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MARCH 11, 2016

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> Security and adoption of bitcoin

Property

a digital age

AST

week, we explored

points to clear doubts on

bitcoin technology. We also

shared bitcoin entrepreneur

Andreas Antonopoulos’ tips and

advice, bidding the authorities to

think twice before making any

decision on regulating bitcoin.

In this last of our four-part series,

we share more of Antonopoulos’

insights, including how safe it is to

use bitcoin.

SAFE AND SECURE

TECHNOLOGY

“The bitcoin network has been

secure since Jan 3, 2009. There has

not been a successful attack on the

bitcoin system.”Why one wonders,

to which Antonopoulos says: “It’s

either that nobody has tried to

attack it or everyone is trying to

attack it.”

The expert justifies the reason

behind his rationale, considering

that many have been trying to

attack it. He says: “Everyone is

trying to attack bitcoin. They have

been at it continuously since 2009.

Bitcoin nowprotects 12 billionUS

dollars, which is a big prize for

whoever is successful in attacking

it. It also serves as a lesson to teach

bitcoin and its users to be more

careful as each person tries to attack

it; the system adapts itself and

becomes more secure. There is no

one who has successfully attacked

bitcoin over the past seven years;

unlike regular financial institutions,

where not a single bank in the world

can accede to this.”

It is remarkable but not magic,

Antonopoulos feels; not that bitcoin

has found a way to secure itself that

nobody else is able to. “It is simply

the result of de-centralising control

among all the participants or

players. So the only way to attack it

is to attack everyone successfully,”

he said, which is quite impossible.

GOVERNMENT VIEW

In response to the emergence

of “disruptive technology”,

the government has set up an

organisation called theMalaysia

Industry-Government Group for

High Technology (MIGHT), to

help understand new technology.

MIGHT is a not-for-profit company

under the purview of the Prime

Minister’s Department.

Its immediate role is to bring

policy-makers and companies

together to discuss leveraging new

disruptive technologies. MIGHT

and Bloktex were the two parties

whicho recently invited

Antonopoulos to share insights on

bitcoin technology. The intention

was to provide the public and

policy-makers with insights into

this technology, and fromwho

better than the expert himself.

MIGHT president Datuk Dr

Mohd Yusoff Sulaiman shared his

reason behind collaborating with

Bloktex on the talk.

“Why we are very interested in

working with Bloktex in this event

is because we see Blockchain as the

technology that will change the

whole way of doing business. It will

especially impact the financial and

property sectors among others. I

think this technology will mature

and further develop and once it

does, it will also affect the non-

financial sectors,” Mohd Yusoff

shared. Another reason for hosting

Antonopoulos and presenting the

public with the talk on this growing

new technology is to helpMalaysia

remain relevant and competitive

among the global industry players.

Mohd Yusoff then shared about

the nature of bitcoin and other

disruptive technologies. “I think the

nature of some of these new

technologies that come under the

umbrella of the fourth industrial

revolution tends to be

RECOMMENDED RESOURCES AND READING FOR BETTER

UNDERSTANDINGOF BLOCKCHAINAND BITCOIN TECHNOLOGY

Mastering Bitcoin by Andreas Antonopoulos

The Internet of Money by Andreas Antonopoulos

Bitcoin.org

Blockchain: Blueprint for a New Economy by Melanie Swan

multidisciplinary and brings sectors

closer together, further redefining

the sector in itself.

“For example, Uber itself is a

combination or merging of two

industries – telecommunications

and transport. This is where we

need to get industries and policy-

makers together, to look into the

future of how this new innovation is

‘disrupting’ our businesses and

economy, hence use it to create

more opportunities to improve

businesses and economies,” Mohd

Yusoff added.

He urged the authorities, those

in the financial sector, including the

man on the street as well as

business entrepreneurs, to look at

today’s modern technologies and

newdevelopments, and try to tap

into these to further grow, improve

andmove from the traditional way

of doing things.

“It is very important for us to

look at the overall technology

development, not in isolation but as

a bigger picture; how it will affect

and change things for the better,” he

added.

MORE TIPS AND ADVICE

Today, bitcoin continues to

impact industries, property

included. However, Antonopoulos

advocates the importance of fully

understanding the concept of

bitcoin before one “invests” into it.

“I ‘speak for’ bitcoin as an

experimental technology that one

should only invest in if one really

understands the mechanics of it.

You should primarily invest in

learning and fully understanding

the technical aspects that could

turn bitcoin into an innovative

industry that can lead to business

start-ups and build careers,”

Antonopoulos said.

He reminds interested parties

that bitcoin is not a stock

investment. “If you hear someone

tell you that this system is a sure

investment, run away as fast as you

can because those characteristics

are shared by only one category of

investment – scams.”

The expert also prompts one to

be alert and aware, especially in the

Southeast Asian regionwhere there

are large numbers of newmiddle-

class investors, many for the first

time entering into the investment

market. “Scams are extremely

popular. When you hear things like

bitcoinwill make you rich, walk

away. Bitcoinwill not make you

rich, but make you poor quickly. It

is a volatile experimental system

that comes with risks. I am

advocating the understanding of

this technology, not the use of it as

speculative investment. Unless you

need to use it and know how to use

it, it is not an investment or a get-

rich-quick scheme,” Antonopoulos

drives his point home.

Sharing Antonopoulos’

sentiments, Mohd Yusoff said:

“Blockchain is currently all the

hype in Asia andwe should look at

it, learn and understand it, and

relate it with the fourth industrial

revolution. It is no longer business

as usual as it fundamentally changes

the way we work and live. Bitcoin

might affect our work culture,

policy and lifestyles. AndMIGHT is

looking at howwe can and should

integrate this technology into our

lives.” Follow out column next

week featuring our monthly read on

interior decor.

PART4

BRIAN CHUNG

How a Bitcoin transaction works

Bob, an onlinemerchant, decides to begin to begin accepting bitcoins as payment.

Alice, a buyer, has bitcoins andwants to purchasemerchandise fromBob.

WALLETS

AND

ADDRESSES

BobandAlice

bothhave

Bitcoin“wallets”

on theircomputers

Walletsarefiles

thatprovide

access tomultiple

Bitcoinaddresses.

Anaddress

isstringof

lettersand

numbers,such

as1HULMwZEP

kjEPeCh

43BeKJL1yb

LCWrfDpN.

Eachaddress

has itsown

balanceof

bitcoins.

CREATING

ANEW

ADDRESS

Bobcreatesanew

Bitcoinaddress for

Alice tosendher

payment to.

SUBMITTING

A PAYMENT

Alice tellsher

Bitcoinclient

thatshe’d like

to transfer

thepurchase

amount toBob’s

Private

key

Alice’swalletholds theprivatekey foreach

ofheraddresses.TheBitcoinclientsignsher

transaction requestwith theprivatekeyof the

addressshe’s transferringbitcoins from.

Anyoneon thenetworkcannowuse thepublic

key toverify that the transaction request is

actuallycoming from the legitimateaccount

owner.

Private

key

VERIFYING

THE

TRANSACTION

Public Key Cryptography 101

WhenBobcreatesanewaddress,what

he’sreallydoing isgeneratinga

“cryptographickeypair,”composedofa

privatekeyandapublickey. Ifyousigna

messagewithaprivatekey (whichonly

youknow), itcanbeverifiedbyusing the

matchingpublickey (which isknown

toanyone).Bob’snewBitcoinaddress

representsauniquepublickey,and the

correspondingprivatekey isstored inhis

wallet.Thepublickeyallowsanyone to

verify thatamessagesignedwith the

privatekey isvalid.

Private

key

Public

key

Gary,Garth,

andGlenn

areBitcoin

Theircomputers

bundle the

transactions

of thepast10

minutes intoa

new“transaction

block.”

Theminers’

computersare

setup tocalculate

cryptographic

hash functions.

It’s tempting to thinkofaddressesasbank

accounts,but theyworkabitdifferently.Bitcoin

userscancreatesasmanyaddressesas theywish

and in factareencouraged tocreateanewone for

everynew transaction to increaseprivacy.So long

asnooneknowswhichaddressesareAlice’s,her

anonymity isprotected.

Gary Garth

Glenn

Hash

value*

New

hash

value

Nonce

*Eachnewhashvalue

contains information

aboutallpreviousBitcoin

transactions.

Nonce

New

hash

value

Nonce

New

hash

value

Theminingcomputers

calculatenewhashvalues

basedonacombinationof

theprevioushashvalue,

thenew transactionblock,

andanonce.

Cryptographic Hashes

Cryptographichash functions transform

acollectionofdata intoanalphanumeric

stringwithafixed length,calledahash

value.Even tinychanges in theoriginaldata

drasticallychange the resultinghashvalue.

And it’sessentially impossible topredict

which initialdatasetwillcreateaspecific

hashvalue.

Nonces

Tocreatedifferenthashvalues from the

samedata.Bitcoinuses “nonces”.Anonce

is justa randomnumber thatadded todata

prior tohashing.Changing thenonce results

inawildlydifferenthashvalue.

Creatinghashes iscomputationally

trivial,but theBitcoinsystem requires

thatnewhashvaluehaveaparticular

form-specifically, itmuststartwitha

certainnumberofzeros.

Theminershave

noway topredict

whichnoncewill

produceahash

valuewith the

requirednumber

of leadingzeros.

So they’re forced

togeneratemany

hasheswith

differentnonces

until theyhappen

uponone that

works.

Eachblock includes“coinbase”

transaction thatpaysout50bitcoin to

thewinningminer- in thiscase,Gary.

Anewaddress iscreated inGary’s

walletwithabalanceofnewlyminted

bitcoin.

TRANSACTION

VERIFIED

As timegoeson,Alice’s transfer toBobgetsburiedbeneath

other,more recent transactions.Foranyone tomodify

thedetails,hewouldhave to redo thework thatGarydid

-becauseanychanges requireacompletelydifferentwinning

nonce-and then redo theworkofall thesubsequentminers.

Sucha feat isnearly impossible.

Bob&Alice

...................

SOURCE:JOSHUAJ.ROMERO

,BRANDONPALACIO&KARLSSONWILKER,INC.