Cryptocurrencies, such as bitcoin and ethereum, have not only risen to public attention as novel means of payments, but also as facilitators of initial coin offerings (ICOs, also called token sales). In these entirely online-mediated offerings, entrepreneurs sell tokens registered on a blockchain in exchange for cryptocoins. Buyers receive tokens that can be understood as cryptographically-secured coupons which embody a bundle of rights and obligations. In July 2017, the SEC released an investigative report that highlighted that such tokens can be subject to the full scope of US securities regulation. It is unclear, however, to what extent EU securities regulation is applicable to ICOs and, particularly, whether issuers have to publish and register a prospectus in order to avoid criminal and civil prospectus liability in the EU. In conceptual terms, this depends on whether tokens are considered “securities” under the EU prospectus regulation regime. Against this background, this paper develops a nuanced approach that distinguishes between three archetypes of tokens: currency, investment, and utility tokens. It analyzes the differential implications of each of these types, and their hybrid forms, for EU securities regulation, and develops policy proposals for their regulation.
Stefan Dziembowski, Lisa Eckey, Sebastian Faust, Daniel Malinowski
Payment channels emerged recently as an efficient method for performing cheap micropayments in cryptocurrencies. In contrast to traditional on-chain transactions, payment channels have the advantage that they allow for nearly unlimited number of transactions between parties without involving the blockchain. In this work, we introduce Perun, an off-chain channel system that offers a new method for connecting channels that is more efficient than the existing technique of ``routing transactions'' over multiple channels. To this end, Perun introduces a technique called ``virtual payment channels'' that avoids involvement of the intermediary for each individual payment. In this paper we formally model and prove security of this technique in the case of one intermediary, who can be viewed as a ``payment hub'' that has direct channels with several parties. Our scheme works over any cryptocurrency that provides Turing-complete smart contracts. As a proof of concept, we implemented Perun's smart contracts in Ethereum.
Open access
2 source records
Blockchain Technology Applications and Security
Cryptography and Data Security
Advanced Steganography and Watermarking Techniques
Ethereum represents the second generation of blockchain technology by providing\nan open and global computing platform which allows the exchange of cryptocurrency\n(Ether) and the development of self-verifying smart contract applications.\nSmart contracts present a foundation for possessing digital assets and a variety of\ndecentralized applications within the blockchain area. Ethereum and smart contracts\nare public, distributed and immutable, as such, they are prone to vulnerabilities\nsourcing from simple coding mistakes of developers.\n\nMotivated by the security breaches and recurring financial losses in smart contracts,\nwe aim to advance the field of security in smart contract programming.\nThe main objective is to aid smart contract developers by providing a taxonomy of\nall known security issues and by inspecting the security code analysis tools used\nto identify those vulnerabilities. Based on previous research as well as attacks on\nEthereum smart contracts, we propose an updated taxonomy which categorizes\nall known vulnerabilities within their architectural and severity level. Our second\nproposed taxonomy is a novel categorization of security tools on Ethereum.\n\nFurthermore, we conduct the investigation of security code analysis tools on\nEthereum by assessing their effectiveness and accuracy. In particular, we analyze\nfour security tools, namely, Oyente, Securify, Remix, and SmartCheck. The results\nindicate that there are overall inconsistencies between the tools on different security\nproperties. SmartCheck outperformed the other tools in terms of effectiveness,\nwhereas Oyente performed the best in terms of accuracy. Furthermore, based on\nthe limitations we identified, we propose future improvements within the user interfaces,\ninterpretation of results, and additional vulnerability checks.
The gas mechanism in Ethereum charges the execution of every operation to ensure that smart contracts running in EVM (Ethereum Virtual Machine) will be eventually terminated. Failing to properly set the gas costs of EVM operations allows attackers to launch DoS attacks on Ethereum. Although Ethereum recently adjusted the gas costs of EVM operations to defend against known DoS attacks, it remains unknown whether the new setting is proper and how to configure it to defend against unknown DoS attacks. In this paper, we make the first step to address this challenging issue by first proposing an emulation-based framework to automatically measure the resource consumptions of EVM operations. The results reveal that Ethereum's new setting is still not proper. Moreover, we obtain an insight that there may always exist exploitable under-priced operations if the cost is fixed. Hence, we propose a novel gas cost mechanism, which dynamically adjusts the costs of EVM operations according to the number of executions, to thwart DoS attacks. This method punishes the operations that are executed much more frequently than before and lead to high gas costs. To make our solution flexible and secure and avoid frequent update of Ethereum client, we design a special smart contract that collaborates with the updated EVM for dynamic parameter adjustment. Experimental results demonstrate that our method can effectively thwart both known and unknown DoS attacks with flexible parameter settings. Moreover, our method only introduces negligible additional gas consumption for benign users.
Ponzi schemes are financial frauds which lure users under the promise of high\nprofits. Actually, users are repaid only with the investments of new users\njoining the scheme: consequently, a Ponzi scheme implodes soon after users stop\njoining it. Originated in the offline world 150 years ago, Ponzi schemes have\nsince then migrated to the digital world, approaching first the Web, and more\nrecently hanging over cryptocurrencies like Bitcoin. Smart contract platforms\nlike Ethereum have provided a new opportunity for scammers, who have now the\npossibility of creating "trustworthy" frauds that still make users lose money,\nbut at least are guaranteed to execute "correctly". We present a comprehensive\nsurvey of Ponzi schemes on Ethereum, analysing their behaviour and their impact\nfrom various viewpoints.\n
Kentaroh Toyoda, P. Takis Mathiopoulos, Iwao Sasase, Tomoaki Ohtsuki
For more than a decade now, radio frequency identification (RFID) technology has been quite effective in providing anti-counterfeits measures in the supply chain. However, the genuineness of RFID tags cannot be guaranteed in the post supply chain, since these tags can be rather easily cloned in the public space. In this paper, we propose a novel product ownership management system (POMS) of RFID-attached products for anti-counterfeits that can be used in the post supply chain. For this purpose, we leverage the idea of Bitcoin's blockchain that anyone can check the proof of possession of balance. With the proposed POMS, a customer can reject the purchase of counterfeits even with genuine RFID tag information, if the seller does not possess their ownership. We have implemented a proof-of-concept experimental system employing a blockchain-based decentralized application platform, Ethereum, and evaluated its cost performance. Results have shown that, typically, the cost of managing the ownership of a product with up to six transfers is less than U.S. $1.
In this paper, we identify a new form of attack, called the Balance attack, against proof-of-work blockchain systems. The novelty of this attack consists of delaying network communications between multiple subgroups of nodes with balanced mining power. Our theoretical analysis captures the precise tradeoff between the network delay and the mining power of the attacker needed to double spend in Ethereum with high probability. We quantify our probabilistic analysis with statistics taken from the R3 consortium, and show that a single machine needs 20 minutes to attack the consortium. Finally, we run an Ethereum private chain in a distributed system with similar settings as R3 to demonstrate the feasibility of the approach, and discuss the application of the Balance attack to Bitcoin. Our results clearly confirm that main proof-of-work blockchain protocols can be badly suited for consortium blockchains.
We present cryptocurrency-based lottery protocols that do not require any collateral from the players. Previous protocols for this task required a security deposit that is $O(N^2)$ times larger than the bet amount, where $N$ is the number of players. Our protocols are based on a tournament bracket construction, and require only $O(\log N)$ rounds. Our lottery protocols thus represent a significant improvement, both because they allow players with little money to participate, and because of the time value of money. The Ethereum-based implementation of our lottery is highly efficient. The Bitcoin implementation requires an $O(2^N)$ off-chain setup phase, which demonstrates that the expressive power of the scripting language can have important implications. We also describe a minimal modification to the Bitcoin protocol that would eliminate the exponential blowup.
Open access
3 source records
Blockchain Technology Applications and Security
Cryptography and Data Security
Advanced Steganography and Watermarking Techniques
Pablo Lamela Seijas, Simon Thompson, Darryl McAdams
We give an overview of the scripting languages used in existing cryptocurrencies, and in particular we review in some detail the scripting languages of Bitcoin, Nxt and Ethereum, in the context of a high-level overview of Distributed Ledger Technology and cryptocurrencies. We survey different approaches, and give an overview of critiques of existing languages. We also cover technologies that might be used to underpin extensions and innovations in scripting and contracts, including technologies for verification, such as zero knowledge proofs, proof-carrying code and static analysis, as well as approaches to making systems more efficient, e.g. Merkelized Abstract Syntax Trees.
Ethereum represents new innovation in the fields of cryptocurrency which has become relatively stagnate, promising many things, including an entire programming language and development enviroment built into the network. However the current trend is to write implementations and proof of concepts before doing the rigor involved with proving security. Miller's recent thesis is an attempt to remedy this, and we apply his provable security techniques to the algorithm description of CASPER, the new "proof-of-stake" consensus protocol scheme to be implemented in ethereum. We conclude by stating it satisfies almost all the definitions, except one, leaving room for improvement.
Ring signatures are cryptographic protocols designed to allow any member of a group to produce a signature on behalf of the group, without revealing the individual signer's identity. This offers group members a level of anonymity not attainable through generic digital signature schemes. We call this property 'plausible deniability', or anonymity with respect to an anonymity set. We concentrate in particular on implementing privacy on the blockchain, introducing a unique ring signature scheme that works with existing blockchain systems. We implement a unique ring signature (URS) scheme using secp256k1, creating the first implementation compatible with blockchain libraries in this way, so as for easy implementation as an Ethereum smart contract. We review the privacy and security properties offered by the scheme we have constructed, and compare its efficiency with other commonly suggested approaches to privacy on the blockchain.
The increasing collective use of distributed application software platforms, programming languages and crypto-currencies around the blockchain concept for general transactions may have radical implications for the way in which society conceptualises and applies trust and trust-based social systems such as law. By exploring one iteration of such generalised blockchain systems – Ethereum – and the historical lineage of such systems, it will be argued that indeed their ideological basis is largely one of distrust, decentralisation and, ultimately, via increasing disassociation of identity, a fear of the body itself. This ideological basis can be reframed as a crypto-legal approach to the problems of human interaction, one whereby the purely technological solutions outlined above are considered adequate for reconciling many of the problems of our collective existence. The article concludes, however, by re-iterating a perspective of law more so as an entirely embodied and trust dependent notion. These aspects go some way to explaining the necessarily centralised role it takes on within societies. They also explain why the crypto-legal approaches advanced by systems like Ethereum – or even the co-opting of blockchain technology by law firms themselves – will only ever be at best efficiency exercises concerned with the processing of data relating to legal affairs, and not the more radical, ambiguous and difficult process of actual legal thought or, indeed, engagement with trust.
The sharing economy, the business of collectively using privately owned objects and services, has fuelled some of the fastest growing businesses of the past years. However, popular sharing platforms like Airbnb or Uber exhibit several drawbacks: a cumbersome sign up procedure, lack of participant privacy, overbearing terms and conditions, and significant fees for users. We demonstrate a Decentralised App (DAPP) for the sharing of everyday objects based on a smart contract on the Ethereum blockchain. This contract enables users to register and rent devices without involvement of a Trusted Third Party (TTP), disclosure of any personal information or prior sign up to the service. With increasing distribution of cryptocurrencies the use of smart contracts such as proposed in this paper has the potential to revolutionise the sharing economy.
Roman Matzutt, Oliver Hohlfeld, Martin Henze, Robin Rawiel · 6 authors
As transaction fees skyrocket today, blockchains become increasingly expensive, hurting their adoption in broader applications. This work tackles the saving of transaction fees for economic blockchain applications. The key insight is that other than the existing "default'' mode to execute application logic fully on-chain, i.e., in smart contracts, and in fine granularity, i.e., user request per transaction, there are alternative execution modes with advantages in cost-effectiveness. On Ethereum, we propose a holistic middleware platform supporting flexible and secure transaction executions, including off-chain states and batching of user requests. Furthermore, we propose control-plane schemes to adapt the execution mode to the current workload for optimal runtime cost. We present a case study on the institutional accounts (e.g., coinbase.com) intensively sending Ether on Ethereum blockchains. By collecting real-life transactions, we construct workload benchmarks and show that our work saves 18%\sim 47%18%-47% per invocation than the default baseline while introducing 1.81%\sim 16.59%1.81%-16.59% blocks delay.
Ethereum is a framework for cryptocurrencies which uses blockchain technology to provide an open global computing platform, called the Ethereum Virtual Machine (EVM). EVM executes bytecode on a simple stack machine. Programmers do not usually write EVM code; instead, they can program in a JavaScript-like language, called Solidity, that compiles to bytecode. Since the main purpose of EVM is to execute smart contracts that manage and transfer digital assets (called Ether), security is of paramount importance. However, writing secure smart contracts can be extremely difficult: due to the openness of Ethereum, both programs and pseudonymous users can call into the public methods of other programs, leading to potentially dangerous compositions of trusted and untrusted code. This risk was recently illustrated by an attack on TheDAO contract that exploited subtle details of the EVM semantics to transfer roughly $50M worth of Ether into the control of an attacker.
Motivated by the great success and adoption of Bitcoin, a number of cryptocurrencies such as Litecoin, Dogecoin, and Ethereum are becoming increasingly popular. Although existing blockchain-based cryptocurrency schemes can ensure reasonable security for transactions, they do not consider any notion of fairness. Fair exchange allows two players to exchange digital items, such as digital signatures, over insecure networks fairly, so that either each player gets the other's item, or neither player does. Given that blockchain participants typically do not trust each other, enabling fairness in existing cryptocurrencies is an essential but insufficiently explored problem. In this paper, we explore the solution space for enabling the fair exchange of a cryptocurrency payment for a receipt. We identify the timeliness of an exchange as an important property especially when one of the parties involved in the exchange is resource-constrained. We introduce the notion of strong timeliness for a fair exchange protocol and propose two fair payment-for-receipt protocol instantiations that leverage functionality of the blockchain to achieve strong timeliness. We implement both and compare their security and efficiency.
Motivated by the great success and adoption of Bitcoin, a number of cryptocurrencies such as Litecoin, Dogecoin, and Ethereum are becoming increasingly popular. Although existing blockchain-based cryptocurrency schemes can ensure reasonable security for transactions, they do not consider any notion of fairness. Fair exchange allows two players to exchange digital "items", such as digital signatures, over insecure networks fairly, so that either each player gets the other's item, or neither player does. Given that blockchain participants typically do not trust each other, enabling fairness in existing cryptocurrencies is an essential but insufficiently explored problem. In this paper, we explore the solution space for enabling the fair exchange of a cryptocurrency payment for a receipt. We identify the timeliness of an exchange as an important property especially when one of the parties involved in the exchange is resource-constrained. We introduce the notion of strong timeliness for a fair exchange protocol and propose two fair payment-for-receipt protocol instantiations that leverage functionality of the blockchain to achieve strong timeliness. We implement both and compare their security and efficiency.
Die Möglichkeit der Programmierbarkeit des Bitcoins ist fast ein nachträglicher Einfall, auch wenn Sidechain‐Vorschläge diese Programmierbarkeit ein wenig leichter machen wollen und es bereits Altcoins mit verschiedenen spezifischen Anwendungen gibt. Im Gegensatz dazu wurde das Kryptowährungstechnologieprojekt Ethereum von Vitalik Buterin, seinem Erfinder, von Tag 1 als Software‐Entwicklungsplattform für dezentrale Applikationen konzipiert, und ihre Blockchain wurde speziell entwickelt, um die Ausführung dieser dezentralen Apps (auch Dapps genannt) zu unterstützen. Vitalik Buterin, 1994 in Russland geboren, war vor der Gründung von Ethereum auch involviert in die Entwicklungsprojekte Colored Coins und Mastercoins. Er gewann 2014 den "World Technology Award" und ein Stipendium des Risikokapitalgebers Peter Thiel. In dem Diskussionspapier zu Ethereum skizzierte Buterin vor allem die Grenzen einer Programmierbarkeit der Bitcoin‐Blockchain und schlug die Erstellung einer neuen komplett programmierbaren Blockchain mit einer turing‐vollständigen Programmiersprache vor. Anders als andere Blockchain‐Projekte soll die Ethereum Software nicht nur für einen Zweck nutzbar sein – sondern soll die Basis für die Erarbeitung aller möglichen Arten von Lösungen sein und dabei die Umsetzung intelligenter Verträge (Smart Contracts) ebenso erfassen als auch die Ethereum‐spezifische Idee von dezentralen autonomen Organisationen (DAOs).
Luke Anderson, Ralph Holz, Alexander Ponomarev, Paul Rimba · 5 authors
Half a decade after Bitcoin became the first widely used cryptocurrency, blockchains are receiving considerable interest from industry and the research community. Modern blockchains feature services such as name registration and smart contracts. Some employ new forms of consensus, such as proof-of-stake instead of proof-of-work. However, these blockchains are so far relatively poorly investigated, despite the fact that they move considerable assets. In this paper, we explore three representative, modern blockchains---Ethereum, Namecoin, and Peercoin. Our focus is on the features that set them apart from the pure currency use case of Bitcoin. We investigate the blockchains' activity in terms of transactions and usage patterns, identifying some curiosities in the process. For Ethereum, we are mostly interested in the smart contract functionality it offers. We also carry out a brief analysis of issues that are introduced by negligent design of smart contracts. In the case of Namecoin, our focus is how the name registration is used and has developed over time. For Peercoin, we are interested in the use of proof-of-stake, as this consensus algorithm is poorly understood yet used to move considerable value. Finally, we relate the above to the fundamental characteristics of the underlying peer-to-peer networks. We present a crawler for Ethereum and give statistics on the network size. For Peercoin and Namecoin, we identify the relatively small size of the networks and the weak bootstrapping process.
Tendermint is a new protocol for ordering events in a distributed network under adversarial conditions. More commonly known as consensus or atomic broadcast, the problem has attracted significant attention recently due to the widespread success of digital currencies, such as Bitcoin and Ethereum, which successfully solve the problem in public settings without a central authority. Tendermint modernizes classic academic work on the subject to provide a secure consensus protocol with accountability guarantees, as well as an interface for building arbitrary applications above the consensus. Tendermint is high performance, achieving thousands of transactions per second on dozens of nodes distributed around the globe, with latencies of about one second, and performance degrading moderately in the face of adversarial attacks.
Most popular blockchain solutions, like Bitcoin, rely on proof-of-work, guaranteeing that the output of the consensus is agreed upon with high probability. However, this probability depends on the delivery of messages and that the computational power of the system is sufficiently scattered among pools of nodes in the network so that no pool can mine more blocks faster than the crowd. New approaches, like Ethereum, generalise the proof-of-work approach by letting individuals deploy their own private blockchain with high transaction throughput. As companies are starting to deploy private chains, it has become crucial to better understand the guarantees blockchains offer in such a small and controlled environment. In this paper, we present the \emph{Blockchain Anomaly}, an execution that we experienced when building our private chain at NICTA/Data61. Even though this anomaly has never been acknowledged before, it may translate into dramatic consequences for the user of blockchains. Named after the infamous Paxos anomaly, this anomaly makes dependent transactions, like "Bob sends money to Carole after he received money from Alice" impossible. This anomaly relies on the fact that existing blockchains do not ensure consensus safety deterministically: there is no way for Bob to make sure that Alice actually sent him coins without Bob using an external mechanism, like converting these coins into a fiat currency that allows him to withdraw. We also explore smart contracts as a potential alternative to transactions in order to freeze coins, and show implementations of smart contract that can suffer from the Blockchain anomaly and others that may cope with it.