Blockchain Papers

David Golumbia

No abstract is available for this record.

Feng Mai, Qing Bai, Zhe Shan, Xin Wang · 5 authors

Bitcoin’s emergence has the potential to pave the way for a technological revolution in financial markets. What determines its valuation is an important open question with far-reaching business and policy implications. Building on Information Systems and Finance literature, we examine the dynamic interactions between social media and the monetary value of Bitcoin using textual analysis and vector error correction models. We show that more bullish forum posts are associated with higher future Bitcoin values. Interestingly, social media’s effects on Bitcoin are driven primarily by the silent majority, the 95% of users who are less active and whose contributions amount to less than 40% of total messages. In addition, messages on an Internet forum, relative to tweets, have a stronger impact on future Bitcoin value. Overall, our findings reveal that social media sentiment is an important predictor in determining Bitcoin’s valuation, but not all social media messages are of equal impact. This study offers new insights into the digital currency market and the economic impact of social media.

Chen Zhao, Yong Guan

No abstract is available for this record.

Giancarlo Bigi, Andrea Bracciali, Giovanni Meacci, Emilio Tuosto

No abstract is available for this record.

Christian Brenig, Rafael Accorsi, Günter Müller

This paper reports on our research towards an economic analysis of money laundering schemes utilizing cryptocurrencies, which are convertible decentralized virtual currencies based on cryptographic operations. They gain ground as means to offer enterprises and its customers new payment methods, investing opportunities and some are even intended as substitutes for centrally controlled government-issued fiat currencies. Our starting point is the observation that their increasing popularity attracts the attention of practitioners and scholars, particularly because of raising anti-money laundering concerns. Consequently, work has already been conducted in this area, mainly focusing on implications on anti-money laundering efforts. However, we argue that the potential benefits for criminal individuals are an important, yet neglected factor in the dissemination of cryptocurrencies as money laundering instrument. Addressing this issue, the paper firstly presents the structure of the money laundering process and introduces prevailing anti money-laundering controls. This forms the basis for the subsequent analysis of contextual and transactional factors with respect to their influence on the incentives of criminals to utilize cryptocurrencies for money laundering. This aims at providing an answer to the open question, whether cryptocurrencies constitute a driver for money laundering.

Florian Glaser, Luis Bezzenberger

The advent of Bitcoin in 2009 has not only introduced Cryptocurrencies and lead to a new digitization movement in the financial, especially payments industry but also made way for a new breed of innovative technologies based on decentralized digital currencies. Generally, decentralized consensus systems could change the very nature of how companies, organizations and individuals are built and interact with each other. Decentralized consensus systems, decentralized applications and smart contracts provide the conceptual framework as well as the technological basis to establish predefined, incorruptible protocols and contracts to organize human behavior and interconnectedness. However, the technical protocols and implementations are quite complex and practitioners as well as interdisciplinary researchers not familiar with cryptography, network protocols or decentralized networks are struggling to find access to these concepts and grasp their potential. To fill this gap, we develop a comprehensive taxonomy of decentralized consensus systems in order to provide a tool for researchers and practitioners alike to facilitate classification and analysis of emerging technologies in the field of "Crypto 2.0", the next level of innovation beyond cryptocurrencies.

Ryan Farell

No abstract is available for this record.

Angela Walch

No abstract is available for this record.

Duane Wilson, Giuseppe Ateniese

PGP is built upon a Distributed Web of Trust in which the trustworthiness of a user is established by others who can vouch through a digital signature for that particular identity. Preventing its wholesale adoption are a number of inherent weaknesses to include (but not limited to) the following: 1) Trust Relationships are built on a subjective honor system, 2) Only first degree relationships can be fully trusted, 3) Levels of trust are difficult to quantify with actual values, and 4) Issues with the Web of Trust itself (Certification and Endorsement). Although the security that PGP provides is proven to be reliable, it has largely failed to garner large scale adoption. In this paper, we propose several novel contributions to address the aforementioned issues with PGP and associated Web of Trust. To address the subjectivity of the Web of Trust, we provide a new certificate format based on Bitcoin which allows a user to verify a PGP certificate using Bitcoin identity-verification transactions - forming first degree trust relationships that are tied to actual values (i.e., number of Bitcoins transferred during transaction). Secondly, we present the design of a novel Distributed PGP key server that leverages the Bitcoin transaction blockchain to store and retrieve Bitcoin-Based PGP certificates. Lastly, we provide a web prototype application that demonstrates several of these capabilities in an actual environment.

Shayan Eskandari, David Barrera, Elizabeth Stobert, Jeremy Clark

Bitcoin users are directly or indirectly forced to deal with public key cryptography, which has a number of security and usability challenges that differ from the password-based authentication underlying most online banking services. Users must ensure that keys are simultaneously accessible, resistant to digital theft and resilient to loss. In this paper, we contribute an evaluation framework for comparing Bitcoin key management approaches, and conduct a broad usability evaluation of six representative Bitcoin clients. We find that Bitcoin shares many of the fundamental challenges of key management known from other domains, but that Bitcoin may present a unique opportunity to rethink key management for end users.

Charles W. Evans

Journal of Anthropology and Archaeology is a peer-reviewed international journal, which publishes original papers promoting theoretical, methodological and empirical developments in the discipline of socio-cultural anthropology.

Max Kubát

In spite of the fact that a lot of virtual currencies have been created in recent years, bitcoin is the best known from all of them and regularly reported in the news. Currency without identified creator is appreciated by its user for non-centralized running, without any chance of governments to influence the money supply. The advantages of bitcoin, such as very quick payments worldwide, stop of inflations caused by governments trying to solve their own problems or high level of transactions privacy are widely mentioned. The aim of the article is not to describe the technical issue of bitcoin and explain how this system works, because it has been widely explained in other articles. The aim is focusing on economic aspects of bitcoin, the technical aspects are mentioned only if necessary. For accomplishing the aim the article is split in two parts. The first part is dedicated to answering the question “What is bitcoin?”. It examines whether bitcoin complies with theoretical, empirical and law definition of money. The law definition of money compliance is done for Czech, German and EU law in general, but attitudes of US and Chinese governments are also mentioned. According to the findings, bitcoin cannot be easily considered as money. The second part is focused on store of value money function. Better store of value in comparison with fiat currencies should be important advantage of bitcoin. This function examination is based on volatility calculation for bitcoin and other currencies and assets. Comparing of results shows that volatility (and therefore risk) of bitcoin is significantly higher than of other currencies and assets.

Aaron W. Baur, Julian Bühler, Markus Bick, Charlotte S. Bonorden

No abstract is available for this record.

Nirupama Devi Bhaskar, Wanfeng Chen, LI Hai-li, David Lee Kuo Chuen

No abstract is available for this record.

William J. Luther

No abstract is available for this record.

Dirk G. Baur, Adrian D. Lee, KiHoon Hong

No abstract is available for this record.

Loi Luu, Ratul Saha, Inian Parameshwaran, Prateek Saxena · 5 authors

Several new services incentivize clients to compete in solving large computation tasks in exchange for financial rewards. This model of competitive distributed computation enables every user connected to the Internet to participate in a game in which he splits his computational power among a set of competing pools — the game is called a computational power splitting game. We formally model this game and show its utility in analyzing the security of pool protocols that dictate how financial rewards are shared among the members of a pool. As a case study, we analyze the Bitcoin cryptocurrency which attracts computing power roughly equivalent to billions of desktop machines, over 70% of which is organized into public pools. We show that existing pool reward sharing protocols are insecure in our game-theoretic analysis under an attack strategy called the “block withholding attack”. This attack is a topic of debate, initially thought to be ill-incentivized in today’s pool protocols: i.e., causing a net loss to the attacker, and later argued to be always profitable. Our analysis shows that the attack is always well-incentivized in the long-run, but may not be so for a short duration. This implies that existing pool protocols are insecure, and if the attack is conducted systematically, Bitcoin pools could lose millions of dollars worth in months. The equilibrium state is a mixed strategy—that is—in equilibrium all clients are incentivized to probabilistically attack to maximize their payoffs rather than participate honestly. As a result, a part of the Bitcoin network is incentivized to waste resource competing for higher selfish reward.

Alexander Eisl, S. Gasser, Karl Weinmayer

No abstract is available for this record.

Ifigeneia Georgoula, Demitrios E. Pournarakis, Christos Bilanakos, Dionisios N. Sotiropoulos · 5 authors

This paper uses time-series analysis to study the relationship between Bitcoin prices and fundamental economic variables, technological factors and measurements of collective mood derived from Twitter feeds. Sentiment analysis has been performed on a daily basis through the utilization of a state-of-the-art machine learning algorithm, namely Support Vector Machines (SVMs). A series of short-run regressions shows that the Twitter sentiment ratio is positively correlated with Bitcoin prices. The short-run analysis also reveals that the number of Wikipedia search queries (showing the degree of public interest in Bitcoins) and the hash rate (measuring the mining difficulty) have a positive effect on the price of Bitcoins. On the contrary, the value of Bitcoins is negatively affected by the exchange rate between the USD and the euro (which represents the general level of prices). A vector error-correction model is used to investigate the existence of long-term relationships between cointegrated variables. This kind of long-run analysis reveals that the Bitcoin price is positively associated with the number of Bitcoins in circulation (representing the total stock of money supply) and negatively associated with the Standard and Poor's 500 stock market index (which indicates the general state of the global economy).

Lam Pak Nian, David Lee Kuo Chuen

No abstract is available for this record.

Trevor Kiviat

The buzz surrounding Bitcoin has reached a fever pitch. Yet in academic legal discussions, disproportionate emphasis is placed on bitcoins (that is, virtual currency), and little mention is made of blockchain technology—the true innovation behind the Bitcoin protocol. Simply, blockchain technology solves an elusive networking problem by enabling “trustless” transactions: value exchanges over computer networks that can be verified, monitored, and enforced without central institutions (for example, banks). This has broad implications for how we transact over electronic networks. This Note integrates current research from leading computer scientists and cryptographers to elevate the legal community’s understanding of blockchain technology and, ultimately, to inform policymakers and practitioners as they consider different regulatory schemes. An examination of the economic properties of a blockchain-based currency suggests the technology’s true value lies in its potential to facilitate more efficient digital-asset transfers. For example, applications of special interest to the legal community include more efficient document and authorship verification, title transfers, and contract enforcement. Though a regulatory patchwork around virtual currencies has begun to form, its careful analysis reveals much uncertainty with respect to these alternative applications.

Caitlin Lustig, Bonnie Nardi

In this paper, I propose a new concept for understanding the role of algorithms in daily life: algorithmic authority. Algorithmic authority is the legitimate power of algorithms to direct human action and to impact which information is considered true. I use this concept to examine the culture of users of Bitcoin, a crypto-currency and payment platform. Through Bitcoin, I explore what it means to trust in algorithmic authority. My study of the Bitcoin community utilizes interview and survey data. I found that Bitcoin users prefer algorithmic authority to the authority of conventional institutions which they see as untrustworthy. However, I argue that Bitcoin users do not have blind faith in algorithms; rather, they acknowledge the need for mediating algorithmic authority with human judgment. I examine the tension between members of the Bitcoin community who would prefer to integrate Bitcoin with existing institutions and those who would prefer to resist integration.

William J. Luther, Alexander William Salter

On March 16, 2013, Cyprus announced that it would accept a bailout that required imposing a one-time levy on bank deposits. It has been argued that, by making traditional deposit accounts seem less secure, the bailout announcement prompted some to consider — or reconsider — using the cryptocurrency bitcoin. Relying on rank data for a subset of apps, existing studies maintain that interest in bitcoin increased following the announcement, especially in countries with troubled banks. We argue that (1) focusing on a subset of apps does not allow one to distinguish a general increase in the demand for bitcoin apps from a substitution between bitcoin apps and (2) changes in rank data are a poor predictor of changes in the number of downloads. In order to address these concerns, we collect rank data for all fifteen bitcoin apps available at the time and use an established technique to estimate an index of downloads for each country considered. We find that, while downloads of bitcoin apps increased following the announcement, the observed effect was not especially pronounced in countries thought to have had troubled banking systems at the time.

Arthur Gervais, Hubert Ritzdorf, Ghassan Karame, Srđjan Čapkun

Given the increasing adoption of Bitcoin, the number of transactions and the block sizes within the system are only expected to increase. To sustain its correct operation in spite of its ever-increasing use, Bitcoin implements a number of necessary optimizations and scalability measures. These measures limit the amount of information broadcast in the system to the minimum necessary. In this paper, we show that current scalability measures adopted by Bitcoin come at odds with the security of the system. More specifically, we show that an adversary can exploit these measures in order to effectively delay the propagation of transactions and blocks to specific nodes for a considerable amount of time---without causing a network partitioning in the system. Notice that this attack alters the information received by Bitcoin nodes, and modifies their views of the ledger state. Namely, we show that this allows the adversary to considerably increase its mining advantage in the network, and to double-spend transactions in spite of the current countermeasures adopted by Bitcoin. Based on our results, we propose a number of countermeasures in order to enhance the security of Bitcoin without deteriorating its scalability.