The Bitcoin has emerged as a fascinating phenomenon in the Financial markets. Without any central authority issuing the currency, the Bitcoin has been associated with controversy ever since its popularity, accompanied by increased public interest, reached high levels. Here, we contribute to the discussion by examining the potential drivers of Bitcoin prices, ranging from fundamental sources to speculative and technical ones, and we further study the potential influence of the Chinese market. The evolution of relationships is examined in both time and frequency domains utilizing the continuous wavelets framework, so that we not only comment on the development of the interconnections in time but also distinguish between short-term and long-term connections. We find that the Bitcoin forms a unique asset possessing properties of both a standard financial asset and a speculative one.
This article presents one of the new elements of virtual reality, which is the Bitcoin cryptocurrency. This thesis focuses on the condition and perspectives on development of the trading function of this instrument. The authors discuss the legal aspects of functioning of the Bitcoin, conduct a SWOT analysis of this cryptocurrency as a medium of exchange, and examin the scale of use of Bitcoin in transaction purposes. As of March 1, 2014 the trading system gradually develops and the strengths of this cryptographic currency outweigh its weaknesses, but the future of Bitcoin as a medium of exchange is difficult to determine.
Alex Biryukov, Dmitry Khovratovich, Ivan Pustogarov
Bitcoin is a digital currency which relies on a distributed set of miners to mint coins and on a peer-to-peer network to broadcast transactions. The identities of Bitcoin users are hidden behind pseudonyms (public keys) which are recommended to be changed frequently in order to increase transaction unlinkability. We present an efficient method to deanonymize Bitcoin users, which allows to link user pseudonyms to the IP addresses where the transactions are generated. Our techniques work for the most common and the most challenging scenario when users are behind NATs or firewalls of their ISPs. They allow to link transactions of a user behind a NAT and to distinguish connections and transactions of different users behind the same NAT. We also show that a natural countermeasure of using Tor or other anonymity services can be cut-off by abusing anti-DoS countermeasures of the bitcoin network. Our attacks require only a few machines and have been experimentally verified. We propose several countermeasures to mitigate these new attacks.
Open access
4 source records
Blockchain Technology Applications and Security
Internet Traffic Analysis and Secure E-voting
Advanced Steganography and Watermarking Techniques
Cryptocurrencies such as bitcoin are often seen as a threat by governmental and financial institutions worldwide. Regulation could help minimise the risks involved. The author explores some legal and self-regulatory precedents from which we can learn.
I denne utredningen Ăžnsker vi Ă„ belyse det Ăžkonomisk innovative fenomenet bitcoin. MĂ„let med oppgaven er Ă„ fĂ„ klarhet i hva bitcoin er, og med grunnlag i dette undersĂžke om det er en boble. I fĂžrste del av utredningen presenterer vi det tekniske som ligger bak og ser pĂ„ hvordan det fungerer i det Ăžkonomiske markedet. Med bakgrunn i fremlagte teorier om valuta, rĂ„vare, betalingssystemer og svindler, analyserer vi hvilken definisjon bitcoin passer best innunder. Analysen viser oss at bitcoin ser ut til Ă„ hovedsakelig fungere som spekuleringsobjekt, men at det i fremtiden kan vĂŠre som betalingssystem. Dette begrunnes i lave transaksjonskostnader, noe som muliggjĂžr mikrotransaksjoner.\nI den andre delen av utredningen forsĂžker vi Ă„ besvare hovedproblemstillingen vĂ„r, hvorvidt bitcoin er en boble. Vi presenterer relevant bobleteori, herunder teorier om rasjonelle og irrasjonelle bobler. Volatilitetsberegninger viser oss at bitcoin har en daglig historisk volatilitet i tidsrommet 1.januar 2012 â 26.mars 2014 pĂ„ 8,5%. Vi har videre beregnet korrelasjonen mellom bitcoin sin prisutvikling og antall sĂžk i Google til Ă„ vĂŠre 0,96. Beregningene er benyttet til Ă„ analysere bitcoin opp mot bobleteori. Analysen viser oss tendenser til at det investeres i bitcoin i hĂ„p om en prisĂžkning i morgen, og at prisen samsvarer med publisiteten. Dette er klare indikasjoner pĂ„ at markedsprisen ikke reflekterer aktivumets fundamentale faktorer. Basert pĂ„ analysen fremlegger vi ogsĂ„ vĂ„re egne beregninger pĂ„ minste fundamentale verdi til bitcoin, en verdi pĂ„ $252,74.\nVĂ„re analyser og funn sett opp mot relevant bobleteori tyder pĂ„ at bitcoin er en boble. Fundamental verdi er ikke gjenspeilet i prisen, man kjĂžper i hĂ„p om gevinst i morgen og prisen korrelerer sterkt med publisiteten.\nĂkonometrisk testing er gjennomfĂžrt i SPSS, mens Ăžvrig databehandling er gjennomfĂžrt i Excel.
Pavel Ciaian, Miroslava RajÄĂĄniovĂĄ, dâArtis Kancs
This is the first article that studies BitCoin price formation by considering both the traditional determinants of currency price, e.g., market forces of supply and demand, and digital currencies specific factors, e.g., BitCoin attractiveness for investors and users. The conceptual framework is based on the Barro (1979) model, from which we derive testable hypotheses. Using daily data for five years (2009â2015) and applying time-series analytical mechanisms, we find that market forces and BitCoin attractiveness for investors and users have a significant impact on BitCoin price but with variation over time. Our estimates do not support previous findings that macro-financial developments are driving BitCoin price in the long run.
In this paper we revisit some major orthodoxies which lie at the heart of the bitcoin crypto currency and its numerous clones. In particular we look at The Longest Chain Rule, the monetary supply policies and the exact mechanisms which implement them. We claim that these built-in properties are not as brilliant as they are sometimes claimed. A closer examination reveals that they are closer to being... engineering mistakes which other crypto currencies have copied rather blindly. More precisely we show that the capacity of current crypto currencies to resist double spending attacks is poor and most current crypto currencies are highly vulnerable. Satoshi did not implement a timestamp for bitcoin transactions and the bitcoin software does not attempt to monitor double spending events. As a result major attacks involving hundreds of millions of dollars can occur and would not even be recorded. Hundreds of millions have been invested to pay for ASIC hashing infrastructure yet insufficient attention was paid to network neutrality and to insure that the protection layer it promises is effective and cannot be abused. In this paper we develop a theory of Programmed Self-Destruction of crypto currencies. We observe that most crypto currencies have mandated abrupt and sudden transitions. These affect their hash rate and therefore their protection against double spending attacks which we do not limit the to the notion of 51% attacks which is highly misleading. In addition we show that smaller bitcoin competitors are substantially more vulnerable. In addition to small hash rate, many bitcoin competitors mandate incredibly important adjustments in miner reward. We exhibit examples of 'alt-coins' which validate our theory and for which the process of programmed decline and rapid self-destruction has clearly already started.
We give an explicit definition of decentralization and show you that\ndecentralization is almost impossible for the current stage and Bitcoin is the\nfirst truly noncentralized currency in the currency history. We propose a new\nframework of noncentralized cryptocurrency system with an assumption of the\nexistence of a weak adversary for a bank alliance. It abandons the mining\nprocess and blockchain, and removes history transactions from data\nsynchronization. We propose a consensus algorithm named Converged Consensus for\na noncentralized cryptocurrency system.\n
With the increasing use of virtual currencies such as bitcoin, tax officials have started paying attention. Privacy and virtual identity specialist Niels Vandezande of the Interdisciplinary Centre for Law and ICT (ICRI) at the KU Leuven â University of Leuven explains the implications of the recent IRS ruling on Bitcoin in the US, arguing that it may undermine the core reasons such virtual currencies were created.
Bitcoins have emerged as a possible competitor to usual currencies, but other\ncrypto-currencies have likewise appeared as competitors to the Bitcoin\ncurrency. The expanding market of crypto-currencies now involves capital\nequivalent to $10^{10}$ US Dollars, providing academia with an unusual\nopportunity to study the emergence of value. Here we show that the Bitcoin\ncurrency in itself is not special, but may rather be understood as the\ncontemporary dominating crypto-currency that may well be replaced by other\ncurrencies. We suggest that perception of value in a social system is generated\nby a voter-like dynamics, where fashions form and disperse even in the case\nwhere information is only exchanged on a pairwise basis between agents.\n
The question "what is Bitcoin" allows for many answers depending on the objectives aimed at when providing such answers. The question addressed in this paper is to determine a top-level classification, or type, for Bitcoin. We will classify Bitcoin as a system of type money-like informational commodity (MLIC).
In this short note we show that the Bitcoin network can allow remote parties to gamble with their bitcoins by tossing a fair or biased coin, with no need for a trusted party, and without the possibility of extortion by dishonest parties who try to abort. The superfluousness of having a trusted party implies that there is no house edge, as is the case with centralized services that are supposed to generate a profit.
In 2009, an innovative form of digital currency premiered in the marketplace â Bitcoin. Bitcoin is a peer-to-peer payment network developed by Satoki Nakamoto (Nakamoto). Nakamoto created Bitcoin to be the ultimate digital currency, meaning no governmental oversight, central database, or tracking system. Bitcoin, a so-called âcryptocurrency,â is a digital currency with encrypted messages that are not accessible to third parties. Bitcoin is leading the cryptocurrency market with pioneering technology concepts such as limited distribution and secure information system.
Bitcoin is a "crypto currency", a decentralized electronic payment scheme based on cryptography. Bitcoin economy grows at an incredibly fast rate and is now worth some 10 billions of dollars. Bitcoin mining is an activity which consists of creating (minting) the new coins which are later put into circulation. Miners spend electricity on solving cryptographic puzzles and they are also gatekeepers which validate bitcoin transactions of other people. Miners are expected to be honest and have some incentives to behave well. However. In this paper we look at the miner strategies with particular attention paid to subversive and dishonest strategies or those which could put bitcoin and its reputation in danger. We study in details several recent attacks in which dishonest miners obtain a higher reward than their relative contribution to the network. In particular we revisit the concept of block withholding attacks and propose a new concrete and practical block withholding attack which we show to maximize the advantage gained by rogue miners. RECENT EVENTS: it seems that the attack was recently executed, see Section XI-A.
Open access
2 source records
Blockchain Technology Applications and Security
Cryptography and Data Security
Advanced Steganography and Watermarking Techniques
The new, decentralized, anonymous digital currency Bitcoin has in less than three years gone from a proof-of-concept to being traded for about âŹ78 million on a daily basis. Its ascendancy offers up a puzzle for financial regulators and other law-enforcers worldwide, while also promising to fulfill the political visions of a group of market-anarchist cryptographers. While it is still a very small economy in absolute terms, Bitcoin also poses some interesting challenges to traditional economic institutions, and is thus an interesting case for economic sociology. Using the notion of material embeddedness, this paper examines the possible implications of a further propagation of Bitcoin. If the currency proves a success, this will have ramifications for a large number of economic institutions, such as the possibility of taxation of untraceable money, the credit economy and interest rates, and international currency control.
Five years after the introduction of the peer-to-peer payment system and digital currency bitcoin, cryptocurrencies have flourished and become a global phenomenon. Concerns regarding the impact of cryptocurrency on financial stability and the conduct of monetary policy have drawn regulatory scrutiny and formal policy stances on this emerging phenomenon. The main purpose of the present research is to determine whether cryptocurrencies are scarce and can, by this virtue, be regarded as money. Cryptocurrencies such as bitcoin and litecoin are programmed to have supply scarcity, however the fact that myriad digital coins can be created effortless by emulation raises the question of whether the total combined supply of this potential money is indeed scarce or not. The primary focus of the paper is to determine empirically if the two main cryptocurrencies, bitcoin and litecoin are actually perceived by the market as being different. In order to determine whether bitcoin and litecoin are perceived as similar or not by the market, I conduct an empirical analysis using daily closing price and trade volumes data from major exchanges Bitstamp and BTC-e. I calculate correlations on a monthly and weekly frequency to investigate price co-movement and its dynamics. Complementarity and substitutability for the entire sample and for 4 separate subsamples is formally analyzed through the calculation of direct price elasticities and of cross-price elasticities of volume. I show that in spite of negligible fundamental differences that would lead us to believe that the two cryptocoins are interchangeable and fungible to a great extent, the empirical landscape is more complex, with fair evidence in favor of substitutability, i.e. them being effectively perceived as different monies. The implication of this finding is that the supply scarcity of any individual coin is not placed under question by the potentially infinite aggregate supply of all cryptocurrencies. Cryptocurrencies can posses scarcity, and, other properties left aside, can be regarded as money.
I explore a popular Bitcoin futures market and make empirical observations on the divergence between standard futures model and the observed futures prices by backing out what the implied risk-free rate of return would be if the standard assumptions held for this exchange. Intended as a blog post.
The appearance of bitcoin is the beginning of a new era in which advanced technological capabili- ties have changed the perspective on the financial system's functioning rules and have expanded the understanding of the category of money. Bitcoin is used in commercial transactions, transfers and as an investment asset. The establishment of bitcoin is a part of the movement away from cash transactions and the general acceptance of non-material form of money observed around the world. The aim of the study is to analyse the bitcoin cryptocurrency in the scope of the fulfilment of the definition criteria and functions of money formulated in an economic theory, and to present the current legal situation in selected countries relating with its functioning.