Death Rites

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A friend of mine told me an interesting anecdote the other day. An aunt had recently passed away. At the wake, there was a funeral service held by the funeral home itself. The representative, according to my friend, was “extreme born again” and as she delivered a fiery sermon, one of the cousins, who belonged to another sect, got up and went outside. As he did so, another cousin whispered, “Oh look, he left because his Jesus and her Jesus don’t get along very well.”

After that came a mass composed of old people wearing yellow, and my friend wondered if his aunt would get confused as to which heaven she was supposed to enter.

I replied that some Filipino-Chinese customs were more bizarre as there would be a mix of Christian and Buddhist or Taoist beliefs — as well as perhaps some folk beliefs. Imagine a priest or pastor delivering a sermon while at his back is an altar with incense and a food offering for the deceased. A really elaborate funeral affair would have a paper-mache house, cars and other property that would later be burned so that the deceased would have these in the afterlife. There is also the constant burning of paper symbolizing money, for the deceased to spend in heaven.

Strict adherents of feng shui would check your birth dates at the door. If your Chinese zodiac sign conflicts with the deceased, you won’t be allowed to enter and view the corpse, even if you are a relative. I learned about this a few years back when I had a student whose brother had passed away and she wasn’t allowed to go to the wake.

Some still adhere to the practice of hiring mourners to wail loudly at the burial procession, to show the deceased how sorrowful everyone is at their passing. And then there is the ritual of wearing only white clothes for certain period of time (a year, if I’m not mistaken) after the funeral.

The interesting thing is that when I talk to some friends who follow these beliefs, I learned that most of them do so not because they really believe in the practices, but because that is what is expected of them by the community. In other words, they don’t want to be seen as ignorant or rebellious of the social customs around them.

This got me to thinking what it would be like on my own funeral. I’ll probably break so many customs and traditions. For one, I will forbid any religious services whatsoever. Eulogies and poetry-reading are acceptable. Anyone can come wearing whatever they like, even the color red. There will be jazz music playing all day long.

My own idea of a death ritual is it should be a celebration of a life well-lived, the perfect dessert to a satisfying meal. I see no purpose in burdening others to follow elaborate rituals or threatening them with eternal hellfire.

I do not know what lies beyond death, or even if there is life after death. What matters is that I have fully lived and loved in this one.

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

Cryptocurrency 101 (Part 5)

Photo by JD Hancock

Part 1     Part 2     Part 3    Part 4

Having written about the basics of cryptocurrency and blockchain computing the past 4 weeks, I now want to conclude this series by addressing certain common objections that people inevitably make every so often. Since most people are familiar with bitcoin, I will use bitcoin as a general term. So when I mention “bitcoin” it not only refers to bitcoin per se but to other types of cryptocurrency as well, unless explicitly stated.

  • Bitcoin is not backed by anything.

People who make this objection usually say that our money is backed up by our government’s gold reserves or something like that, but that is actually an argument from ignorance. As early as 1931, Britain abandoned the gold standard of money and it was quickly followed by the US in 1933. Today, no government in the world uses the gold standard.

Instead we are now using fiat money — which is essentially money that the government mandates to be accepted as a means of payment. In other words, our money today is not backed by anything except the government’s say-so that it is valuable. Even then, even our government does not control the value of our currency but is instead dependent on the world market for our currency — like any other currency in existence — cryptocurrency included.

The underlying implication of this objection is that bitcoin has no value in itself. It’s all just electronic signals in a computer. But this overlooks the fact that the same can be said for fiat money. It has no value for itself — it’s just pieces of paper and bits of metal. If the government collapses, the currency becomes worthless.

Even gold and silver have no intrinsic value other than being rare and shiny perhaps. Now, I would even argue that the intrinsic value of bitcoin lies in the security of its network as well as its portability. No other currency can match bitcoin’s portability. I can go to any country that has internet and send the to anyone or receive them from anyone in the world. Even if entire countries like the US or China gets blocked off from the internet, bitcoin will still be running and I will still have access to my coins because they can’t be blocked or frozen by any government.

  • Bitcoin has no central authority.

Again, this comes from a mindset that a country’s currency is backed (or controlled) by its government. Someone told me, “If the Philippine peso fails, then I know who to run to or to blame.”

My response is, if the government fails, well yes, you can blame the government but there is now no government to run to. And so what if you can blame the government? That will not bring back the value of your money.

In fact, the one using this objection misses the point entirely that the power of bitcoin resides in its being decentralized — that it is quite difficult for any one entity to control and manipulate the currency because of the way the blockchain works. That it has no central authority is actually an advantage rather than a disadvantage. As I mentioned in #1, no one and I mean no one can freeze my bitcoins. As long as I have my private keys, I will always be able to access my bitcoins and no government or any other entity can stop that.

  • The bitcoin market is too volatile and risky.

This is true. When I started on this series, the price of bitcoin was at an all-time high of around $2900. Since then, it has dropped briefly to around $2,200 and is now hovering at around $2,600. Those are some pretty wild swings in a four-week span.

However, I approach risk not in terms of avoiding it but in how to manage it. As a businessman, I understand that there is risk in everything that I do. There is risk even in crossing the street or driving my car to work. One cannot avoid risk. One can only manage it.

The way I manage risk when investing in bitcoin is to use only extra money — money that I can afford to lose or to keep dormant for a few months or even a few years. That way, if the price of bitcoin drops suddenly, I won’t panic and begin to sell it off because I need the cash. I can just sit tight and wait for it to go up again.

And I’m confident that bitcoin (and other cryptocurrencies) will still go up in value. We have only begun to scratch the surface of this new type of currency. I believe there is so much more in store and so many other uses for it that will be developed in the future — maybe not necessarily with bitcoin itself but with other cryptocurrencies offering more advanced features like smart contracts and so on.

It used to be that only a small group of geeks understood bitcoin, and that circle eventually grew wider and wider, and it grows wider still up to today when even non-geeks are now interested in investing. Simple economics dictate that when the demand goes high for a commodity of limited supply, it’s price can only go up.

 

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

Cryptocurrency 101 (Part 4)

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Part 1     Part 2     Part 3

Last week, I discussed 2 out of 3 key ideas of blockchain technology — how it uses cryptography to protect transaction data and how it uses distributed networks to maintain data integrity — that is, complete copies of its transaction ledgers can be freely downloaded and maintained by “miners,” thus securing the blockchain network.

The third key idea explains why anyone would bother downloading and running  “mining” software. Why would you spend resources such as computer hardware and electricity to run this piece of software? The answer is that you are rewarded for doing so. That is the third key idea — incentivized computing.

To understand this, let’s go back to the idea of a blockchain as a ledger of transactions. In a physical ledger like a notebook, transactions are recorded sequentially in different pages. You start at page 1, then 2, and so on. On the blockchain, transactions are recorded in “blocks” which are produced sequentially over time, thus they are “chained” together. The first block (usually called the genesis block, block 1, or block 0) is produced before the second block, the second before the third and so on. Each block contains a certain number of transactions.

Now, each miner in the network has the opportunity to produce a block. The miner that produces the block is rewarded by being given a certain amount of tokens or coins, as well as the fees for the transactions in that block. (As mentioned before, making transactions on a blockchain network usually involves paying some kind of fee — like the fee one pays to send money via wire transfer. So for example, to send 10 bitcoins to another account, one would pay 0.0001 bitcoin as a transfer fee.)

So how is the miner of a particular block determined?

At the beginning of every cycle, the miners are tasked to solve a mathematical problem. This problem is automatically produced by the blockchain program itself and is given to all the miners. When a miner solves the problem, it broadcasts the solution, which is verified by the other miners and once verified, that miner is then rewarded with the authority to produce the block.

I’ll try to make it clearer. Imagine that there are five accountants seated in a circle. Let’s call them A, B, C, D and E. Each accountant has a phone, pen, paper and a loose-leaf ledger (e.g. a ring binder where you manually add pages instead of a notebook that already has the pages bound together).  In the middle of the circle is a mysterious printer which produces mathematical problems for each accountant to solve.

Now, all of these accountants are ambidextrous and are capable of writing with their right and left hands at the same time. Their left hand is always working on a mathematical problem and their right hand is always ready to write transaction details. Each time someone wants to make a transaction on the network, one or more of the accountants gets a text message with the details of that transaction, which they write with their right hand.

That transaction may contain something as simple as “transfer x amount of coins from account abc to account xyz” and then contain a verification key to validate that transaction (this is handled by the private-public keypair discussed in part 3).

The accountant who receives that message then broadcasts it to the other accountants who also write the details on their own papers. So with their left hand they trying to solve a problem while with their right hand they are recording a list of transactions. Now, let’s say accountant B solves the problem. He then announces the solution to the other accountants who then check and verify that it is indeed correct. Once verified, B then gets the privilege of making a final copy of the transactions, and then add that page to his ledger. The others will then make an exact copy of that page and add it to their own ledgers. In addition, B gets bonus pay for solving the problem.

Then the mysterious printer in the middle produces another problem, and the cycle begins again.

The accountants in that example are the equivalent of the mining computers that run the blockchain. Everything that I’ve described is done automatically by the program and requires no human intervention except for initiating a transaction, of course.

I should note that I have given a simplified narrative of the mining process and did not bother going into more details such as what if one of the accountants has malicious intent (simulating a hacked miner), or is it possible for a transaction to be excluded from the final list of transactions for a block, and so on. These issues would just confuse the novice. I guess it should suffice to say that many exceptions have been considered and addressed, and the more a coin matures, the more updated and upgraded its core code becomes.

I have also only discussed one type of mining — this one is called proof-of-work. There are other types of mining — proof of stake, delegated proof of stake, etc. Again this is to avoid confusion, and you may read more about these other methods once you have gained the basic idea.

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

Cryptocurrency 101 (Part 3)

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Click here for Part 1

Click here for Part 2

What is blockchain technology and how does it work to provide decentralized transactions?

Blockchain technology is built on 3 key ideas:

  1. Private-Public Key Cryptography
  2. Distributed Networks
  3. Incentivized Computing

Cryptography is the process of writing and reading coded messages. The process of writing it is called encrypting and the process of reading it is called decrypting. In order to properly read and write a message, one needs a key which is the formula to unlock the message.

One of the simplest methods of encryption is direct substitution. An example of this is for you to take a sheet of paper and write the letters A to Z in one long column downwards. On the next column, beside the letter A, start with another letter, for example M, then continue downwards. So you would write N beside B, O beside C, and so on until you get to Z and then you start again at A.

This now is your key.

That means the when you want to write the letter A, you should instead write M. And when you want to write the letter B, you should write N, and so on.

Using this method, the word “apple” will be written as “mbbxq” and the word “balloon” will be written as “nmxxaaz” and so if we write an entire message this way, it will appear as gibberish to someone who does not have the proper key to decode it. Of course, a simple code like this can be broken very easily even by a ten-year old, which is about the age I got interested in this sort of thing.

So one can make a more complex formula, for example a=”45w”, p=”x3e”, l=”ch”, e=”6a” so now the word “apple” will read as “45wx3ex3ech6a” and this will be a more difficult code to break. Modern encryption takes advantage of the power of computers to do very complex calculations and so are many orders of magnitude harder to break than these simple encryption methods.

One of the most popular modern encryption technologies is called the private-public keypair. These keys are typically very long numbers which may look like this: “3048024100C918FACF8DEB2DEFD5FD3789B9E069EA97FC20.” Your private key is yours alone while your public key is the one you give to people you want to transact with. For someone to send you an encoded message, he only needs to know your public key. Once he encodes the message, even he will not be able to decode it, as you will need the private key to do that.

Blockchains use this method to ensure that your transaction is authentic, authorized and secure. In fact, this method is more secure than simply typing a password on a web browser.

Next, the blockchain uses the idea of a distributed network. Most of our transactions use the client-server model wherein the data resides in a central repository. For example, if we are doing online banking, all the data resides in the bank’s servers (and nowhere else). Therefore, if someone would be able to hack that server and modify certain transactions, it would be possible for that person to make a cash transfer of P1,000 to his account appear to be P1,000,000. If he were then able to withdraw that amount before the hack was discovered, then he would have gotten away with free money.

The same thing happened to a local bank several weeks ago where there was an IT glitch which caused some people to see their bank balances suddenly go to zero or negative, while others were surprised to see more money than they should have in their accounts. In fact, some were able to withdraw this excess cash before the glitch was discovered and all machines were taken offline to prevent further damage.

This happened because the transaction records were centralized and any alterations (whether authorized or malicious) to those records will immediately affect the clients accessing those records.

In contrast, cryptocurrency uses a distributed system which essentially has multiple transaction ledgers. Anyone can download and secure a copy of these ledgers. Transactions are recorded in segments called blocks, and these blocks are produced regularly and sequentially — that is why it is called a blockchain.

The software to record transactions and secure the blockchain network is called a “miner” or a “node,” and it is typically open-source and free for anyone to download and run. So anyone who does this will have a complete record of the entire blockchain since the beginning. It’s like having a complete record of all your bank’s transactions on your computer.

So now, there is no central repository of the data, and the integrity of the data can be quickly compared with all the other miners or nodes in the network. For example, if someone were able to hack my computer and change the transactions there, once the program verifies that data with the rest of the network, it will discover that my records are different from the vast majority of other miners and thus will automatically reject those hacks. For a hack to be successful, the hacker must be able to manipulate the records of 51% of all the miners in existence — a feat which is near-impossible for popular cryptocurrencies like bitcoin or ethereum which has thousands and thousands of miners all over the world.

But why would someone want to download and run a miner or node on his computer? We’ll tackle the next key idea, incentivized computing, next week.

 

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

Cryptocurrency 101 (Part 2)

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Click here to read Part 1.

Last week, I said that a key concept in cryptocurrency is the idea of a trustless transaction. Let me now expand on that idea.

A lot of things we do with our money involves trusting an entity other than the one with whom we are transacting. That means if Jose wants to buy a watch from Maria, he has to trust another person or entity other than Maria, and likewise for Maria.

Let’s go with the clearest example first. Jose sees a watch on the internet and wants to buy it. He sees that the merchant is Maria and after doing some background research, he decides that Maria is trustworthy and is not a scammer. So he transacts and buys the watch using his credit card. Aside from trusting Maria, he is also TRUSTING:

  1. The owner of the website to handle his transactions securely. But this can also be checked visually by looking at the address and making sure the transaction is sent over a secure layer (https instead of http).
  2. The owner of the website not to use his credit card information maliciously. Since Jose has entered all the pertinent details of his card, the website owner can theoretically store this information and use it for ill intentions.
  3. The credit card issuer to settle the payment for him, and then bill him correctly afterwards.

These are some reasons why people are still uncomfortable with online transactions using credit cards, although that number is growing smaller.

But from Maria’s point-of-view, there is also some trust involved. She is also trusting the credit card company to pay her.

But what about if Jose uses physical cash to transact? If he goes to Maria’s store and buys the watch and hands over his money, does he still need to trust a third party? Well, yes, he is effectively trusting the Philippine government which is backing up the value of the pieces of paper he is handing over to Maria, and Maria is also trusting the government for the same thing — that the pieces of paper she is receiving has value. If Maria received that money now and 5 minutes later, she hears on the news that the government has just declared bankruptcy, that money will be worthless.

Now what if Jose simply keeps his money in the bank? There is still trust involved. Jose trusts that his money is “safe” in the bank and that when the time comes when he needs to withdraw it, the money will be readily available. But what happens when there is bank run or when the bank declares bankruptcy? Jose will be unable to recover his money beyond the maximum amount he can claim via insurance.

This issue of trust could be felt quite recently when a local bank had some problems with its systems that caused some depositors to have negative balances, double transactions, and other such errors. This caused some people to lose their trust in that bank and transfer to another bank — but what they don’t realize is that the very same thing could also happen to whatever bank they run to. Human error, carelessness and negligence is unfortunately universal.

What I hope you see here is that the power of our money system today still derives from central authorities from banks to central banks to governments. These central authorities are prone to security failures such as hacking, or even simple mistakes in programming, or manipulation by those in power within that authority.

Cryptocurrencies, by their very nature and programming, try to move away from the idea of a central authority to being truly decentralized. That does not mean that there are no rules, but that the rules, once set, will be virtually impossible to hack or to manipulate, even by the program authors themselves.

To understand that, we have to understand a key architecture of cryptocurrency called the blockchain, which I will explain next week.

Originally published in Sunstar Davao.

Email me at andy@freethinking.me. View previous articles at www.freethinking.me.

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