Cryptography: How is Bitcoin safer than your bank

Keynote at GeekCamp Singapore 2012 (http://geekcamp.sg/schedule/view_schedule/2012)

Fiat currencies and Bitcoin are valuable, despite being physically intangible, unlike gold is. However, while fiat currencies rely on government regulations to maintain their values and security, Bitcoin requires none of the authority interventions or appointed watchdogs, all thanks to cryptography.

This talk covers basic and intermediate topics on how cryptology aids in the working of Bitcoin P2P network.

Transcript

1. How is Bitcoin safer than your bank? Cryptography by U-Zyn Chua
2. U-Zyn Chua is not Cryptographer Economist
3. U-Zyn Chua is IT Consultant @ Security enthusiast Bitcoiner
4. How many... ? Bitcoiner? Knows about Bitcoin? Have no idea about Bitcoin?
6. What is Bitcoin? Distributed electronic cash protocol and a unit of currency
7. What is Bitcoin? Satoshi Nakamoto Genesis block on 3 Jan 2009 “Gone for good” since late 2010
8. What is Bitcoin?
9. What makes a currency? Scarce Predictable growth Secure Valuable
10. Production is halved every 4 years Never more than 21 million
11. ~USD 15/Bitcoin
12. Problems Currency creation Keeps value stable Fraud prevention
13. Cryptography No central bank No watchdog only No authority
14. How does Bitcoin work? Public-key cryptography Peer-to-peer network Proof-of-work
15. Public-key crypto 160-bit hash (SHA-256) 18YCR8bvxLaVCmbgY6eCavF733QDs1sQDT Base58-encoded Generate as many as you want 215,000,000,000,000,000,000,000,000,0 00,000,000,000 addresses per capita.
16. Public-key crypto
17. Transaction Public & broadcasted http://blockchain.info
18. Transaction 499335.01317523 1DkyBEKt5S2GDtv7aQw6rQepAvnsRyHoYM 105555.03133700 1933phfhK3ZgFQNLGSDXvqCn32k2buXY8a 79957.03133700 1FeexV6bAHb8ybZjqQMjJrcCrHGW9sb6uF 53000.03133700 16cou7Ht6WjTzuFyDBnht9hmvXytg6XdVT 50259.03133700 1CfPAfVDe1Br11SkNrk2bEMmMP3bAA5wRr 50130.03133700 13vJZKHKBirruXwmjMaRtakzPQRRHQit1S 50000.03133700 1P3S1grZYmcqYDuaEDVDYobJ5Fx85E9fE9 50000.03133700 1DEpjpftLbsGiCJvJDp2F2quVRnymV8U5Q 47458.03133700 1BBqjKsYuLEUE9Y5WzdbzCtYzCiQgHqtPN 44914.03133700 1MR6pXDZ6gpBVN8n61SqCNF61vU8ZzRu8Y 44512.03133700 1BVA88962SxcymHSfqXSy9F7cgXefi3zgt 40000.03133700 16Ls6azc76ixc9Ny7AB5ZPPq6oiEL9XwXy 40000.03133700 12HddUDLhRP2F8JjpKYeKaDxxt5wUvx5nq 40000.03133700 1cXNTyXj4xPGopfYZNY5xfSM1EPJJvBZV 38058.03133700 1FngtAcZsLfK89MNe7TqzyqVtSype8TiVD 38000.03133700 18Hsgq92AUB1PYLU6MUMQXiwdebaDRo9oQ 35000.00000000 1DAmsh8tHUtH2cVUDMxnDkKr8SaPNkb36h 31000.03133700 12ib7dApVFvg82TXKycWBNpN8kFyiAN1dr 30000.03133700 1MyGwFAJjVtB5rGJa32M6Yh46cGirUta1K Bitcoin richest
19. Transaction 499335.01317523 1DkyBEKt5S2GDtv7aQw6rQepAvnsRyHoYM 105555.03133700 1933phfhK3ZgFQNLGSDXvqCn32k2buXY8a 79957.03133700 1FeexV6bAHb8ybZjqQMjJrcCrHGW9sb6uF 53000.03133700 16cou7Ht6WjTzuFyDBnht9hmvXytg6XdVT 50259.03133700 1CfPAfVDe1Br11SkNrk2bEMmMP3bAA5wRr 50130.03133700 13vJZKHKBirruXwmjMaRtakzPQRRHQit1S 50000.03133700 1P3S1grZYmcqYDuaEDVDYobJ5Fx85E9fE9 50000.03133700 1DEpjpftLbsGiCJvJDp2F2quVRnymV8U5Q 47458.03133700 1BBqjKsYuLEUE9Y5WzdbzCtYzCiQgHqtPN 44914.03133700 1MR6pXDZ6gpBVN8n61SqCNF61vU8ZzRu8Y 44512.03133700 1BVA88962SxcymHSfqXSy9F7cgXefi3zgt 40000.03133700 16Ls6azc76ixc9Ny7AB5ZPPq6oiEL9XwXy 40000.03133700 12HddUDLhRP2F8JjpKYeKaDxxt5wUvx5nq 40000.03133700 1cXNTyXj4xPGopfYZNY5xfSM1EPJJvBZV 38058.03133700 1FngtAcZsLfK89MNe7TqzyqVtSype8TiVD 38000.03133700 18Hsgq92AUB1PYLU6MUMQXiwdebaDRo9oQ 35000.00000000 1DAmsh8tHUtH2cVUDMxnDkKr8SaPNkb36h 31000.03133700 12ib7dApVFvg82TXKycWBNpN8kFyiAN1dr 30000.03133700 1MyGwFAJjVtB5rGJa32M6Yh46cGirUta1K Bitcoin richest 500k BTC ~ USD 7.5 million stored in a PUBLIC string!
20. Mining Adding tx records to ledger Confirm transactions Profit (50 BTC / block) ???
23. Block chain Broadcasted transaction database since Day 1 (Jan 3 2009) 1 block every 10 minutes (how?) Currently at 2.1GB
24. Block Field Purpose Version Client version Previous hash Hash of previous block Merkle root Hash of transactions Timestamp Current UNIX time Target Target hash Nonce 32-bit number
25. Target 1 block every 10 minutes (this is how!) A (max) target hash output Generate lower hash than the target The lower the target is, the harder it is
26. Target Let’s look back at block’s component and assume that we want to make a hash with the following target 0x0000000000000fffffffff.....
27. Target Difficulty is adjusted every 2016 blocks (2 weeks) Based on time it takes for the last 2016 blocks Current chance to find a block: 0.0000000000000001062717181778399105906984800640202593058
28. Block generation
29. Cryptography is the authority! is the watchdog! Many other clever features of Bitcoin
30. Security incidents
31. Security incidents
32. Security incidents
33. Is Bitcoin safe? https://github.com/bitcoin/bitcoin Reward: USD 140 million
34. Bitcoin vs Bank Bitcoin Bank Trust no one Trust bank Open source Closed source Proven & known security Unknown & obscured security Can’t phish Prone to phish
35. Questions? @uzyn chua@uzyn.com