Bitcoin is a decentralized P2P digital currency in which coins are generated by a distributed set of miners and transaction are broadcasted via a peer-to-peer network. While Bitcoin provides some level of anonymity (or rather pseudonymity) by encouraging the users to have any number of random-looking Bitcoin addresses, recent research shows that this level of anonymity is rather low. This encourages users to connect to the Bitcoin network through anonymizers like Tor and motivates development of default Tor functionality for popular mobile SPV clients. In this paper we show that combining Tor and Bitcoin creates an attack vector for the deterministic and stealthy man-in-the-middle attacks. A low-resource attacker can gain full control of information flows between all users who chose to use Bitcoin over Tor. In particular the attacker can link together user's transactions regardless of pseudonyms used, control which Bitcoin blocks and transactions are relayed to the user and can \ delay or discard user's transactions and blocks. In collusion with a powerful miner double-spending attacks become possible and a totally virtual Bitcoin reality can be created for such set of users. Moreover, we show how an attacker can fingerprint users and then recognize them and learn their IP address when they decide to connect to the Bitcoin network directly.
Bitcoin, a virtual currency created in 2009, has resulted in the unlikely pairing of the underworld criminals with the Harvard educated Winklevoss brothers. The online currency can be obtained by “mining” through solving complex equations, and can be bought and sold on Bitcoin Exchanges. It is primarily utilized for investment in Bitcoin financial products as well as speculating on the value of the currency. It is also used as a method of payment for legal and illegal goods and services. This comment addresses the regulatory issues Bitcoin faces, namely the regulation and taxation of financial products. After providing a fundamental definition of Bitcoin and how it operates, this Comment explores issues stemming from anonymity, price volatility, and use in criminal activity. It then provides an analysis of classifying and regulating Bitcoin as currency and examines how FinCEN and Treasury Regulations issued by the IRS will reduce criminal activity stemming from anonymity. Next, it discusses how SEC and CFTC regulations could stabilize Bitcoin’s volatile market value, and explains why the IRS was incorrect to classify Bitcoin as property. It concludes by addressing the policy implications of classifying Bitcoin as currency under various regulatory laws.
Bitcoin is a decentralized, open-source cryptocurrency used to make private, peer-to-peer transactions anywhere across the world. Although the individuals involved are (mostly) anonymous, every Bitcoin transaction is a matter of public record; anyone can view every Bitcoin transaction ever made. Following the methodology developed by Evans and Lyons (2002), this paper adapts and estimates a FX microstructure model that emphases order flow, the difference between buyer- and seller-initiated trading volume, to the Bitcoin market Using a data set consisting of all major currency transactions occurring on the Mt. Gox exchange, our results are quite similar to prior microfinance research on traditional currencies insofar order flow is a significant determinant of Bitcoin spot rates.
Bitcoin is a distributed, virtual currency without centralized control. While a few services accept bitcoins directly, it is also possible to exchange bitcoins into fiat currency and vice versa. Bitcoins are effectively computation puzzles that are mined based on a bruteforce algorithm. As computation requires electricity, it can be stated that the miners are exchanging energy for bitcoins. However, electricity is not usually free and the energy efficiency of the mining devices can vary. Thus, some low-efficiency devices could be considered mainly as an environmental hazard because the expense of using the electricity exceeds the profits. The miners are competing with each other to find solutions, which has resulted in an arms race to use specialized hardware for mining. While this improves energy efficiency, the computational limit for profitable Bitcoin mining is still a moving target. In this thesis, we study and analyse past developments in this limit and try to estimate its future directions.
Lillian J. Ratliff, Carlos Barreto, Roy Dong, Henrik Ohlsson · 6 authors
As smart meters continue to be deployed around the world collecting unprecedented levels of fine-grained data about consumers, we need to find mechanisms that are fair to both, (1) the electric utility who needs the data to improve their operations, and (2) the consumer who has a valuation of privacy but at the same time benefits from sharing consumption data. In this paper we address this problem by proposing privacy contracts between electric utilities and consumers with the goal of maximizing the social welfare of both. Our mathematical model designs an optimization problem between a population of users that have different valuations on privacy and the costs of operation by the utility. We then show how contracts can change depending on the probability of a privacy breach. This line of research can help inform not only current but also future smart meter collection practices.
In the history of money bitcoin represents an outstanding medium of exchange, independent from central authorities. Therefore, it has experienced impressive demand which, combined with inelastic supply, has led to huge price appreciation. Nonetheless, transaction volume has not been increasing accordingly. At the core of this conundrum is the very poor performance of bitcoin as unit of account: dramatic deflationary price instability makes bitcoin just impractical for commerce, but completely unserviceable for salaries, mortgages, and deferred payments in general. Ametrano (2014a) has championed as Hayek Money the proposal to engineer cryptocurrencies with fully automatic algorithmic non-discretionary elastic supply: the monetary rule of pegging to a price index would dynamically rebase the outstanding amount of money and achieve price stability. It is proposed here to implement Hayek Money as multiple coexisting units of account wrapped around the unmodified bitcoin (or any other cryptocurrency). Prices would be stable in terms of these rebased-bitcoin units of account: different coexisting cryptocurrencies all backed by the same bitcoins, each one with its own floating bitcoin-equivalent rebasing index. These cryptocurrencies would define a new monetary standard, with striking resemblance to the gold standard as improved by the compensated dollar proposed by Fisher (1913). In this Fisher Money scenario bitcoin would be digital crypto-gold and exchange rates would be floating, not fixed, being just the relative prices of the respective cryptocurrency price indexes.
Bitcoin has two major roles: as currency and as financial asset. This paper attempts to address these roles: whether Bitcoin is a real currency, and what its financial features are. Using daily data of the exchange rates quoted from the world major Bitcoin dealer since the inception of Bitcoin and the spot market exchange rates, we calculate the triangle arbitrage asset price to decompose the features of this currency. The results suggest significant liquidity discount of Bitcoin and risk premium as a financial asset in terms of British Pound Sterling (2.46%) and Chinese Yuan (0.3%). There is idiosyncratic risk component associated with Bitcoin implied by the Granger causality tests. Bitcoin, as investment objectives instead of currency unit, is associated with excess risk and low returns. Such poor performance discourages investors to spend Bitcoin as currency and to pursue the arbitrage profit. Investors store and hold Bitcoin as fixed asset. In addition, both arbitrage stickiness and low Treynor ratio are persistent over time.
Kay Noyen, Dirk Volland, Dominic Wörner, Elgar Fleisch
Sensing-as-a-Service (S2aaS) is an emerging Internet of Things (IOT) business\nmodel pattern. To be technically feasible and to effectively allow for broad\nadoption, S2aaS implementations have to overcome manifold systemic hurdles,\nspecifically regarding payment and sensor identification. In an effort to\novercome these hurdles, we propose Bitcoin as protocol for S2aaS networks. To\nlay the groundwork and start the conversation about disruptive changes that\nBitcoin technology could bring to S2aaS concepts and IOT in general, we\nidentify and discuss the core characteristics that could drive those changes.\nWe present a conceptual example and describe the basic process of exchanging\ndata for cash using Bitcoin.\n
Provable data possession (PDP) is one of the techniques to ensure the integrity of data in storage outsourcing. Here in this paper, we speak to the creation of an efficient PDP method for distributed cloud storage to maintain the scalability of service and data migration. On the basis on homomorphic verifiable response and hash index hierarchy we projected a cooperative PDP (CPDP) method. We confirm the security of our method based on multi-prover zeroknowledge proof scheme, which can satisfy knowledge soundness, fullness , and zero-knowledge properties. As well, we expressive performance optimization mechanisms for our method, and in particular present an capable method for selecting finest parameter values to reduce the addition expenses of storage service providers and client. Our experiment shows that our solution introduces lower addition and communication overheads in evaluation with noncooperative approaches.
V okviru diplomskega dela je bila izdelana informacijska resitev, ki omogoca izvajanje razlicnih trgovalnih strategij nad kriptovaluto Bitcoin. Podprte borze so Bitstamp, Btc-e ter MtGox. Na podrocju tehnicne analize za Bitcoin že obstajajo razne resitve, ki trgovalcem pomagajo pri trgovanju in jim svetujejo s pomocjo tehnicnih indikatorjev in vzorcev. Vendar ima vsaka resitev svoje slabosti, ki se jih je želelo odpraviti. Razvita je bila spletna aplikacija v tehnologiji Node.js, ki poleg izvajanja strategij na zgodovinskih podatkih za vsako podprto borzo ponuja se prikaz grafa vrednosti kriptovalute skozi cas z japonskimi svecniki ter grafa globine trga skupaj s knjigo narocil. Uporabnik ima možnost implementirati tudi lastno strategijo. Trgovalni podatki, ki so potrebni za delovanje spletne aplikacije in morajo biti osveženi, se s podprtih borz pridobivajo preko vmesnikov API s pomocjo javanskih programov in shranjujejo v podatkovno bazo MongoDB.
This paper is a primer on many topics related to the digital cryptocurrency, Bitcoin. Bitcoins have been developed and advertised as a private digital money. We analyze this claim, generally to conclude that Bitcoins as they presently exist are not money. They are not generally accepted in exchange and do not serve as a unit of account. We test the hypothesis that the value of Bitcoins are determined largely by network externalities, finding very limited data to support this claim. We analyze features of bitcoins, such as their high exchange rate volatility with respect to the U.S. dollar and other currencies. We examine pricing on various exchanges, and how the law of one price works in bilateral and trilateral exchange rates involving Bitcoins. The potential for arbitrage is examined. We look at the use of bitcoins at Overstock.com, and the impact of that decision on Overstock.com stock prices and on the value of Bitcoins. We consider Bitcoins as an asset and examine their contribution to portfolio holdings. We discuss Bitcoin’s use in fraud resembling a Ponzi scheme. Finally, we speculate on the future of Bitcoins and the potential uses for the underlying technology.
This Article investigates an increasingly important yet under-developed body of law: regulation of virtual currency. At its peak in March of 2014, the daily volume of Bitcoin transactions in United States dollars exceeded $575,000,000. The growing mainstream acceptance of Bitcoin, however, is best illustrated by the growing number of leading merchants that have decided to accept Bitcoin payments. While Bitcoin’s rise as an alternative payment method is well-chronicled, Bitcoin’s impact extends further due to its use as an investment vehicle and its ability to spur the growth of an industry of Bitcoin-based businesses. Despite increasingly widespread use, Bitcoin (and other virtual currencies) have largely operated without the burden of regulation. Why? Like the potentially transformative innovations that preceded Bitcoin, virtual currency raises unique challenges for which existing legal models may be unprepared. As policymakers struggle to catch-up, the effort to develop an appropriate regulatory regime for virtual currency is at a critical juncture.The response in the United States has thus far involved regulatory bodies acting independently to clarify the treatment of virtual currency under a variety of different laws designed to regulate traditional payment systems, financial services, and investments. This Article argues, contrary to this approach, that a narrow focus on the technical application and extension of existing law creates a deficient regulatory regime. Instead, we suggest that policymakers should: (1) engage the various agency stakeholders to promote cross-communication; (2) think more globally about the wide spectrum of issues arising from virtual currency; and (3) embrace the unique and distinct characteristics of virtual currency. In support of this proposition, we show that refocusing on the collection of policy goals advanced by existing law offers policymakers an additional tool to aid in the development of a comprehensive, cohesive, and appropriately-scaled virtual currency regulatory model.
Bitcoin is the first decentralised, peer-to-peer network that allows for the proof and transfer of ownership of virtual currencies without the need for a trusted third party. The purpose of this article is to address how we can capture Bitcoin’s potential benefits for the economy while addressing new regulatory challenges.
The present paper seeks to effectively address the following question: What Bitcoin looks like? To do so, we regress Bitcoin price on a number of variables (Bitcoin fundamentals recorded in the literature) by applying an ARDL Bounds Testing approach for daily data covering the period from December 2010 to June 2014. Our findings highlight the speculative nature of Bitcoin. We also provide insightful evidence that Bitcoin may be used for economic reasons but there is any sign of being a safe haven. By considering the Chinese trading bankruptcy and the closing of Road Silk by FBI, the contribution of users’ interest stills sharply dominant, indicating the robustness of our results.
Off-Chain transactions allow for the immediate transfer of Cryptocurrency between two parties, without delays or unavoidable transaction fees. Such capabilities are critical for mainstream Cryptocurrency adaption. They allow for the "Coffee-Coin Criteria"; under which a customer orders a coffee and pays for that coffee in bitcoins. This is not possible with On-Chain transactions today. Unfortunately, all existing Off-Chain transaction protocols are notoriously unreliable The current generation of third-party facilitators are vulnerable to hacker-based attacks. As Mt. Gox tragically demonstrated, centralized-transaction institutions are easy targets for Cryptocurrency thieves. The slightest security flaw in a third-party system will pounced on by hackers, who will proceed to devour it like ants devouring a crab. Under such circumstances, it no wonder that the Public treats most Cryptocurrency services with a constant shadow of suspicion. For Bitcoin to flourish, its anti-hierarchy principles must be applied to safe Off-Chain transactions. First and foremost, we need a new hacker-proof protocol that can easily be executed by any experienced developer. Preferably, the protocol will be open-sourced for full reliability and transparency. This paper presents one such procedure, which allows for he safe transmission of Bitcoin private key control by way of Cryptocubic transactions.
David García, Claudio J. Tessone, Pavlin Mavrodiev, Nicolas Perony
What is the role of social interactions in the creation of price bubbles? Answering this question requires obtaining collective behavioural traces generated by the activity of a large number of actors. Digital currencies offer a unique possibility to measure socio-economic signals from such digital traces. Here, we focus on Bitcoin, the most popular cryptocurrency. Bitcoin has experienced periods of rapid increase in exchange rates (price) followed by sharp decline; we hypothesise that these fluctuations are largely driven by the interplay between different social phenomena. We thus quantify four socio-economic signals about Bitcoin from large data sets: price on on-line exchanges, volume of word-of-mouth communication in on-line social media, volume of information search, and user base growth. By using vector autoregression, we identify two positive feedback loops that lead to price bubbles in the absence of exogenous stimuli: one driven by word of mouth, and the other by new Bitcoin adopters. We also observe that spikes in information search, presumably linked to external events, precede drastic price declines. Understanding the interplay between the socio-economic signals we measured can lead to applications beyond cryptocurrencies to other phenomena which leave digital footprints, such as on-line social network usage.
Gyan Prakash, B. N. VYAS, Product Design Specialist, Cognizant Technology Solutions, Kolkata, India
Cloud-based outsourced storage relieves the client's load for storage management and maintenance by providing a comparably low-cost, scalable, locationindependent platform. Though, the information that clients no longer have physical control of data specifies that they are facing a potentially formidable risk for missing or corrupted data. To avoid the security risks, inspection services are serious to ensure the integrity and availability of outsourced data and to achieve digital forensics and reliability on cloud computing. Provable data possession (PDP), which is a cryptographic method for validating the reliability of data without retrieving it at an untrusted server, can be used to realize audit services. In this project, profiting from the interactive zero-knowledge proof system, the construction of an interactive PDP protocol to prevent the fraudulence of prover (soundness property) and the leakage of verified data (zero knowledge property).To prove that our construction holds these properties based on the computation Diffie-Hellman assumption and the rewindable black-box knowledge extractor. An efficient mechanism on probabilistic queries and periodic verification is proposed to reduce the audit costs per verification and implement abnormal detection timely. Also, we present an efficient method for choosing an optimal parameter value to reduce computational overheads of cloud audit services.
This work project analyses the possibility for a company to trade their goods and services for bitcoins, by joining the Bitcoin network. It analyses the technological and business requirements to join the Bitcoin Network by looking at Bitcoin’s potential to act as a mean of exchange for trade, unit of account and store of value. The analysis points to the motives, benefits and risks for investors to use the Bitcoin as a traditional currency and recommends on strategies for addressing those risks and maximizing benefits. Other than companies this report, to a lesser extent, will also analyse the Bitcoin from an investor’s point of view, this is, should an investor buy bitcoins for trade and make savings on a regular and everyday basis? A major finding in this work project is that companies could start using the Bitcoin system as a legit form of payment since the benefits of using this technology outweigh the costs and risks, given the right approach. This form of payment will contribute for the upgrade of a company’s business’ image, attract a new pool of consumers and businesses that already trade in bitcoins and pressure existing financial institutions and electronic payment vendors to upgrade their service levels.
Melissa Chase, Markulf Kohlweiss, Anna Lysyanskaya, Sarah Meiklejohn
A signature scheme is malleable if, on input a message and a signature, it is possible to efficiently compute a signature on a related message, for a transformation that is allowed with respect to this signature scheme. In this paper, we first provide new definitions for malleable signatures that allow us to capture a broader range of transformations than was previously possible. We then give a generic construction based on malleable zero-knowledge proofs that allows us to construct malleable signatures for a wide range of transformation classes, with security properties that are stronger than those that have been achieved previously. Finally, we construct delegatable anonymous credentials from signatures that are malleable with respect to an appropriate class of transformations (that we show our malleable signature supports). The resulting instantiation satisfies a stronger security notion than previous schemes while also scaling linearly with the number of delegations.
2008 yilinda bir makale ile ortaya cikan, 2009 yilinda ilk islemini gerceklestiren bilgisayar algoritmalariyla tasarlanmis Bitcoin, son iki yilda onemli kullanici kitlesi yakalayarak, talebini artirmis, piyasa degerini hizla yukseltmis online bir satin alma birimi ya da sanal para olarak tanimlanabilir. Isminin gercekligi bile supheli anonim bir kisi tarafindan aktif hale getirilen sistemde bir devlet, merkez bankasi gibi klasik para birimlerinin sahip olduklari otoriteler ve garantorler yer almadigi gibi denetim de soz konusu degildir. Islemler network uzerinde direkt olarak iki taraf arasinda herhangi bir araci kurum olmaksizin gerceklestirildiginden maliyeti yok denecek kadar azdir. Sozkonusu durum herhangi bir devlet otoritesinin kontrol ve sorumlulugunun olmamasindan dogabilecek handikaplari da icinde barindirmaktadir. Bununla birlikte sistemin bircok disiplini bir araya getirerek calisan bir yapiya sahip olmasi disiplinlerarasi isbirligi ile ne gibi yeniliklerin ortaya cikabileceginin gorulmesi acisindan oneme sahiptir. Bu calismada; Bitcoin’in dogusu, ozellikleri, Dunya’da ve Turkiye’deki gelisimi ve ekonomisi icindeki yeri, isleyis yontemi arastirilmis, yeni sanal para birimi ile ilgili mevcut durum analizi yapilmistir.
Bitcoin created as an academic article in 2008 and realized first transaction in 2009 is a digital/electronic currency which is designed on computer and built from calculating an algorithm. It developed rapidly and skyrocketed its market value in last two years by increasing its number of users and demand. The system designed by the pseudonymous person is not depend on neither any government nor a guarantor or an audit institution that the classical monetary system has. The transactions are realizing peer-to-peer network system and the cost of transaction is almost nothing. On the other hand Bitcoin inholds some of problems stemming from its uncontrollable features by any authority such as government, central banks etc. However the system which can be defined as a interdisciplinary study is a good sample in respect of digital innovations. In this study; emerge of Bitcoin, its features, place in World and Turkish economy, transaction methods are researched and worked on a SWOT analysis for new digital currency.
This paper analyzes correlations and causalities between Bitcoin market indicators and Twitter posts containing emotional signals on Bitcoin. Within a timeframe of 104 days (November 23rd 2013 - March 7th 2014), about 160,000 Twitter posts containing "bitcoin" and a positive, negative or uncertainty related term were collected and further analyzed. For instance, the terms "happy", "love", "fun", "good", "bad", "sad" and "unhappy" represent positive and negative emotional signals, while "hope", "fear" and "worry" are considered as indicators of uncertainty. The static (daily) Pearson correlation results show a significant positive correlation between emotional tweets and the close price, trading volume and intraday price spread of Bitcoin. However, a dynamic Granger causality analysis does not confirm a statistically significant effect of emotional Tweets on Bitcoin market values. To the contrary, the analyzed data shows that a higher Bitcoin trading volume Granger causes more signals of uncertainty within a 24 to 72-hour timeframe. This result leads to the interpretation that emotional sentiments rather mirror the market than that they make it predictable. Finally, the conclusion of this paper is that the microblogging platform Twitter is Bitcoin's virtual trading floor, emotionally reflecting its trading dynamics.
This paper presents an agent-based artificial cryptocurrency market in which heterogeneous agents buy or sell cryptocurrencies, in particular Bitcoins. In this market, there are two typologies of agents, Random Traders and Chartists, which interact with each other by trading Bitcoins. Each agent is initially endowed with a finite amount of crypto and/or fiat cash and issues buy and sell orders, according to her strategy and resources. The number of Bitcoins increases over time with a rate proportional to the real one, even if the mining process is not explicitly modelled. The model proposed is able to reproduce some of the real statistical properties of the price absolute returns observed in the Bitcoin real market. In particular, it is able to reproduce the autocorrelation of the absolute returns, and their cumulative distribution function. The simulator has been implemented using object-oriented technology, and could be considered a valid starting point to study and analyse the cryptocurrency market and its future evolutions.
We study decentralized cryptocurrency protocols in which the participants do not deplete physical scarce resources. Such protocols commonly rely on Proof of Stake, i.e., on mechanisms that extend voting power to the stakeholders of the system. We offer analysis of existing protocols that have a substantial amount of popularity. We then present our novel pure Proof of Stake protocols, and argue that they help in mitigating problems that the existing protocols exhibit.