One of the fundamental applications for a practically useful system of money is remuneration. Information pertaining to the amount of compensation awarded to different individuals is often considered sensitive, commanding a certain degree of privacy. As Bitcoin and similarly designed cryptocurrencies evolve into a recognized medium of exchange for larger swaths of the world economy, an increasing number of people will earn income in the form of blockchain-based payments. The nature of these transactions is such that the minute details of an affected individuals compensation package and spending habits will be exposed to public scrutiny. In some cases this violates cultural norms which respect the confidentiality of salaries, yet in other cases it could be regarded as providing the benefits associated with greater transparency. In this work we analyse the Bitcoin blockchain record of periodic payments accruing to an individual address in exchange for goods or services rendered. For differing levels of available information we seek to determine the extent of insights that can be gleaned about the transacting counter-parties and the privacy implications this entails.
Tien Tuan Anh Dinh, Ji Wang, Gang Chen, Rui Liu · 6 authors
Blockchain technologies are taking the world by storm. Public blockchains, such as Bitcoin and Ethereum, enable secure peer-to-peer applications like crypto-currency or smart contracts. Their security and performance are well studied. This paper concerns recent private blockchain systems designed with stronger security (trust) assumption and performance requirement. These systems target and aim to disrupt applications which have so far been implemented on top of database systems, for example banking, finance applications. Multiple platforms for private blockchains are being actively developed and fine tuned. However, there is a clear lack of a systematic framework with which different systems can be analyzed and compared against each other. Such a framework can be used to assess blockchains' viability as another distributed data processing platform, while helping developers to identify bottlenecks and accordingly improve their platforms. In this paper, we first describe BlockBench, the first evaluation framework for analyzing private blockchains. It serves as a fair means of comparison for different platforms and enables deeper understanding of different system design choices. Any private blockchain can be integrated to BlockBench via simple APIs and benchmarked against workloads that are based on real and synthetic smart contracts. BlockBench measures overall and component-wise performance in terms of throughput, latency, scalability and fault-tolerance. Next, we use BlockBench to conduct comprehensive evaluation of three major private blockchains: Ethereum, Parity and Hyperledger Fabric. The results demonstrate that these systems are still far from displacing current database systems in traditional data processing workloads. Furthermore, there are gaps in performance among the three systems which are attributed to the design choices at different layers of the software stack.
Ponzi schemes are financial frauds which lure users under the promise of high profits. Actually, users are repaid only with the investments of new users joining the scheme: consequently, a Ponzi scheme implodes soon after users stop joining it. Originated in the offline world 150 years ago, Ponzi schemes have since then migrated to the digital world, approaching first the Web, and more recently hanging over cryptocurrencies like Bitcoin. Smart contract platforms like Ethereum have provided a new opportunity for scammers, who have now the possibility of creating "trustworthy" frauds that still make users lose money, but at least are guaranteed to execute "correctly". We present a comprehensive survey of Ponzi schemes on Ethereum, analysing their behaviour and their impact from various viewpoints.
The payment services market in Poland is particularly open to new payment solutions. The most important financial innovations of the recent years include cryptocurrencies. Bitcoin is the most well-known of them and its applications cover payments and investments. The article aims to determine the potential for using cryptocurrencies in individual segments of the payment services market in Poland. The paper considers the following research hypothesis: Representatives of the financial sector see a potential for a widespread use of cryptocurrencies in the payment services sector in Poland. The aim of the paper was achieved and the hypothesis verified on the basis of selected results of a survey among representatives of institutions operating in the financial market in Poland. The study, primarily carried out by the author, presents the opinions of experts representing the broadly understood community of professionals from the payment services market in Poland. Their views concern the directions in which innovations in the payment services sector may develop and the prospects for the use of cryptocurrencies in that area.
Bitcoin is attracting a steadily increasing interest since its first appearance in 2008. Bitcoin price forecasting would be of great practical interest given its role as a relatively new virtual âcurrencyâ. This presupposes the modeling and verification of some kind of relation, causal or not, connecting bitcoin price to other âestablishedâ factors of economic interest. Towards this goal, cross-correlation analysis is used in this work to investigate relations between bitcoin price and a set of other factors of economic interest. The years 2013 to 2015 are selected as the temporal basis of this research, because earlier bitcoin prices were practically zero. Results reveal a strong correlation between bitcoin and stock market indices or other economical factor values. SWOT analysis for bitcoin is carried out for the same period of time, based on cross-correlation as well as on existing research results. Bitcoin is seen to possess more benefits than risks, while its strong temporal correlations with other economic indices or prices constitute an opportunity to be further explored towards the goal of bitcoin price forecasting.
We introduce blockchains and distributed ledgers and describe their potential applications to money and banking. The analysis compares public and private ledgers and outlines the suitability of various types of ledgers for different purposes. Furthermore, a few historical prototypes of blockchains and distributed ledgers are presented, and results of their hard forking are illustrated. Next, some potential applications of distributed ledgers to trading, clearing and settlement, payments, trade finance, etc. are outlined. Monetary circuits are argued to be natural applications for blockchains. Finally, the role of digital currencies in modern society is articulated and various forms of digital cash, such as central bank issued electronic cash, bank money, bitcoin and P2P money, are compared and contrasted. Keywords: blockchains, distributed ledgers, digital currencies, modern monetary circuit; credit creation banking; interconnected banking network.
In zunehmendem MaĂe wird das Finanzsystem von digitalen Technologien beeinflusst. Welche Potenziale bringen diese neuen Technologien fĂŒr das Geld- und Austauschsystem mit sich? Und wie können diese fĂŒr eine nachhaltige Entwicklung eingesetzt werden?
A ledgerLedger can be defined as a âbook of permanent record.â With modern information technology, data have become economic resources if they are associated with exclusive owners and put into a ledgerLedger. It is shown in Chaps. 3 and 4 that IoTInternet of Things (IoT) data can be transformed into productive resources while Chaps. 5 and 6 show that transaction data can be turned into money-likeMoney bank deposit currenciesDeposit currency.
During times of extreme market turmoil, it is acknowledged that there is a tendency towards "flight to safety". A strong (weak) safe haven is defined as an asset that has a significant positive (negative) return in periods where another asset is in distress, while hedge has to be negatively correlated (uncorrelated) on average. The Bitcoin's surge alongside the aftermath of Trump's win in the 2016 U.S. presidential elections has strengthened its status as the modern safe haven. This paper uses a truly noise-assisted data analysis method, termed as Ensemble Empirical Mode Decomposition-based approach, to examine whether Bitcoin can act as a hedge and safe haven for U.S. stock price index. The results document that the Bitcoin's safe-haven property is time-varying and that it has primarily been a weak safe haven in the short term and the long-term. We also demonstrate that precious metals lost their safe haven properties over time as the correlation between gold/silver and U.S. stock price declines from short-to long-run horizons.
We provide an extreme value analysis of the returns of Bitcoin. A particular focus is on the tail risk characteristics and we will provide an in-depth univariate extreme value analysis. Those properties will be compared to the traditional exchange rates of the G10 currencies versus the US dollar. For investors, especially institutional ones, an understanding of the risk characteristics is of utmost importance. So for Bitcoin to become a mainstream investable asset class, studying these properties is necessary. Our findings show that the bitcoin return distribution not only exhibits higher volatility than traditional G10 currencies, but also stronger non-normal characteristics and heavier tails. This has implications for risk management, financial engineering (such as bitcoin derivatives) â both from an investor's as well as from a regulator's point of view. To our knowledge, this is the first detailed study looking at the extreme value behavior of the cryptocurrency Bitcoin.
Andrew Miller, Iddo Bentov, Surya Bakshi, Ranjit Kumaresan · 5 authors
Bitcoin, Ethereum and other blockchain-based cryptocurrencies, as deployed today, cannot scale for wide-spread use. A leading approach for cryptocurrency scaling is a smart contract mechanism called a payment channel which enables two mutually distrustful parties to transact efficiently (and only requires a single transaction in the blockchain to set-up). Payment channels can be linked together to form a payment network, such that payments between any two parties can (usually) be routed through the network along a path that connects them. Crucially, both parties can transact without trusting hops along the route. In this paper, we propose a novel variant of payment channels, called Sprites, that reduces the worst-case "collateral cost" that each hop along the route may incur. The benefits of Sprites are two-fold. 1) In Lightning Network, a payment across a path of $\ell$ channels requires locking up collateral for $Î(\ellÎ)$ time, where $Î$ is the time to commit an on-chain transaction. Sprites reduces this cost to $O(\ell + Î)$. 2) Unlike prior work, Sprites supports partial withdrawals and deposits, during which the channel can continue to operate without interruption. In evaluating Sprites we make several additional contributions. First, our simulation-based security model is the first formalism to model timing guarantees in payment channels. Our construction is also modular, making use of a generic abstraction from folklore, called the "state channel," which we are the first to formalize. We also provide a simulation framework for payment network protocols, which we use to confirm that the Sprites construction mitigates against throughput-reducing attacks.
Andrew Miller, Iddo Bentov, Ranjit Kumaresan, Christopher Cordi · 5 authors
Bitcoin, Ethereum and other blockchain-based cryptocurrencies, as deployed\ntoday, cannot scale for wide-spread use. A leading approach for cryptocurrency\nscaling is a smart contract mechanism called a payment channel which enables\ntwo mutually distrustful parties to transact efficiently (and only requires a\nsingle transaction in the blockchain to set-up). Payment channels can be linked\ntogether to form a payment network, such that payments between any two parties\ncan (usually) be routed through the network along a path that connects them.\nCrucially, both parties can transact without trusting hops along the route.\n In this paper, we propose a novel variant of payment channels, called\nSprites, that reduces the worst-case "collateral cost" that each hop along the\nroute may incur. The benefits of Sprites are two-fold. 1) In Lightning Network,\na payment across a path of $\\ell$ channels requires locking up collateral for\n$\\Theta(\\ell\\Delta)$ time, where $\\Delta$ is the time to commit an on-chain\ntransaction. Sprites reduces this cost to $O(\\ell + \\Delta)$. 2) Unlike prior\nwork, Sprites supports partial withdrawals and deposits, during which the\nchannel can continue to operate without interruption.\n In evaluating Sprites we make several additional contributions. First, our\nsimulation-based security model is the first formalism to model timing\nguarantees in payment channels. Our construction is also modular, making use of\na generic abstraction from folklore, called the "state channel," which we are\nthe first to formalize. We also provide a simulation framework for payment\nnetwork protocols, which we use to confirm that the Sprites construction\nmitigates against throughput-reducing attacks.\n
We present Bitcoin Security Tables computing the probability of success p(z,q,t) of a double spend attack by an attacker controlling a share q of the hashrate after z confirmations in time t.
Countries like Estonia, Norway or Australia developed electronic voting systems, which could be used to realize parliamentary elections with the help of personal computers and the Internet. These systems are completely different in their design and their way to solve the same problem. In this thesis, we analyze some of the largest real-world systems, describe their building blocks and their general design to focus on possible problems in these electronic voting systems. Furthermore, we present a template for an e-voting system, which we designed to try to fulfill the preliminaries and requirements of a secure electronic voting system. We use the experiences and the building blocks of existing systems to combine them to another more secure system. Afterwards, we compare our concept with real-world systems to evaluate the fulfillments of the requirements. Conclusively, we discuss the occurring problems when designing a secure system. Peer-to-peer networks provide many advantages, like decentralization, which might be applicable to electronic voting systems. Therefore, we take a look on the distributed database called blockchain and the usage in a peer-to-peer voting system. Our contribution to this topic is a modification of the proof-of-stake, which enables the usage of common devices, like smartphones or tablets, for the blockchain verification and inclusion of new ballots to the chain. This proof does not need much computing power and has a lower carbon footprint than the proof-of-work in the Bitcoin protocol.
We correct the double spend race analysis given in Nakamotoâs foundational Bitcoin article and find the exact closed-form formula for the probability of success of a double spend attack using the regularized incomplete beta function. We give the first proof of its exponential decay on the number of confirmations, often cited in the literature, and find an asymptotic formula. Larger number of confirmations are required compared to those given by Nakamoto. We also compute this probability conditional to the knowledge of the time of the confirmations. This provides a finer risk analysis than the classical one.
Smart contracts are full-fledged programs that run on blockchains (e.g., Ethereum, one of the most popular blockchains). In Ethereum, gas (in Ether, a cryptographic currency like Bitcoin) is the execution fee compensating the computing resources of miners for running smart contracts. However, we find that under-optimized smart contracts cost more gas than necessary, and therefore the creators or users will be overcharged. In this work, we conduct the first investigation on Solidity, the recommended compiler, and reveal that it fails to optimize gas-costly programming patterns. In particular, we identify 7 gas-costly patterns and group them to 2 categories. Then, we propose and develop GASPER, a new tool for automatically locating gas-costly patterns by analyzing smart contracts' bytecodes. The preliminary results on discovering 3 representative patterns from 4,240 real smart contracts show that 93.5%, 90.1% and 80% contracts suffer from these 3 patterns, respectively.
Bitcoin is a virtual currency that is created from computer code. It has no central bank and is not backed by any government. But it can be exchanged for goods and services or for any other currencies. They were launched in 2009 as a bit of software written under the name Satoshi Nakamoto. The present paper analyse the Indian Tax and legal considerations regarding Bit coins. It also analyse the problems and risks related with Bitcoins.
We consider a prediction market in which all aspects are controlled by market forces, in particular the correct outcomes of events are decided by the market itself rather than by trusted arbiters. This kind of a decentralized prediction market can sustain betting on events whose outcome may remain unresolved for a long or even unlimited time period, and can facilitate trades among participants who are spread across diverse geographical locations, may wish to remain anonymous and/or avoid burdensome identification procedures, and are distrustful of each other. We describe how a cryptocurrency such as Bitcoin can be enhanced to accommodate a truly decentralized prediction market, by employing an innovative variant of the Colored Coins concept. We examine the game-theoretic properties of our design, and offer extensions that enable other financial instruments as well as real-time exchange.
Digital technology is changing, and has changed the ways we create and consume narratives, from moving images and immersive storyworlds to digital long-form and multi-branched story experiences. At the same time, blockchain, the technology that underpins cryptocurrencies such as Bitcoin, is revolutionizing the way that transactions and exchanges occur. As a globally stored and collaboratively written list of all transactions that have ever taken place within a given system, the blockchain decentralizes money and offers a platform for its creative use. There are already examples of blockchain technologies extending beyond the realm of currency, including the decentralization of domain name servers that are not subject to government takedown and identity management and governance. By framing key blockchain concepts with past and present storytelling practices, this article raises questions as to how the principles and implementation of such distributed ledger technologies might be used within contemporary writing practices â that is, can we imagine stories as a currency or value system? We present three experiments that draw on some of the fundamental principles of blockchain and Bitcoin, as an instantiation of a blockchain implemented application, namely, (1) the ledger, (2) the blocks and (3) the mining process. Each low-fi experiment was intentionally designed to be very accessible to take part in and understand and all were conducted as discrete workshops with different sets of participants. Participants included a cohort of design students, technology industry and design professionals and writing and interaction design academics. Each experiment raised a different set of reflections and subsequent questions on the nature of digital, the linearity (or not) of narratives and collaborative processes.
In the aftermath of the 2008 financial crisis, Bitcoin emerged as an alternative monetary system that could circumvent political and financial authorities. A practice in libertarian prefigurative politics, Bitcoin demonstrates the capacity for online subgroups to creatively appropriate internet-based technologies to enact alternative futures. Andrew Feenbergâs critical theory of technology clarifies this capacity and outlines the significance of agency in technical action. As technology mediates many social relations, it has a significant role in the reproduction of social power. Technological agency is therefore a crucial site of resistance in which users can form alternative, democratic rationalizations of technology. Yet are such instances of agency intrinsically democratic? In analysing this aspect of Feenbergâs theory, this article argues that Bitcoin represents a âpopular rationalizationâ of technology â a creative appropriation of technology that empowers some groups while lacking the ethical justification necessary to be considered democratic.
This comprehensive survey deliberated over the security of electronic payment systems. In our research, we focused on either dominant systems or new attempts and innovations to improve the level of security of the electronic payment systems. This survey consists of the Card-present (CP) transactions and a review of its dominant system i.e. EMV including several researches at Cambridge university to designate variant types of attacks against this standard which demonstrates lack of a secure "offline" authentication method that is one of the main purpose of using the smart cards instead of magnetic stripe cards which are not able to participate in authentication process, the evaluation of the EMV migration from RSA cryptosystem to ECC based cryptosystem 3. The evaluation of the Card-not-present transactions approaches including 3D Secure, 3D SET, SET/EMV and EMV/CAP, the impact of concept of Tokenization and the role of Blind Signatures schemes in electronic cash and E-payment systems, use of quantum key distribution (QKD) in electronic payment systems to achieve unconditional security rather than only computational assurance of the security level by using traditional cryptography, the evaluation of Near Field Communication (NFC) and the contactless payment systems such as Google wallet, Android Pay and Apple Pay, the assessment of the electronic currency and peer to peer payment systems such as Bitcoin. The criterion of our survey for the measurement and the judgment about the quality of the security in electronic payment systems was this quote: "The security of a system is only as strong as its weakest link"
Bitcoin and other cryptocurrencies have surged in popularity over the last decade. Although Bitcoin does not claim to provide anonymity for its users, it enjoys a public perception of being a `privacy-preserving' financial system. In reality, cryptocurrencies publish users' entire transaction histories in plaintext, albeit under a pseudonym; this is required for transaction validation. Therefore, if a user's pseudonym can be linked to their human identity, the privacy fallout can be significant. Recently, researchers have demonstrated deanonymization attacks that exploit weaknesses in the Bitcoin network's peer-to-peer (P2P) networking protocols. In particular, the P2P network currently forwards content in a structured way that allows observers to deanonymize users. In this work, we redesign the P2P network from first principles with the goal of providing strong, provable anonymity guarantees. We propose a simple networking policy called Dandelion, which achieves nearly-optimal anonymity guarantees at minimal cost to the network's utility. We also provide a practical implementation of Dandelion.