The adoption of blockchain technology is taking place at a fast pace. Security features inherent in blockchain make it resistant to attack, but they do not make it immune, and blockchain security risks do exists. This paper details the associated risks and concerns of the blockchain. We explore relevant standards and regulations related to blockchain and survey and analyze 38 blockchain incidents to determine the root cause to provide a view of the most frequent vulnerabilities exploited. The paper reviews six of these 38 incidents in greater detail. The selection is made by choosing incidents with the most frequent root cause. In the review of the incidents, the paper details what happened and why and aims to address what could have been done to mitigate the attack. The paper concludes with a recommendation on a framework to reduce cyber security risks when using blockchain technologies.
Blockchain has emerged into one of the most promising technologies for the future. Its most successful implementation in the form of cryptocurrency has shifted many existing paradigms where financial instruments were limited by locations or jurisdictions. While blockchain is touted to offer many significant and promising features on the other hand it also increases the difficulty level in the taxation area as well as digital forensics. We investigated the issues and explores the real-world situation and how taxation and digital forensics can cope with these technology challenges.
RĂŽmulo Rhemo Palitot Braga, Arthur Augusto Barbosa Luna
This article analyzes some of the existing digital anonymity technologies, as well as their impact on the process and facilitation of the money laundering process. It presents the concept of superficial Internet and clarifies the difference between the Deep Web and the Dark Web, exposing how it works one of its most important operating structures, the TOR protocol. It also details the operation of BitCoin, one of the most important crypto-coins today, and draws a parallel on how these technologies can impact the practice of money laundering, as well as discusses the capacity of the mechanisms currently in place to curb and punish it. The anonymity guaranteed by the use of BitCoin is so much that in the first half of May 2017, hackers infected thousands of computers in dozens of countries, including Brazil, the United Kingdom, the United States, China, Russia, Spain and Italy, encrypting computer files and requiring redemption payment for the coded data.
Data breaches are an increasingly common part of consumersâ lives. No institution is immune to the possibility of an attack. Each breach inevitably risks the release of consumersâ personally identifiable information and the strong possibility of identity theft. Unfortunately, current solutions for handling these incidents are woefully inadequate. Private litigation like consumer class actions and shareholder lawsuits each face substantive legal and procedural barriers. States have their own data security and breach notification laws, but there is currently no unifying piece of legislation or strong enforcement mechanism. This Note argues that proactive solutions are required. First, a national data security lawâsetting minimum data security standards, regulating the use and storage of personal information, and expanding the enforcement role of the Federal Trade Commissionâis imperative to protect consumersâ data. Second, a proactive solution requires reconsidering how to minimize the problem by going to its source: the collection of personally identifiable information in the first place. This Note suggests regulating companiesâ collection of Social Security numbers, and, eventually, using a system based on distributed ledger technology to replace the ubiquity of Social Security numbers.
We propose and compare two approaches to identify smart contracts as token systems by analyzing their public bytecode. The first approach symbolically executes the code in order to detect token systems by their characteristic behavior of updating internal accounts. The second approach serves as a comparison base and exploits the common interface of ERC-20, the most popular token standard. We present quantitative results for the Ethereum blockchain, and validate the effectiveness of both approaches using a set of curated token systems as ground truth. We observe 100% recall for the second approach. Recall rates of 89% (with well explainable missed detections) indicate that the first approach may also be able to identify "hidden" or undocumented token systems that intentionally do not implement the standard. One possible application of the proposed methods is to facilitate regulator' tasks of monitoring and policing the use of token systems and their underlying platforms.
Muhammad Saad, Laurent Njilla, Charles Kamhoua, Aziz Mohaisen
Selfish mining is a well known vulnerability in blockchains exploited by miners to steal block rewards. In this paper, we explore a new form of selfish mining attack that guarantees high rewards with low cost. We show the feasibility of this attack facilitated by recent developments in blockchain technology opening new attack avenues. By outlining the limitations of existing countermeasures, we highlight a need for new defense strategies to counter this attack, and leverage key system parameters in blockchain applications to propose an algorithm that enforces fair mining. We use the expected transaction confirmation height and block publishing height to detect selfish mining behavior and develop a network-wide defense mechanism to disincentivize selfish miners. Our design involves a simple modifications to transactions' data structure in order to obtain a âtruth stateâ used to catch the selfish miners and prevent honest miners from losing block rewards.
We increasingly live in a world where there is a balance between the rights to privacy and the requirements for consent, and the rights of society to protect itself. Within this world, there is an ever-increasing requirement to protect the identities involved within financial transactions, but this makes things increasingly difficult for law enforcement agencies, especially in terms of financial fraud and money laundering. This paper reviews the state-of-the-art in terms of the methods of privacy that are being used within cryptocurrency transactions, and in the challenges that law enforcement face.
Bitcoin is the leading cryptocurrency in the world with a total marketcap of nearly USD 33 billion, [1] with 370,000 transactions recorded daily[2]. Pseudo-anonymous, decentralized peer-to-peer electronic cash systems such as Bitcoin have caused a paradigm shift in the way that people conduct financial transactions and purchase goods. Although cryptocurrencies enable users to securely and anonymously exchange money, they can also facilitate illegal criminal activities. Therefore, it is imperative that law enforcement agencies develop appropriate analytical processes that will allow them to identify and investigate criminal activities in the Blockchain (a distributed ledger). In this paper, INTERPOL, through the INTERPOL Global Complex for Innovation, proposes a Bitcoin analytical framework and a software system that will assist law enforcement agencies in the real-time analysis of the Blockchain while providing digital crime analysts with tracing and visualization capabilities. By doing so, it is feasible to render transactions decipherable and comprehensible for law enforcement investigators and prosecutors. The proposed solution is evaluated against three criminal case studies linked to Darknet markets, ransomware and DDoS extortion.
As Bitcoin's popularity has grown over the decade since its creation, it has become an increasingly attractive target for adversaries of all kinds. One of the most powerful potential adversaries is the country of China, which has expressed adversarial positions regarding the cryptocurrency and demonstrated powerful capabilities to influence it. In this paper, we explore how China threatens the security, stability, and viability of Bitcoin through its dominant position in the Bitcoin ecosystem, political and economic control over domestic activity, and control over its domestic Internet infrastructure. We explore the relationship between China and Bitcoin, document China's motivation to undermine Bitcoin, and present a case study to demonstrate the strong influence that China has over Bitcoin. Finally, we systematize the class of attacks that China can deploy against Bitcoin to better understand the threat China poses. We conclude that China has mature capabilities and strong motives for performing a variety of attacks against Bitcoin.
Marcel C. Ugwu, Izunna Okpala, Collins I. Oham, Cosmas Ifeanyi Nwakanma
In this paper, we present a tiered vehicular forensics framework based on permission BlockChain. We integrate all entities involved in the forensics process and record their interactions in the BlockChain to generate comprehensive evidence for settling disputes and appropriating blame. We incorporate a watchdog entity in our tiered framework to prevent collusive tendencies of potentiality liable entities and to prevent exploitation of evidence. Also, we incorporate a state mechanism to prove the state of a smart vehicle when an accident occurs. Furthermore, we conduct a security analysis to demonstrate the resilience of our framework against identified attacks and describe security mechanisms used to achieve key requirements for vehicular forensics. Finally, we comparatively evaluate our framework against existing proposals.
Yusuf Sani Abubakar, Ahmad Faosiy Ogunbado, Mpawenimana Abdallah Saidi
Bitcoin is a type of cryptocurrency and the most successful in blockchain management. It has become famous in recent years. The critical aspects of cryptocurrency are its legitimacy, source of money laundering, tax evasion, lack of regulation etc. The aim of this study is to explore the view of Muslim scholars on the legality of bitcoin with respect to Shariah. The study adopts doctrinal approach which utilizes descriptive approach of qualitative research methodology which relies on secondary data in form of text books, journals, newspapers, related websites etc. The study found that Muslim scholars are divided on the issue. A part of them completely rejected bitcoin and considered it against Shariah principles. On the other hand, some Muslim scholars believe bitcoin does not contradict Islamic principles and therefore may be used, however with certain conditions. The researchers tend to support the proponentsâ view as most of the opponentsâ grounds for the rejection are temporary in nature which may be covered through policy regulations.
In recent years, the Darknet has become one of the most discussed topics in cyber security circles. Current academic studies and media reports tend to highlight how the anonymous nature of the Darknet is used to facilitate criminal activities. This paper reports on a recent research in four Darknet forums that reveals a different aspect of the Darknet. Drawing on our qualitative findings, we suggest that many users of the Darknet might not perceive it as intrinsically criminogenic, despite their acknowledgement of various kinds of criminal activity in this network. Further, our research participants emphasised on the achievement of constructive socio-political values through the use of the Darknet. This achievement is enabled by various characteristics that are rooted in the Darknetâs technological structure, such as anonymity, privacy, and the use of cryptocurrencies. These characteristics provide a wide range of opportunities for good as well as for evil.
Virtual currencies are on the rise and so is money laundering. While there are efforts to combat money laundering through various intergovernmental bodies, many have expressed concern over the rise of virtual currencies. Some cryptocurrencies such as Bitcoin have played a major role in the proliferation of online money laundering as it possesses characteristics that criminals are fond of. Bitcoin and other cryptocurrencies are decentralised, anonymous/pseudonymous and irreversible. They provide the means to skirt the Anti-Money laundering safeguards that have been put in place. \nThis paper discusses the intersection between Anti-Money Laundering efforts and the challenges that are introduced by cryptocurrencies such as Bitcoin. It also looks at the case of Liberty Reserve to highlight these challenges.
A bitcoin node needs to download the full block contents of the entire blockchain, before actually being able to send and receive transactions on bitcoin broadcast network, except simple payment verification clients which require only block headers and bloom filters to sync with others peers available on the network. Transactions/Blocks pass through a complex process at sender and receiver than it apparently looks to be. During transmission transactions/blocks are broken down into smaller chunks of data so that they can be carried on the wire. These chunks are given appropriate headers, encapsulated and then passed through several layers to reach the destination. In this paper we captured Bitcoin packets using Wireshark and deeply investigated and analyzed them. We investigated how bitcoin transaction/block messages work and what values and parameters are considered during this whole process.
Benjamin Johnson, Ăron LĂĄszka, Jens GroĂklags, Tyler Moore
Cryptocurrency exchanges are frequently targeted and compromised by cyber-attacks, which may lead to significant losses for the depositors and closure of the affected exchanges. These risks threaten the viability of the entire public blockchain ecosystem since exchanges serve as major gateways for participation in public blockchain technologies. In this paper, we develop an economic model to capture the short-term incentives of cryptocurrency exchanges with respect to making security investments and establishing transaction fees. Using the model, we derive conclusions regarding an exchange's optimal economic decisions, and illustrate key features of these conclusions using graphs based on real-world data. Our security investment model exhibits horizontal scaling properties with respect to reducing exposure to losses, and may be of special interest to exchanges operating in markets with high price volatility.
Bitcoin mining is a process that serves to both verify sets of transactions and slowly introduce new currency into the system. As a reward for performing this process, miners are paid in bitcoin for the blocks they mine. It was originally thought that there was no incentive in trying to subvert the mining protocolâin other words, there was no reason to believe that miners could be profitable by somehow cheating the system. As it turns out, a specific strategy called âselfish miningâ was discovered to increase profitability for miners under certain conditions. This paper presents the selfish mining strategy, traverses a revenue model associated with the strategy, and then simulates the bitcoin network to see how this revenue model holds up under complicated network conditions. Specifically, the selfish mining revenue model typically assumes there is one selfish miner in the networkâI simulate the more realistic case of there being many selfish miners in the network. We find that the revenue model can overestimate selfish miner revenues by up to 100% and underestimate them by up to 300% depending on network variables such as the number of selfish miners, the power of those miners, and network latency (the speed of block propagation from one miner to another).
Manasa Sastry J. K, Astha Pandey, M. S. Dahiya, L Magwa M
Background: From the time immemorial there have been several types of crimes. With the advancement in science and technology, digital crimes have become very prominent. One among which is Bit-Coin crypto-currency frauds which are gaining momentum in the types of frauds encountered by law enforcement agencies. Bit-Coin is a growing form of digital crypto-currency that is created and held electronically that has no centralized control systems, that governs the transactions. It is the most secretive form of money transfer between two anonymous people all over the world. It is on a superficial layer used to purchase or sell goods electronically, similar to the conventional dollars that are traded digitally where individual ledgers are maintained by all the bit coin users to have access to the building block-chain. However, a masked layer consists of a dark-net where enormous amounts of money are concealed in cold storage where illegal websites and illicit commerce like ATM/ Debit/ Credit Card scams subjecting to illegal transactions rule over the deep net by utilizing the innocent public money. Case Presentation: The present study involves a case study where it was noted that innumerable ATM Debit/Credit Cards were skimmed and the illicit money was exchanged with this crypto-currency using an illicit website for bit coin mining and storing huge amounts of anonymous public money that was dictated by a few Nigerian Fraudsters running this racket all over the nation.
In the present techno-political moment it is clear that ignoring or dismissing the hype surrounding blockchain is unwise, and certainly for regulatory authorities and governments who must keep a grip on the technology and those promoting it, in order to ensure democratic accountability and regulatory legitimacy within the blockchain ecosystem and beyond. Blockchain is telling (and showing) us something very important about the evolution of capital and neoliberal economic reason, and the likely impact in the near future on forms and patterns of work, social organization, and, crucially, on communities and individuals who lack influence over the technologies and data that increasingly shape and control their lives. In this short essay I introduce some of the problems in the regulation of blockchain and offer counter-narratives aimed at cutting through the hype fuelling the ascendency of this most contemporary of technologies.
Ransomware is a type of malware that encrypts the files of infected hosts and demands payment, often in a crypto-currency like Bitcoin. In this paper, we create a measurement framework that we use to perform a large-scale, two-year, end-to-end measurement of ransomware payments, victims, and operators. By combining an array of data sources, including ransomware binaries, seed ransom payments, victim telemetry from infections, and a large database of bitcoin addresses annotated with their owners, we sketch the outlines of this burgeoning ecosystem and associated third-party infrastructure. In particular, we are able to trace the financial transactions, from the acquisition of bitcoins by victims, through the payment of ransoms, to the cash out of bitcoins by the ransomware operators. We find that many ransomware operators cashed out using BTC-e, a now-defunct Bitcoin exchange. In total we are able to track over $16 million USD in likely ransom payments made by 19,750 potential victims during a two-year period. While our study focuses on ransomware, our methods are potentially applicable to other cybercriminal operations that have similarly adopted Bitcoin as their payment channel.
Objective: There is broad agreement in the literature on the transformative potential of drug cryptomarkets that allow sourcing on a global market and consequently the circumvention of existing supply chains between producer and end user. We examine whether the transformative potential of drug cryptomarkets has been realized in two ways: Are cryptomarket drug sellers found in production and transit countries? and Do we see the increased use of shipping across international borders over time? Method: Using data collected by the DATACRYPTO software tool between 2013 and 2016, we characterize cryptomarket buyer behavior through the product reviews (i.e., sales transactions) posted on 15 cryptomarkets. Findings: Cryptomarket drug sellers are predominantly based in countries of Europe, North America, and Oceania. For both cannabis resin and cocaine sold on cryptomarkets, we find that known production and transit countries are not the primary sources of supplied drugs but rather key countries of consumption. In the case of 3,4-methylenedioxymethamphetamine, we observe that the Netherlands, a known production country, is the largest supplier. We further observe tendencies over time toward increased localization of cryptomarkets with regard to product destinations. Discussion: Though cryptomarkets offer a potentially global platform for drug distribution, they do not tend to be used as such. We explain our results with reference to buyersâ preferences regarding safety, risk, and convenience, alongside structural limitations for cryptomarket use such as bitcoin availability.
Masarah Paquet-Clouston, Bernhard Haslhofer, BenoĂźt Dupont
Ransomware can prevent a user from accessing a device and its files until a ransom is paid to the attacker, most frequently in Bitcoin. With over 500 known ransomware families, it has become one of the dominant cybercrime threats for law enforcement, security professionals and the public. However, a more comprehensive, evidence-based picture on the global direct financial impact of ransomware attacks is still missing. In this paper, we present a data-driven method for identifying and gathering information on Bitcoin transactions related to illicit activity based on footprints left on the public Bitcoin blockchain. We implement this method on-top-of the GraphSense open-source platform and apply it to empirically analyze transactions related to 35 ransomware families. We estimate the lower bound direct financial impact of each ransomware family and find that, from 2013 to mid-2017, the market for ransomware payments has a minimum worth of USD 12,768,536 (22,967.54 BTC). We also find that the market is highly skewed with only a few number of players responsible for the majority of the payments. Based on these research findings, policy-makers and law enforcement agencies can use the statistics provided to understand the size of the illicit market and make informed decisions on how best to address the threat.
The emergence of block-chain technology in the form known as âcryptocurrencyâ is an evolution of the global monetary system that is here to stay. The rise of this new variant of distributed ledger technology has been dismissed by some who believe it offers no real value and denigrated by others who believe its prevalence raises national security concerns. Many of these concerns stem from the common misperception that all cryptocurrencies have cryptographic properties which render them anonymous and can be used by terrorists and other undesirables to fund their criminal enterprises. After discussing the basic technical components of blockchain technology, this article distinguishes that, contrary to popular belief, most cryptocurrencies are not what could be classified as âanonymous,â but are instead âpseudonymous.â These pseudonymous cryptocurrencies can actually enhance law enforcementâs ability to track criminal usersâ financial activities. It further refines the notion that all cryptocurrencies are the same by noting that some are more anonymous than others, and some are in fact more identifiable than fiat currencies. Instead of resisting cryptocurrencies altogether, this article argues that the United States government should embrace those cryptocurrencies that are pseudonymous and should further study those which are considered anonymous.