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Showing posts with label Satoshi Nakamoto. Show all posts
Showing posts with label Satoshi Nakamoto. Show all posts

Monday 5 February 2018

What is Blockchain Technology, its uses and applications?

https://youtu.be/E_kCCgsldjU

According to Wikipedia, a blockchain,[1][2][3] originally block chain,[4][5] is a continuously growing list of records, called blocks, which are linked and secured using cryptography.[1][6]

Each block typically contains a cryptographic hash of the previous block,[6] a timestamp and transaction data.[7] By design, a blockchain is inherently resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way".[8]

For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.


Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a blockchain.[9]

This makes blockchains potentially suitable for the recording of events, medical records,[10][11] and other records management activities, such as identity management,[12][13][14] transaction processing, documenting provenance, food traceability[15] or voting.[16]

Blockchain was invented by Satoshi Nakamoto in 2008 for use in the cryptocurrency bitcoin, as its public transaction ledger.[1]


. Blockchain - Wikipedia  https://en.wikipedia.org/wiki/Block

Uses and apllications : 
 

Blockchain technology can be integrated into multiple areas. The primary use of blockchains today is as a distributed ledger for cryptocurrencies, most notably bitcoin.[65] 

While a few central banks, in countries such as China, United States, Sweden, Singapore, South Africa and England are studying issuance of a Central Bank Issued Cryptocurrency (CICC), none have done so thus far.[65]

 

The Big Four

Each of the Big Four accounting firms is testing blockchain technologies in various formats. Ernst & Young has provided cryptocurrency wallets to all (Swiss) employees,[79] has installed a bitcoin ATM in their office in Switzerland, and accepts bitcoin as payment for all its consulting services.[80] Marcel Stalder, CEO of Ernst & Young Switzerland, stated, "We don't only want to talk about digitalization, but also actively drive this process together with our employees and our clients. It is important to us that everybody gets on board and prepares themselves for the revolution set to take place in the business world through blockchains, [to] smart contracts and digital currencies."[80]
  
  PwC, Deloitte, and KPMG have taken a different path from Ernst & Young and are all testing private blockchains.[80]

 

Why enterprises should care about blockchain


If you are in business or government or interact with businesses or government (that should be all of you), blockchain technologies will impact you in a profound way.

People much smarter than me who have studied blockchain deeply say this is like the internet before Marc Andreessen co-invented the browser. Then, we had no idea that the world would change as radically as it has. The world will change radically again, and no one can predict how.

However, let’s take a glimpse into the future at what people are working on now, so you get just an inkling of what’s possible.

IBM is putting a lot of wood behind the blockchain arrow and aggressively going after business. One example is a project with Walmart to track food shipments. Let’s use the example of mangos. Why is this important and how does the blockchain fit in?

This food-tracking application is important because Walmart wants to have all the information it can about the mangos it’s buying. Armed with this information, Walmart can do many valuable things:

  • Verification: Verify that the mangos that claim to be organic are actually organic (ensures quality) Tracking: Track the mangos as they travel from the farm to the store, so they know where they are and when they will arrive (reduces cost)
  • Ensure quality: Ensure that if they need to be refrigerated within 40 and 50 degrees to ensure freshness, that they were refrigerated correctly during shipment (ensures quality
  • Recall management: Know exactly which mangos should be taken off the shelves if there’s a problem with the food (both ensures quality and reduces cost)
  • Automation: Reduce human interaction required between the farmer, distributors, brokers and the buyer (reduce cost)

But where does the blockchain fit in? Here’s how a blockchain-enabled mango-buying transaction works better than a process without the blockchain.

VERIFICATION

It turns out that people eat more food that has been labeled "organic" than is farmed. That's because there is fraud in some claims as to whether or not something is organic and those things can make their way into shipments unbeknownst to the buyer. Now, the mangos get labeled at the source, by a trusted entity that deems them organic. That information is then recorded on the blockchain, and that information cannot be changed. The "proof of organic" is now locked in and Walmart now fully trusts its mangos are organic. That makes it very difficult to fraudulently sell you mangos that are not organic.

TRACKING

Walmart is great at removing costs from their supply chain - maybe the best in the world. Now, they can build in a delivery price guarantee into the system, without human intervention. It works like this. Using a smart contract (code that represents an agreement) Walmart can say they will pay a certain amount for mangos that show up on the shipping dock within a specific shipment window. And, they can do that without having to create paperwork representing a different price for a late shipment. The payment to the late shipper gets changed automatically, based on the code in the smart contract.

ENSURE QUALITY

If the refrigerator truck in which the mangos are being shipped has a malfunction, the mangos could go bad. The shipper might not realize there's a problem, and Walmart might not realize there's a problem, but the consumer will be very unhappy. If the transportation company has thermometers on their truck continually report the temperature of the truck during transport, then Walmart will know that the mangos are fresh when they arrive, ensuring high quality. And, this is done automatically on the blockchain due to a trusted source of information (the thermometers) communicating with the smart contract that has set the temperature parameters.

RECALL MANAGEMENT

Sometimes mangos need to be recalled for one reason or another. Without the blockchain, Walmart might have to remove many thousands of mangos to ensure no customer gets a bad one. With the blockchain, Walmart now knows exactly what mangos need to be taken off the shelf. This ensures the bad mangos are removed. Yes, other technologies exist today that can do something similar as it’s related to tracking mangos. However, what the blockchain does is provide a higher level of confidence that fraud did not occur at some point along the way to protect the entity that enabled bad mangos to happen in the first place.

AUTOMATION

Today, a lot of intermediate transactions can exist in a transportation process. For example, transactions between the farmer and the broker; between the broker and the shipper; between the shipper and Walmart. These transactions usually require people to approve or deny some aspect of the movement of products. Through smart contracts, a lot of these approvals can be automated and sped up by removing people from the equation. This both reduces costs and speeds up the process.

Of course, this is only one example of an application that can transform an industry. Many, many other applications are being built to address very different use cases. I recommend you start to become educated on what is going on so you can get ahead of the curve.

Glenn Gow
By Glenn Gow is the Marketing Partner at Clear Ventures, a CEO Coach, Board Member and Advisor, and a Blockchain Strategist.


Is bitcoin a scam?

Is bitcoin a Ponzi scheme?


Is bitcoin one humongous scam or Ponzi scheme? Before I answer that question, let’s look at the four typical characteristics of a Ponzi scheme.

First of all, there must be a promoter for the scheme. It may be a single individual or a corporation.

The key point here is that there is a single party promoting (and thus benefiting from) the scheme. The second characteristic is the promised return.

To attract gullible investors the scheme will promise unrealistic sky-high returns. The saying “if it is too good to be true, it probably is” always applies in this scenario.

The third characteristic pertains to the investment’s liquidity, which simply means how easy it is to get out once you are in. The promoter will tend to discourage investors from cashing out using and will do so using one or more of these three approaches.

The stick approach is where the investor loses a portion of his investment if he withdraws early.

Conversely the carrot approach entices the investor to stay in by promising even higher returns the longer he keeps the funds invested.

Finally the “too-good-not-to-share” approach requires the investor to find a new investor to take over his investment. In short, he needs to look for new fools to buy him out.

Yes, the Ponzi scheme’s liquidity is at the mercy of the promoter’s whim and fancy.

Thus we come to the fourth characteristic. Ponzi schemes require a constant flow of new investors (read: new money) to fund the payout to early investors.

Before the promoter vanishes into thin air, a small number of EARLY investors DO actually get to cash out and enjoy the ridiculous returns. This is done intentionally by the promoter to “instill” confidence in the scheme as these early investors will help to bring in new investors.

Let’s apply these four characteristics to Bitcoin. The decentralised nature of bitcoin means that there is never a single party promoting bitcoin.

One may argue that there are plenty of people promoting the virtues of bitcoin.

However these are all unrelated parties, akin to different investment advisers promoting the virtues of gold as an investment.

What about returns?

Yes, bitcoin has provided spectacular profits to some investors in the past year.

However these profits were never promised in the first place. In fact people have lost money trading bitcoins, in spite its meteoric rise. This is due to the extreme volatility of the price.

Does bitcoin have sufficient liquidity that is, can you get out? All the recent headlines about regulators and banks freezing the accounts of crypto-related transactions have given the impression that it is hard-to-get-out once you are in.

However, nothing could be further from the truth. The decentralised nature means that there are so many alternatives for selling bitcoins, although not all are convenient.

Finally, are bitcoin investors who are late to the party effectively funding the early investors’ profits?

On that note, bitcoin may sound similar to a Ponzi scheme.

Then again the same can be said of investors who entered the markets at the peak of the dotCom bubble or the housing bubble.

This is a zero-sum game.

I would be remiss if I did not acknowledge the existence of numerous proven scams out there that uses or references Bitcoin.

To counter that point, note that these scams never actually put money into bitcoin, merely hitching a ride on the bitcoin bandwagon and hype.

Prior to the emergence of cryptocurrencies, Ponzi schemes already existed. These schemes claim to use special techniques to generate spectacular profits from various asset classes such as commodities or real estate. Do you hear anyone labelling real estate as a Ponzi?

That said, I must make the point clear that one can easily lose a fortune putting hard earned money into either bitcoins or a Ponzi scheme. Nevertheless, bitcoin is not a scam or Ponzi scheme, as outlined by the points above.

Source: The Star, by Chong Jin Yoong, CFA, is a financial markets trainer and consultant.

Readers can learn more about whole bitcoin and cryptocurrency saga at a talk organised by The Star on Feb 10 entitled “Bitcoin: Dive in or stay away?”

Related Links:

Bitcoin's Big Wipeout Erased $46 Billion of Value Last ... - Bloomberg




Bitcoin: Dive In or Stay Away - Events by Star Media Group


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Tuesday 19 September 2017

JPMorgan CEO warns he will fire any employee trading Bitcoin for being “stupid.”

 

 
Tough stand: Dimon has warned that he will fire JPMorgan traders who traded in bitcoin ‘in a second. For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.’ — AFP

NEW YORK: JPMorgan Chase & Co chief executive officer Jamie Dimon said he will fire any employee trading bitcoin for being “stupid.”

The cryptocurrency “won’t end well,” he told an investor conference in New York on Tuesday, predicting it will eventually blow up. “It’s a fraud” and “worse than tulip bulbs.”

If a JPMorgan trader began trading in bitcoin, he said: “I’d fire them in a second. For two reasons: It’s against our rules, and they’re stupid. And both are dangerous.”

Bitcoin has soared in recent months, spurred by greater acceptance of the blockchain technology that underpins the exchange method and optimism that faster transaction times will encourage broader use of the cryptocurrency.

Prices have climbed more than four-fold this year – a run that has drawn debate over whether that’s a bubble.

Bitcoin initially slipped after Dimon’s remarks. It was down as much as 2.7% before recovering.

Last week, it slumped after reports that China plans to ban trading of virtual currencies on domestic exchanges, dealing another blow to the US$150bil cryptocurrency market.

Tulips are a reference to the mania that swept Holland in the 17th century, with speculators driving up prices of virtually worthless tulip bulbs to exorbitant levels.

That didn’t end well.

In bitcoin’s case, Dimon said he’s sceptical authorities will allow a currency to exist without state oversight, especially if something goes wrong.

“Someone’s going to get killed and then the government’s going to come down,” he said.

“You just saw in China, governments like to control their money supply.”

Dimon differentiated between the bitcoin currency and the underlying blockchain technology, which he said can be useful.

Still, he said banks’ application of blockchain “won’t be overnight.”

The bank chief said he wouldn’t short bitcoin because there’s no telling how high it will go before it collapses.

The best argument he’s heard, he said, is that it can be useful to people in places with no other options – so long as the supply of coins doesn’t surge.

“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars,” he said.

“So there may be a market for that, but it’d be a limited market.”— Bloomberg


Related Links:





 
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Wednesday 4 May 2016

Who created Bitcoin? How? Why? The long search may not be over


SAN FRANCISCO  — Who is Satoshi Nakamoto? For many in the tech world, the identity of bitcoin's elusive creator has been a long-running parlor game. And the speculation might not be over.

Australian entrepreneur Craig Steven Wright, who announced Monday that he founded the digital currency , convinced at least one longtime bitcoin contributor that he's the real deal. He managed that feat via a technical demonstration involving Nakamoto's secret bitcoin keys. But Wright's public documentation, which he posted online Monday , underwhelmed others and left the question of Nakamoto's true identity far from settled.

"There's no way you can conclusively prove that you are the creator of bitcoin," said Jerry Brito, executive director of Coin Center, a Washington, D.C.-based crypto-currency think tank, who is skeptical of Wright's claims.

Tracking a pseudonymous cryptographic genius would be challenging under the best circumstances. And here we're talking someone who invented a way for people to send money around the world anonymously, without banks or national currencies. Someone who apparently disappeared five years ago for unknown reasons.

None of that has stopped people from trying. Journalists, researchers and amateur detectives have scoured Nakamoto's emails and online posts, plus the original bitcoin code, for unusual phrases, cultural references and other potential clues to their author.

One of the most celebrated candidates — to his own dismay — was an unassuming Japanese-American engineer who found himself in the cross-hairs of Newsweek magazine in 2014.


A Newsweek cover story fingered Dorian Satoshi Nakamoto, a retired resident of suburban Los Angeles County, after citing circumstantial clues and a vague comment that Nakamoto made when confronted briefly on his front doorstep. The article sparked a media frenzy and a car chase with reporters that ended at the Los Angeles offices of The Associated Press — where Dorian Nakamoto emphatically denied any involvement with bitcoin.

An earlier contender named in a 2011 New Yorker magazine piece was Michael Clear, then a graduate student in cryptography at Trinity College in Dublin. The New Yorker cited some of Nakamoto's writings, which used British slang such as "maths" for mathematics and "flat" for an apartment. It also noted that Clear had worked on currency-trading software for an Irish bank and co-authored a paper on "peer-to-peer" technology similar to that used in bitcoin.

At first, according to the New Yorker, Clear was evasive when asked at a cryptography conference if he had created bitcoin. But he later denied it repeatedly. He also suggested another candidate to the New Yorker reporter, naming Finnish researcher Vili Lehdonvirta, who studied virtual currencies and created video games.

"I would love to say that I'm Satoshi, because bitcoin is very clever," Lehdonvirta told the New Yorker, after laughing for several seconds. "But it's not me."

Speculation has also focused on a Hungarian-American computer scientist named Nick Szabo, who was called a likely candidate by linguistic experts who conducted their own "reverse textual analysis" — essentially, looking for distinctive phrases or word patterns — on an early white paper by the bitcoin creator.

The only problem? Szabo, who has worked on other digital currencies, has repeatedly denied creating bitcoin.

Other scientists' names have surfaced over the years; some theories pose the notion of two or three working together. But denials have usually followed each new mention.

At one point, two Israeli mathematicians floated, and later retracted, the notion that bitcoin was created by the founder of Silk Road, an online bazaar known for trade in various illicit goods.

Conspiracy theorists have even speculated it could have been the work of some shadowy government agency — no one's saying which government — to undermine established currencies or somehow monitor online transactions. (That theory depends on the unproved notion that the creator retained the ability to decode bitcoin's encryption.)

Vice magazine once suggested Nakamoto might be Gavin Andresen, an American software expert and early bitcoin enthusiast who has helped push bitcoin forward in Nakamoto's absence. Andresen has denied it — and on Monday declared that he believes Wright is Nakamoto.

But other cryptocurrency enthusiasts aren't convinced it's Wright. The truth, they say, is still out there. - AP



Image for the news result
AP EXPLAINS: What Is Bitcoin? A Look at the Digital Currency How it work, security, vulnerability and why? 

Comments:

Indeed, the way Wright has stage-managed the latest revelations about himself seem inconsistent with what we know about Nakamoto. Wright chose to give his scoop to the BBC, the Economist, and GQ. These are all excellent publications, but none of them are known for their in-depth coverage of computer security. The real Satoshi Nakamoto should have anticipated that no one would give much weight to a GQ scoop about his identity.

Bitcoin was Nakamoto's attempt to create a financial system that didn't require trusting the fallible human beings that run the banking system. Yet when Wright decided to reveal his identity as Nakamoto, he chose to do it via face-to-face meetings with a handful of journalists and Bitcoin insiders instead of providing mathematically rigorous proof that anyone could verify. It's hard to believe that's what Nakamoto would have done.


http://www.vox.com/cards/bitcoin

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Aug 25, 2015 ... Tokyo (AFP) - The arrest of MtGox boss Mark Karpeles has begun to shed light on the defunct Bitcoin exchange after hundreds of millions of ...

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  Bitcoin creator mystery, who is the Face Behind the ...
Mar 30, 2014 ... This story has been appended to include a statement from Dorian Nakamoto received on March 19th when Newsweek was first contacted...


Apr 14, 2014 ... In fact, the actual creator of Bitcoin itself has been shrouded in mystery — although credited to Satoshi Nakamoto, the name is believed to be a ...
 
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Tuesday 25 August 2015

Bitcoin CEO arrest leaves long trail of unanswered questions

Bitcoin trader Kolin Burges from London protests against Tokyo-based bitcoin changer MtGox in front of the company's office in Tokyo on February 26, 2014.



Tokyo (AFP) - The arrest of MtGox boss Mark Karpeles has begun to shed light on the defunct Bitcoin exchange after hundreds of millions of dollars in virtual currency vanished from its digital vaults last year.

But as details of a lengthy investigation by Japanese police trickle out, at least one crucial question remains unanswered: where is the money?



On Friday authorities issued a fresh arrest warrant for Frenchman Karpeles over claims he stole several million dollars from clients, including about $48,000 allegedly spent on a luxury canopy bed.

Karpeles, 30, who has reportedly denied the allegations, was initially taken into custody earlier this month and has been held without formal charges for three weeks, as allowed under Japanese law.

A fresh warrant resets the clock on how long police can hold him and grill the self-described computer geek over Tokyo-based MtGox's missing Bitcoins.



So far, police have accused Karpeles of manipulating data and stealing sums that amount to just a fraction of the 850,000 coins -- worth around $480 million at the time, or $387 million at current exchange rates -- that disappeared last year.

MtGox, which once said it handled around 80 percent of global Bitcoin transactions, filed for bankruptcy protection soon after the cyber-money went missing, leaving a trail of angry investors calling for answers.

The company initially said there was a bug in the software underpinning Bitcoins that allowed hackers to pilfer them.

Karpeles later claimed he had found some 200,000 of the lost coins in a "cold wallet" -- a storage device, such as a memory stick, that is not connected to other computers.

But the whereabouts of the money and Karpeles' involvement appear far from solved. "If there were instances of mismanagement or fraud like this carried out by Mark Karpeles, then he should be held accountable," Bitcoin investor Kim Nilsson told AFP.
Mark Karpeles, head of the MtGox Bitcoin exchange, …

(But) if these charges against (him) don't adequately explain where all the Bitcoin ... money went, then there are still unresolved questions, quite possibly additional crimes and criminals, that must be investigated further."

 - Real or fake? -

Nilsson also questioned whether MtGox's Bitcoin deposits were even real in the first place.

"Did MtGox at any point actually hold the coins in question, or have there been faked deposit entries merely making it look that way?" he asked MtGox reportedly kept its own funds and clients' money in the same bank account.

In an interview with Japan's top-selling Yomiuri newspaper, Karpeles' mother said her "genius" son learned computer languages at age three and started making simple programmes of his own two years later.

Back in 2006, Karpeles -- who reportedly lived in an $11,000-a-month penthouse Tokyo apartment -- wrote on his blog that computer crime was "totally contrary to my ethical principles".

But four years later, a Paris court sentenced him in absentia to a year in prison for hacking. He had come to Japan to work for a web development company in 2009 and later got involved with the Bitcoin exchange. - Tangible object -

Investors have called on the firm's court-appointed administrators to publicise its data so that experts around the world can help analyse what happened at MtGox.

But the case presented a complex challenge to Japanese police, as financial watchdogs around the world struggle to work out how to regulate digital money.

Unlike traditional currencies backed by a government or central bank, Bitcoins are generated by complex chains of interactions among a huge network of computers around the planet.

"The Bitcoin case is really an embezzlement case, but embezzlement has to involve a 'tangible object,'" said Hisashi Sonoda, a criminal law professor at Japan's Konan University.

"Japanese criminal law treats digital currency as 'data,' not what we call 'tangible object' in a legal sense."

Backers say virtual currencies, which started to appear around 2009, allow for an efficient and anonymous way to store and transfer funds online.

But critics argue the lack of legal framework governing the currency, the opaque way it is traded and its volatility make it dangerous.

Following Karpeles' arrest, Tokyo vowed to boost digital-currency regulations.

Japan's penal code "is not really catching up with quickly changing business models", hampering authorities' investigation, Sonoda said.

"If there was a clause or a fresh law targeting digital currency, that would have been helpful for investigators."

AFP By Hiroshi Hiyama

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Monday 14 April 2014

Bitcoin, cryptocurrency rising, money talks, mining boom sputters


The Internet has spawned a new form of currency that’s purely digital called Bitcoin. 

Picture this — a high speed car chase with a slew of journalists trying to keep up with a celebrity as they hound him around Los Angeles, California.

The only problem is that inside the lead car isn’t Brad Pitt or even Christian Bale, but a rather unassuming 64-year-old man of Japanese descent named Dorian Nakamoto.

The car chase started when Newsweek claimed in an article that he was the mysterious ­creator of Bitcoin who goes under the ­pseudonym Satoshi Nakamoto, after which a slew of journalists flocked to his home for comment.

Whether he is indeed the fabled founder is still unclear but the media storm revolving around Bitcoin’s creator is a sign of how much interest it’s generating in technology circles.

In this article we take a look at the concept of Bitcoin and how this so-called cryptocurrency works.

Real world, virtual ­currency 

Today, currency or money is produced by the national banks of each country and is accepted as legal tender to be exchanged for goods or services. While we take it for granted, currency is a pretty abstract concept made real by a few pieces of paper and metal which we can exchange for products that have value to us.

It used to be that countries like the United States backed up its ­currency with gold reserves but since 1971 this is no longer the case and now its value is determined by governmental regulation or law. This form of money is also known as fiat currency.


CRYPTOCURRENCY:  A strange revolution on the Net has started a form of currency known as Bitcoin.

Then we have credit cards and online payment gateways like Paypal which make it possible to conduct a transaction without ­actually exchanging hard cash.

However, when you drill down to it, the system is always based on currency produced by the national banks.

Over the past few years, though, a strange revolution on the Net has started a form of currency known as Bitcoin, ­created by private ­individuals ­without national bank or ­government involvement.

In fact, the actual creator of Bitcoin itself has been shrouded in mystery — although credited to Satoshi Nakamoto, the name is believed to be a pseudonym and while a few individuals have been identified, none have been definitively proven to be the elusive ­creator.

V for volatility 

Being digital, Bitcoin itself has no built-in intrinsic value, except what its users assign to it. As such, the price of Bitcoin can vary quite a bit.

As a sign perhaps that the ­currency is gaining more ­acceptance, the value of Bitcoin has gone up in the last few years — today, the price of a single Bitcoin hovers at around RM1,300, although it has gone up as high as RM5,000.


VALUABLE: Today, the price of a single Bitcoin hovers at around RM1,300, although it has gone up as high as RM5,000. — AFP

When it first started, a single Bitcoin was worth very little, and slowly rose to US$1 (about RM3.10) and finally to its current value.

However, if you’re thinking of buying Bitcoin as a form of investment, do be aware that the sheer volatility of Bitcoin does mean that your virtual currency could be worth nothing in the future, or it could be worth a lot.

Is it legal?

This is perhaps the crux of the matter — is Bitcoin legal or illegal?

So far, Bitcoin itself is not illegal and in most countries, there are no restrictions to its use amongst ­parties who accept it as currency.

However, some countries have moved to limit the use of Bitcoin. China, for example, does not allow financial institutions to deal with Bitcoin.


LEGAL TENDER?: A shop in Hong Kong. Some countries have moved to limit the use of Bitcoin. China, for example, does not allow financial institutions to deal with Bitcoin. — AFP

The situation is similar here and Bank Negara has released a short official statement on Bitcoin in January, stating that “... Bitcoin is not recognised as legal tender in Malaysia. The Central Bank does not regulate the operations of Bitcoin. The public is therefore advised to be cautious of the risks associated with the usage of such digital currency.”

Last month, The Star ran a story on the dangers of Bitcoin (Be wary of virtual money, M’sians told) but the currency is still widely used in ­technology circles. According to Nook Malaysia chief executive Daniel Yap, the fact that it is not “legal tender” does not make its use a crime. It simply means that Bitcoin is not regulated by Bank Negara and thus will not be recognised by any bank or financial institution in this country as legal tender.

However, it is not illegal for ­private businesses and users to deal in Bitcoin and Nook Malaysia is one of the local companies that accepts Bitcoin.

According to Yap, even if the government moved to ban Bitcoin use, it would be difficult to stop private individuals from dealing in it.

What is Bitcoin?

Bitcoin as a concept is simple — it’s essentially digital currency. Dig deeper into the concept, however, and it gets fairly complicated.

Bitcoin (or BTC which is also the symbol used for the currency) is defined as a form of ­cryptocurrency that utilises peer-to-peer ­transactions, a decentralised system where users across the Internet handle the payment network ­without a central authority or any kind of middlemen.

Users can make transactions and get paid in Bitcoin almost immediately, much like how it works with more conventional systems like PayPal.

However, where it differs is that because Bitcoin transactions are managed by a peer-to-peer system without various companies (such as your credit card company or PayPal) taking a “cut” of the money, the transaction charge for dealing in Bitcoin is either nil or a lot lower.

As the transactions are processed by machines on the peer-to-peer network, the “peers” within the network actually receive the ­transaction fee if there is one. This means that transaction fees are received by the community itself instead of a third party.

As for security, users on peer-to-peer network who run the full Bitcoin client have a copy of a virtual ledger called the “block chain” — this contains a list of every Bitcoin transaction ever processed.

The authenticity of each ­transaction in this ledger is ­authenticated by digital signatures and as every person running the full Bitcoin client has a copy of it, the transactions are also checked against others in the network.

As you may well imagine, the block chain is quite large and ­getting larger every day — last we checked, it was about 14GB in size.

Get started

Using Bitcoin to pay for goods and services is actually easier than trying to explain it. To get started, all a user needs is to install the ­wallet application, which is ­available for Windows, Mac OS X, Linux and even Android.

At its most basic, the wallet app allows users to send and receive Bitcoin currency. While you can run a dedicated application on your PC to send and receive Bitcoins, some sites like Blockchain.info also allow you to perform transactions using a simple web browser.


[VIRTUAL MONEY: A digital wallet used to store Bitcoins is displayed at a Bitcoin conference on at the Javits Center in New York City. — AFP

To be clear, sites like Blockchain.info are not “online banks” and do not actually keep your Bitcoin ­currency — they simply make ­transactions more convenient.

Android smartphone users can download the Blockchain app for sending and receiving Bitcoin ­currency, but due to Apple’s ­restrictions, there is no such app on iOS.

To receive money, every person gets a public address, which is a long string of letters and numbers. For convenience, this string of ­letters and numbers can also be represented by a QR code, which can be scanned by smartphones with a Bitcoin app.

This public address allows other users to deposit money into your account but not take money out from it.

The current value of a ­single Bitcoin is hovering at about RM1,300, which is probably too large to pay for most goods or ­services. However, it is possible to send a fraction of a Bitcoin — ­currently, a single Bitcoin can be split up into a fraction of up to a million, so you can send it in much smaller denominations.


A Numoni Bitcoin Automatic Vending Machine

Once you install the wallet application, you can actually get bitcoins either by receiving it from other users, or buying it from an “exchange” or simply mining for it.

An exchange is an online ­company that will sell you Bitcoins for real money. A relatively new development in this country is the so-called Bictoin AVM (automatic vending machines), where you trade real cash for Bitcoin.

When we first started writing this story, there were two Bitcoin AVMs — one in Bangsar Shopping Complex in Kuala Lumpur and another in Gurney Plaza, Penang. There is also a local website at ­cryptomarket.my which sells Bitcoin Scratch Cards of various denominations similar to mobile phone credit top ups.

Private address

Every Bitcoin wallet app has what is called a private address which is similar to your public address in that it’s also represented by a long string of letters and numbers. This private address is essentially the key to unlocking your wallet and allows you to send out Bitcoin currency to others.

Most Bitcoin wallet apps hide your private address from you since it’s not necessary to know it to send or receive Bitcoin.

However, most wallet apps allow you to “backup” this private address by printing it out or writing it down to be stored in a safe place.

It’s important to never reveal your private address, as this ­represents your actual wallet. Anybody who knows your private address can effectively take control of your ­wallet and transfer all your Bitcoin out of it into their own ­wallet.

Mining for more

Mining is the term used to refer to machines that run special software to “mine” for bitcoins. Although the term mining is used, what a machine that runs the ­mining ­software ­actually does is process ­transactions and secure the network, as well as keep everyone in the Bitcoin ­network ­synchronised.

Processing of transactions and securing the network involves a ­highly secure and complicated encryption system and as such requires pretty hefty computing power.

In the early days of Bitcoin, ­individual users could easily use a PC to mine for Bitcoins. But as more Bitcoins have surfaced, the system, by design, has become more ­complicated and requires specialised machines running powerful ASIC (Application Specific Integrated Circuit) chips.

As such, a number of companies have sprung up around the world that run specialised machines ­dedicated to mining for Bitcoins.

As an incentive for contributing to the system, Bitcoin miners get a twofold reward — first, in the form of transaction fees, and second, the system itself can reward miners by producing new Bitcoins.


NOT EASY TO MINE: Bitcoin mining hardware — each specialised ASIC-based mining machine is equivalent to 180 PCs! — AFP

Don’t expect to be able to easily mine for Bitcoins using a regular PC — each specialised ASIC-based ­mining machine is equivalent to 180 PCs with powerful graphic chips installed and as such, using a regular PC for mining could take years to yield any Bitcoins.

Regular users who still want to try mining for Bitcoins can band together to share computing power over a network by joining what’s called a “mining pool”. If you’re interested in mining for Bitcoins check out www.bitcoinmining.com.

Future of Bitcoin

In many ways, Bitcoin is still in its infancy with many countries ­taking a wait-and-see approach as to whether to accept as legal tender.

This lack of regulation also means that there is effectively no enforcement when there is theft — while there are ways to trace the perpetrators, there is no way to force Bitcoin thieves to return what they’ve stolen.

Money Talks

There are hundreds of ­vendors across the world that accept Bitcoin as a valid form of ­currency in exchange for goods and services.

While Bitcoin acceptance has grown in many neighbouring countries, including Singapore and Thailand, according to coinmap.org, which keeps a list of worldwide businesses that accept Bitcoin, only three businesses in Malaysia currently accept Bitcoin as a form of payment. The three are The Nook Bangsar (nook.my), Ked.ai (ked.ai) and Footsteps (www.footsteps.com.my).

Daniel Yap started accepting Bitcoins as a
Daniel Yap started accepting Bitcoins as a "social experiment" since November, to help encourage its use in this country.

The chief executive officer of Nook Malaysia, Daniel Yap, says he started accepting Bitcoins as a “social experiment” since November. Yap, who operates a co-working space in Bangsar, started to accept Bitcoin to help encourage its use in this country.

“If you don’t encourage people to use it, then it will never be adopted,” he said

“Bitcoin may not be the ­ultimate form of ­cryptocurrency or decentralised currency, but it’s certainly the most well known. But the whole ­movement is beyond Bitcoin, as it’s about going towards unregulated ­currency,” he said.

Right now, though, the ­percentage of customers who pay via Bitcoin for Nook’s co-working space is very small, according to Yap, and it’s mostly foreigners.

Muaaz Mohamad Nor, owner of Footsteps who operates kayak tours and sells outdoor gear, says that the number of customers who pay via Bitcoin are similarly small, although in his case, they’re mostly Malaysians.

“My opinion is that there are three factors that affect Bitcoin adoption — education, Internet access and desperation,” said Muaaz.

Muaaz Mohamad Nor says that accepting Bitcoin is better for a 'mom-and-pop' style shop like his.
Muaaz Mohamad Nor says that accepting Bitcoin is better for a 'mom-and-pop' style shop like his.

Muaaz explains that in countries where the first two criteria are met, weak currency will usually push people to start adopting Bitcoin as a form of currency.

“The practical reason for me to start accepting Bitcoin is that it’s relatively low-cost for mom and pop shops like mine, and in the wider view, I like the idea of an alternative to fiat currency,” he said.

Unlike fiat currency, which derives its value from goverment regulation or law, Bitcoin’s value is determined by its users and the value they place on the ­currency.

“If you look at the value of Bitcoin, it suffered three major crashes over the years but its value has quickly risen again. You can’t say that about most other currency crashes,” he said.

According to Muaaz, he used to own some 5,000 Bitcoins which he bought for just five euros in 2007 when he was studying and living in Germany.

“Back then it was hip to pay for stuff using Bitcoin,” he said. When asked about how much of those 5,000 Bitcoins he still holds, Muaaz laughs and said, “None of it!” At current exchange rates, if he had held on it would be worth some RM6.35mil.

However, both Muaaz and Yap have opted to hold on to the Bitcoins they’ve obtained from their businesses rather than ­convert it to cash.

Bitcoin business: Arsyan Ismail says that he likes Bitcoin because of the decentralised, open and instantaneous nature of the cryptocurrency.
Arsyan Ismail says that he likes Bitcoin because of the decentralised, open and instantaneous nature of the cryptocurrency.

Arsyan Ismail, chief excutive officer of 1337 Tech Sdn Bhd and creator of. Ked.ai, an online ­marketplace that also accepts Bitcoin, says that he likes it because of the decentralised, open and instantaneous nature of the cryptocurrency.

Currently, Arsyan enables merchants who sell products on Ked.ai to accept Bitcoin and will convert it to cash for them automatically. However, like the other local online retailers, ­payments made with Bitcoin on Ked.ai still amounts to a very small ­percentage.

Arsyan says the biggest hurdle to Bitcoin acceptance is that most people find it very hard to understand the concept, and there are no local exchanges for buying and selling Bitcoin.

“What I’ve seen in Malaysia is that there are two sides — a community of miners who have Bitcoins but don’t know where to sell it, and on the other side, a group who wants to buy Bitcoin but don’t know where to get it,” he said.

The function of Bitcoin exchanges is to bring these two groups together but without an official one the flow of Bitcoins from miners to buyers is a little more complicated, he said.

Contributed by Tan Kit Hoong The Star/Asia News Network

Bitcoin Mining Boom Sputters as Prospectors Face Losses 

Portland: The bitcoin mining rush is sputtering.

Speculators, known as miners, use powerful computers to solve complex software problems and verify transactions to unlock new bitcoins. They’re finding that the enterprise isn’t as profitable as it once was.

Drawn by the virtual currency’s jump in value last year, digital prospectors have turned the mining industry into an arms race as they buy expensive computing equipment and gobble up electricity. While that worked well as long as bitcoin’s value kept rising, smaller players are now being crowded out by bigger competition, high utility bills and declining prices.

“If you mine at the moment, you have to be very lucky to get anything,” said Mehmet Vatansever, who bought $16,000 worth of mining computers in February to chase after new bitcoins. “It’s a very difficult business.”

Mining, a nod to the excavation of minerals and metal ore, is entirely digital and part of bitcoin’s design, so that the money self-regulates supply and prevents out-of-control inflation. The mining process gets increasingly complicated as more bitcoins are created, driving demand for computing power.

Bitcoins, which jumped to more than $1,200 last year from $12, were trading at about $420 apiece yesterday, according to the CoinDesk Bitcoin Price Index, an average of prices across major global exchanges. China’s tighter controls on alternative currencies, the implosion of the Mt.Gox exchange and a U.S. Internal Revenue Service ruling that bitcoins should be taxed as a property have all weighed on the virtual currency.

Used Equipment

While he has been able to create new bitcoins, Vatansever soon discovered that his equipment was on track to earn less than his monthly utility bill of $480. After selling his computers on EBay Inc. in April, Vatansever estimates that he lost a total of about $6,000 on his mining adventure.

In the past week, miners made $14.9 million in revenue, compared with a weekly average of $25.2 million in December, according to Blockchain.info, a bitcoin-data aggregator. The figures represent the number of bitcoins mined plus transaction fees, multiplied by the dollar-based market price.

EBay now features more than 1,600 listings for mining computers, many of them used.

“The mining market has evolved from being mostly isolated ventures to more organized entrepreneurial ventures that are still racing to get an edge with increasingly fast equipment and lower electricity costs,” Gil Luria, an analyst at Wedbush Securities Inc., said in an interview. “At this point, the opportunity for individual miners is very small.”

Big Miners

While individuals give up prospecting, at least two other larger mining companies, KnCMiner and Cloud Hashing, are still generating profits. By scaling up operations, they’ve been able to save costs on cooling and power, making their computers more efficient and cost-effective. KnCMiner also sells mining computers to other miners.

KnCMiner, based in Stockholm, operates about 7,000 machines. While the mining company’s electric bill in March came to $450,000, the computers mined 21,000 bitcoins, according to co-founder Sam Cole.

Cloud Hashing, which lets people buy computing capacity in its data center and share in profits, mines about $230,000 to $260,000 worth of bitcoins a day, according to Chief Executive Officer Emmanuel Abiodun.

“We are profitable whether we sell contracts or not -- through mining,” Abiodun said in an interview. “Our business model can handle volatility in pricing.”

Sales Shift

Mining-equipment suppliers are feeling the cool-down firsthand. CoinTerra Inc., a manufacturer of the powerful computers used to crunch numbers for new bitcoins, has seen new sales shrink by 30 percent in the past three weeks from the preceding period, according to CEO Ravi Iyengar.

Mining-equipment suppliers are also detecting early signs of a shift to new virtual currencies. Approximately 250 KnCMiner customers switched their orders from $10,000 computers to similarly priced alternative-currency mining machines in the past three weeks, according to Cole.

Because they are newer, designed differently and currently mined by fewer people, currencies such as Litecoin can be more profitable, according to CoinWarz, which tracks mining activity.

“The new rush right now is Litecoin,” Colin Lusk, a network engineer in Portland, Oregon, said in an interview.

While he once mined only bitcoins, Lusk now uses five of his eight machines to produce Litecoins and other virtual currencies. Created in 2011, Litecoin is similar in design to bitcoin yet requires less computing power.

A $3,500 computer can produce $25 worth of Litecoins a day for $3 in electricity, while producing $20 worth of bitcoins would cost $17, Lusk said.

Math Problem

Andrew Korb, another miner, said buying bitcoins outright is easier than participating in the mining arms race. While Korb and fellow investors have spent 900 bitcoins on mining equipment since last year, they have only generated 77 units of the virtual currency, he said.
“People do the math,” said CoinTerra’s Iyengar. “If the price goes down significantly, people realize they may be better off buying bitcoins directly from an exchange rather than buying machines.” 

Contributed by