse the transaction. 98 00:08:19,030 --> 00:08:20,770 It is however anonymous. 99 00:08:20,770 --> 00:08:28,840 Mostly what you need to remember is that with Bitcoin the block chain ledger can be viewed by anybody 100 00:08:29,240 --> 00:08:35,410 while your identity and the identity of the person that you are transacting with might just be a wallet 101 00:08:35,410 --> 00:08:36,490 address. 102 00:08:36,490 --> 00:08:43,880 It is still possible to track coins as they move across the network and view wallet balances. 103 00:08:43,900 --> 00:08:49,600 This kind of detective work is an entire field unto itself and those wishing to retain anonymity using 104 00:08:49,600 --> 00:08:57,460 bitcoin are likely to go to great lengths to try to tumble their coins as it is cold so as to obscure 105 00:08:57,460 --> 00:09:01,050 them and make any direct trail harder to follow. 106 00:09:01,060 --> 00:09:04,410 Again I'm just covering the concepts here. 107 00:09:04,420 --> 00:09:09,030 There will be no explanation of bitcoin laundering techniques in this video. 108 00:09:09,040 --> 00:09:14,440 So I'm sorry if that disappoints anyone but you don't have to worry strictly speaking about the finer 109 00:09:14,440 --> 00:09:21,820 points of how the block chain works on the simplest level you buy let's say zero point zero zero zero 110 00:09:21,820 --> 00:09:28,690 five bitcoins on an exchange you then send them or some fraction of them from your wallet to someone 111 00:09:28,690 --> 00:09:32,160 else's wallet in exchange for goods and services. 112 00:09:32,320 --> 00:09:38,350 When you're done and you want to convert them back into money you sell them on an exchange to someone 113 00:09:38,350 --> 00:09:40,210 else looking to buy them. 114 00:09:40,510 --> 00:09:44,520 You then pay whatever taxes are required by your locality. 115 00:09:44,530 --> 00:09:52,840 Keep in mind that trying to use bitcoin to launder real money or to evade tax responsibility is pretty 116 00:09:52,840 --> 00:09:58,160 much universally illegal everywhere since the block chain can be viewed by anybody. 117 00:09:58,180 --> 00:10:06,160 Some users prefer to use other forms of cryptocurrency And there are a great many Monaro works very 118 00:10:06,160 --> 00:10:13,210 much like bitcoin except its block chain is not viewable which in theory makes it more anonymous. 119 00:10:13,210 --> 00:10:19,300 There are many different types of coins with different pros and cons and different risks and different 120 00:10:19,300 --> 00:10:20,740 relative values. 121 00:10:20,740 --> 00:10:29,950 Suffice it to say which coin happens to be popular at any given moment will vary as do their relative 122 00:10:29,950 --> 00:10:36,340 values for real world exchange I mentioned before that you can download the block chain and set up your 123 00:10:36,340 --> 00:10:39,110 own off line hardware wallet. 124 00:10:39,160 --> 00:10:44,390 You can also buy an offline hardware wallet that is sort of pre set up for you. 125 00:10:44,410 --> 00:10:47,510 And this may be a better option for many of you. 126 00:10:47,530 --> 00:10:52,780 Provided that you fully trust the source that you're purchasing from the one you're seeing here is just 127 00:10:52,780 --> 00:10:55,160 when I pulled up for random demonstration. 128 00:10:55,210 --> 00:10:57,980 There are a great many you should research them. 129 00:10:58,060 --> 00:11:00,250 If this is something that interests you. 130 00:11:00,310 --> 00:11:07,090 All right so let's say that you've bought a bitcoin or more likely a tiny fraction of a bitcoin which 131 00:11:07,090 --> 00:11:12,030 still equals out to a very high dollar value at least at the time this video is being made. 132 00:11:12,040 --> 00:11:18,130 What can you actually do with your bitcoin other than hold it as an investment. 133 00:11:18,130 --> 00:11:25,450 Well there are many legitimate stores that allow you to buy and sell online using bitcoin and other 134 00:11:25,450 --> 00:11:34,300 popular crypto currencies such as for example Monaro lite coin theorem dogecoin and the like. 135 00:11:34,300 --> 00:11:40,600 Again those other coins have pros and cons and different real world values but in general they tend 136 00:11:40,600 --> 00:11:41,920 to work the same way. 137 00:11:41,920 --> 00:11:50,140 It is also a fact that bitcoin has always been a popular choice for criminal enterprises on the darknet 138 00:11:50,200 --> 00:11:51,400 or Deep Web. 139 00:11:51,400 --> 00:12:00,760 Many illegal markets use bitcoin to facilitate their transactions and make no mistake such transactions 140 00:12:00,820 --> 00:12:04,840 are most certainly illegal and to be absolutely clear. 141 00:12:04,900 --> 00:12:12,340 Buying something illegal with bitcoins such as for example drugs or weaponry or hacking services is 142 00:12:12,340 --> 00:12:16,890 the same as buying that same thing with hard cash. 143 00:12:17,290 --> 00:12:21,370 Always remain lawful and never use this technology for bad purposes. 144 00:12:21,550 --> 00:12:28,600 Nevertheless I would be remiss if I did not point out that this does happen and that was sort of the 145 00:12:28,600 --> 00:12:32,170 original practical use for such coins. 146 00:12:32,170 --> 00:12:38,290 But now that cryptocurrency is taken off and entered the public domain so to speak. 147 00:12:38,290 --> 00:12:44,410 There are a great many more legitimate outlets through which it can be spent with all of that being 148 00:12:44,410 --> 00:12:51,490 said it is probably safe to say that most people are buying and selling bitcoin as an investment. 149 00:12:51,490 --> 00:12:58,720 This holds true of other coins as well cryptocurrency can be a good way to do things anonymously and 150 00:12:59,260 --> 00:13:03,620 that is at the end of the day what all forms of cryptography are for. 151 00:13:03,640 --> 00:13:07,160 If you want to invest in it you do so at your own risk. 152 00:13:07,180 --> 00:13:13,870 As I said the value of these coins fluctuate wildly from moment to moment and it is not impossible that 153 00:13:13,870 --> 00:13:19,890 at some future date the cryptography behind the might be broken resulting in their value crashing to 154 00:13:19,900 --> 00:13:21,720 zero to zero overnight. 155 00:13:21,720 --> 00:13:29,070 It is also necessary for me to say that because there is no regulation at all within the system and 156 00:13:29,070 --> 00:13:36,220 no way to reverse a transaction there are no real protections in place where these currencies are concerned. 157 00:13:36,240 --> 00:13:40,960 If your computer gets hacked and your coin stolen you're out of luck. 158 00:13:41,160 --> 00:13:47,420 If your hardware wallet crashes or breaks or get stolen and you have no backup you're out of luck. 159 00:13:47,430 --> 00:13:53,130 If the online wallet you use gets hacked or closes down or the people running the server just decide 160 00:13:53,130 --> 00:13:55,700 to rob you you're out of luck. 161 00:13:55,710 --> 00:14:02,950 In short crypto currency is risky both as an investment and as a way of transacting business. 162 00:14:03,000 --> 00:14:08,460 There are countless scams out there all designed to rip you off. 163 00:14:08,460 --> 00:14:13,720 I'm not trying to say don't use cryptocurrency but please be aware of the risks involved. 164 00:14:13,800 --> 00:14:19,610 The value can crash your coins can be stolen and you can't reverse any transaction. 165 00:14:19,650 --> 00:14:26,940 The tradeoff is that you get a degree of anonymity to your financial transactions and there is always 166 00:14:26,940 --> 00:14:33,550 the chance that a coin purchased a year ago will have increased in value by some outrageous amount. 167 00:14:33,570 --> 00:14:39,570 How you approach this technology and in what ways you use it are up to you. 168 00:14:39,570 --> 00:14:44,680 As I said this isn't an investment class and I'm not giving financial advice. 169 00:14:44,700 --> 00:14:51,000 Hopefully you understand these concepts well enough that you can at least know what they are and how 170 00:14:51,000 --> 00:14:57,060 they work and how it relates to the subject of modern cryptography and the general hacking sphere. 171 00:14:57,060 --> 00:15:03,630 The very last thing I'll say about this is do your research on any exchange that you plan to do business 172 00:15:03,630 --> 00:15:04,150 on. 173 00:15:04,320 --> 00:15:11,670 Very carefully and I would strongly recommend that if you choose to buy and sell any coin online you 174 00:15:11,670 --> 00:15:18,100 do not leave any amount of money in an exchange account longer than is absolutely necessary. 175 00:15:18,360 --> 00:15:26,430 When the exchange known as Mt. Gox abruptly closed in 2014 it was because something on the order of 176 00:15:27,120 --> 00:15:34,650 850000 bitcoins valued at that time around four hundred and fifty million United States dollars had 177 00:15:34,650 --> 00:15:41,800 been stolen through a rather legendary hack and it was literally all due to one single hack. 178 00:15:42,030 --> 00:15:47,370 Those hackers might be some of the richest individuals on the planet right now and a great many innocent 179 00:15:47,370 --> 00:15:48,780 users lost their money. 180 00:15:48,780 --> 00:15:55,470 Also keep in mind that the price of these crypto currencies can and are manipulated frequently by greater 181 00:15:55,470 --> 00:16:03,970 powers such as nation states or exchanges working in shady and sketchy ways all for their own purposes. 182 00:16:03,990 --> 00:16:07,280 So the moral of the story is if you hold these currencies. 183 00:16:07,380 --> 00:16:10,650 Be very careful where and how you store them. 184 00:16:10,650 --> 00:16:18,120 You should probably always choose to encrypt your wallet particularly if it's stored locally or somewhere 185 00:16:18,120 --> 00:16:20,240 where it can be easily snatched. 186 00:16:20,250 --> 00:16:21,360 Thank you for your attention.