Blockchain Papers

Jennifer Isom

No abstract is available for this record.

Ajibola Ogunbadewa

No abstract is available for this record.

Yogesh Malhotra

No abstract is available for this record.

Marc Pilkington

No abstract is available for this record.

David Groshoff

This manuscript builds on my existing research program that (a) broadly seeks to analyze laws, regulations, instruments, and policy levers that inhibit a market’s ability to recognize an asset’s intrinsic value, whether in terms of financial, social, or human capital, and (b) explores and advances interdisciplinary corporate governance theories by employing a heterodox economic analytic to derive its proposal to the paradox of an unregulated virtual currency market (Bitcoins) and an overly regulated crowdfunding market (Kickstarter). The manuscript functions not only as an homage to Charles MacKay’s legendary 1841 book, Extraordinary Popular Delusions and the Madness of Crowds, which described the human, social, and economic psychology of financial bubbles — particularly the Dutch tulip bulb bubble — but also as an offering of problems and proposals that crowdfunded and Kickstarted entrepreneurial businesses, including those funded by Bitcoin currencies, present for a wide swath of societal stakeholders. To describe the problem, this manuscript (i) describes behavioral finance, (ii) details the new entrepreneurial business possibilities that virtual currencies and crowdfunded entities can explore, (iii) describes how current rules and regulations represent unnecessary constraints to traditional equity-based funding models and concerning governance models of entrepreneurial enterprises, and (iv) questions why one form of capital deployment (currencies) may provide equity-like returns and unique governance, while the other form of investing (crowdfunding), provides only soft-dollar-like returns and no governance for middle-class investors. While both virtual currencies and crowdfunding represent risks, including economic bubble risk, this Article believes that a heterodox economic analysis demonstrates unnecessary constraints on entrepreneurial businesses imposed by extant regulation, regulators, and law and policymakers. To assuage these paradoxic problems for emerging business enterprises, this Article proposes a minarchist heterodox solution of modest statutory language that requires market-based solutions that employ needed risk reduction strategies while redeploying necessary capital to private startup business enterprises. This proposal thus benefits the middle class entrepreneurs, suppliers of capital, and job seekers harmed by the current regulatory regime, while permitting for an expansion of the U.S. and global economies.

Sarah Meiklejohn, Marjori Pomarole, Grant Jordan, Kirill Levchenko · 7 authors

Bitcoin is a decentralized virtual currency whose usage has skyrocketed since its introduction in January 2009. Like cash, the ownership of bitcoins is anonymous, as participants transact bitcoins using pseudonyms rather than persistent real-world identities. In this article, we examine the limitations of Bitcoin anonymity and discover that the ability to cluster pseudonyms according to heuristics about shared ownership allows us to identify (i.e., associate with a real-world entity or user) a significant and active slice of the Bitcoin economy. Along the way, we explain a lot about how Bitcoin works.

Maria A. Arias, Yongseok Shin

Central to Bitcoin is its independence from any institution or government, allowing anyone to engage in a direct transaction at a low cost. So, what exactly is it, and how does it work?

Mihaela Iavorschi

The human innovation in the field of monetary freedom takes shape in the virtual communities. Developed and implemented through a decentralized algorithm, the bitcoin project has so far proved itself a success in the field of virtual currency. Beyond the technical part of operation, in this paper we will analyse the theoretical principles underlying the bitcoin. This study shows that the bitcoin largely meets the role of natural money of gold and silver, in compliance to the free market’s behaviour. This allows us to observe the fact that people are aware of the negative implications the state’s intervention has in the monetary filed, thus deciding to create and use their own currency in online transactions.

Jörg Becker, Dominic Breuker, Tobias Heide, Justus Holler · 6 authors

No abstract is available for this record.

Marcin Andrychowicz, Stefan Dziembowski, Daniel Malinowski, Łukasz Mazurek

Abstract. We show how the Bitcoin currency system (with a small modification) can be used to obtain fairness in any two-party secure computation protocol in the following sense: if one party aborts the protocol after learning the output then the other party gets a financial compensation (in bitcoins). One possible application of such protocols is the fair contract signing: each party is forced to complete the protocol, or to pay to the other one a fine. We also show how to link the output of this protocol to the Bitcoin currency. More precisely: we show a method to design secure two-party protocols for functionalities that result in a “forced ” financial transfer from one party to the other. Our protocols build upon the ideas of our recent paper “Secure Multiparty Computations on Bitcoin ” (Cryptology ePrint Archive, Report 2013/784). Compared to that paper, our results are more general, since our protocols allow to compute any function, while in the previous paper we concentrated only on some specific tasks (commitment schemes and lotteries). On the other hand, as opposed to “Secure Multiparty Computations on Bitcoin”, to obtain security we need to modify the Bitcoin specification so that the transactions are “non-malleable ” (we discuss this concept in more detail in the paper). 1

Shawn Bayern

An innovative software technology known as Bitcoin makes it easier for software to operate with some degree of financial autonomy. In a meaningful sense, it is now possible for software to conduct business on its own account, without using the traditional financial system as an intermediary and without a financial existence tied to an existing natural or legal person. This Essay explores this possibility and suggests that legally autonomous entities, such as a limited liability company (LLC) with no members, are a useful legal structure for factually autonomous systems.

Sarah Jeong

This paper will discuss and evaluate the design features of Bitcoin in relation to the libertarian and metallist philosophies that have shaped the cryptocurrency. Bitcoin has failed to be perfectly decentralized or particularly anonymous. Furthermore, its hyperdeflationary design features have made Bitcoin a currency dependent on outside, more stable currencies (e.g., the U.S. dollar), which serve as units of account. Finally, despite the view of money taken by its creators, this supposedly stateless currency is far from apolitical in nature. Although its creators tend to espouse apolitical accounts of money, Bitcoin has been from the beginning a political project -- an evolving, distributed constitutional project, with many goals, visions, and factions. Furthermore, depending on the shape of these political goals, Bitcoin advocates may or may not have a vested interest in creating mechanisms to stabilize the currency and make it a viable unit of account. This paper was written for Christine Desan's seminar, "The Constitutional Law of Money," at Harvard Law School.

Marie Brière, Kim Oosterlinck, Ariane Szafarz

No abstract is available for this record.

William J. Luther

Cryptocurrencies are digital alternatives to traditional government‐issued paper monies. Given the current state of technology and skepticism regarding the future purchasing power of existing monies, why have cryptocurrencies failed to gain widespread acceptance? I offer an explanation based on network effects and switching costs. In order to articulate the problem that agents considering cryptocurrencies face, I employ a simple model developed by Dowd and Greenaway (1993) (Dowd, K., and D. Greenaway. “Currency Competition, Network Externalities, and Switching Costs: Towards an Alternative View of Optimum Currency Areas.” The Economic Journal , 103(420), 1993, 1180–89). The model demonstrates that agents may fail to adopt an alternative currency when network effects and switching costs are present, even if all agents agree that the prevailing currency is inferior. The limited success of bitcoin—almost certainly the most popular cryptocurrency to date—serves to illustrate. After briefly surveying episodes of successful monetary transition, I conclude that cryptocurrencies like bitcoin are unlikely to generate widespread acceptance in the absence of either significant monetary instability or government support. ( JEL E40, E41, E42, E49)

William J. Luther, Josiah Olson

We maintain that the crypto-currency bitcoin is a practical application of what is termed “memory” in the monetary economics literature. After reviewing the theoretical literature on money and memory, we offer a brief overview of the bitcoin protocol and argue that, like memory, bitcoin functions as a public record-keeping device. Finally, we provide evidence that — in line with the standard theoretical account of memory — bitcoin use has soared as the expected cost of storing traditional monies increased.

Tyler Moore, Nicolas Christin

No abstract is available for this record.

Marcin Andrychowicz, Stefan Dziembowski, Daniel Malinowski, Łukasz Mazurek

Abstract—Bitcoin is a decentralized digital currency, intro-duced in 2008, that has recently gained noticeable popularity. Its main features are: (a) it lacks a central authority that controls the transactions, (b) the list of transactions is publicly available, and (c) its syntax allows more advanced transactions than simply transferring the money. The goal of this paper is to show how these properties of Bitcoin can be used in the area of secure multiparty computation protocols (MPCs). Firstly, we show that the Bitcoin system provides an attractive way to construct a version of “timed commitments”, where the committer has to reveal his secret within a certain time frame, or to pay a fine. This, in turn, can be used to obtain fairness in some multiparty protocols. Secondly, we introduce a concept of multiparty protocols that work “directly on Bitcoin”. Recall that the standard definition of the MPCs guarantees only that the protocol “emulates the trusted third party”. Hence ensuring that the inputs are correct, and the outcome is respected is beyond the scope of the definition. Our observation is that the Bitcoin system can be used to go beyond the standard “emulation-based” definition, by constructing protocols that link their inputs and the outputs with the real Bitcoin transactions. As an instantiation of this idea we construct protocols for secure multiparty lotteries using the Bitcoin currency, without relying on a trusted authority (one of these protocols uses the Bitcoin-based timed commitments mentioned above). Our protocols guarantee fairness for the honest parties no matter how the loser behaves. For example: if one party interrupts the protocol then her money is transferred to the honest participants. Our protocols are practical (to demonstrate it we performed their transactions in the actual Bitcoin system), and can be used in real life as a replacement for the online gambling sites. We think that this paradigm can have also other applications. We discuss some of them. Keywords—bitcoin; multiparty; lottery; I.

David Yermack

A bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria. Bitcoin has achieved only scant consumer transaction volume, with an average well below one daily transaction for the few merchants who accept it. Its volatility is greatly higher than the volatilities of widely used currencies, imposing large short-term risk upon users. Bitcoin’s daily exchange rates exhibit virtually zero correlation with widely used currencies and with gold, making bitcoin useless for risk management and exceedingly difficult for its owners to hedge. Bitcoin prices of consumer goods require many decimal places with leading zeros, which is disconcerting to retail market participants. Bitcoin faces daily hacking and theft risks, lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than a currency.

Arthur Gervais, Ghassan Karame, Vedran Čapkun, Srđjan Čapkun

Bitcoin has achieved large-scale acceptance and popularity by promising its users a fully
\ndecentralized and low-cost virtual currency system. However, recent incidents and observations
\nare revealing the true limits of decentralization in the Bitcoin system. In this article, we
\nshow that the vital operations and decisions that Bitcoin is currently undertaking are not
\ndecentralized. More specifically, we show that a limited set of entities currently control the
\nservices, decision making, mining, and the incident resolution processes in Bitcoin. We also
\nshow that third-party entities can unilaterally decide to “devalue” any specific set of Bitcoin
\naddresses pertaining to any entity participating in the system. Finally, we explore possible
\navenues to enhance the decentralization in the Bitcoin system.

Nicolas Christin

Abstract : We perform a comprehensive measurement analysis of Silk Road, an anonymous, international online marketplace that operates as a Tor hidden service and uses Bitcoin as its exchange currency. We gather and analyze data over eight months between the end of 2011 and 2012, including daily crawls of the marketplace for nearly six months in 2012. We obtain a detailed picture of the type of goods being sold on Silk Road, and of the revenues made both by sellers and Silk Road operators. Through examining over 24,400 separate items sold on the site, we show that Silk Road is overwhelmingly used as a market for controlled substances and narcotics, and that most items sold are available for less than three weeks. The majority of sellers disappears within roughly three months of their arrival, but a core of 112 sellers has been present throughout our measurement interval. We evaluate the total revenue made by all sellers, from public listings, to slightly over USD 1.2 million per month; this corresponds to about USD 92,000 per month in commissions for the Silk Road operators. We further show that the marketplace has been operating steadily, with daily sales and number of sellers overall increasing over our measurement interval. We discuss economic and policy implications of our analysis and results including ethical considerations for future research in this area.

Jannik Dreier, Jean‐Guillaume Dumas, Pascal Lafourcade

Auctions have a long history, having been recorded as early as 500 B.C. [Auction Theory, Academic Press, San Diego, USA, 2002]. Nowadays, electronic auctions have been a great success and are increasingly used in various applications, including high performance computing [Concurrency and Computatio n: Practice and Experience 14(13–15) (2002), 1507–1542]. Many cryptographic protocols have been proposed to address the various security requirements of these electronic transactions, in particular to ensure privacy. Brandt [International Journal of Information Security 5 (2006), 201–216] developed a protocol that computes the winner using homomorphic operations on a distributed ElGamal encryption of the bids. He claimed that it ensures full privacy of the bidders, i.e. no information apart from the winner and the winning price is leaked. We first show that this protocol – when using malleable interactive zero-knowledge proofs – is vulnerable to attacks by dishonest bidders. Such bidders can manipulate the publicly available data in a way that allows the seller to deduce all participants’ bids. We provide an efficient parallelized implementation of the protocol and the attack to show its practicality. Additionally we discuss some issues with verifiability as well as attacks on non-repudiation, fairness and the privacy of individual bidders exploiting authentication problems.

Ghassan Karame, Elli Androulaki, Srđjan Čapkun

Bitcoin is a decentralized payment system that relies on Proof-of-Work (PoW) to verify payments. Nowadays, Bitcoin is increasingly used in a number of fast payment scenarios, where the time between the exchange of currency and goods is short (in the order of few seconds). While the Bitcoin payment verification scheme is designed to prevent double-spending, our results show that the system requires tens of minutes to verify a transaction and is therefore inappropriate for fast payments. An example of this use of Bitcoin was recently reported in the media: Bitcoins were used as a form of \emph{fast} payment in a local fast-food restaurant. Until now, the security of fast Bitcoin payments has not been studied. In this paper, we analyze the security of using Bitcoin for fast payments. We show that, unless appropriate detection techniques are integrated in the current Bitcoin implementation, double-spending attacks on fast payments succeed with overwhelming probability and can be mounted at low cost. We further show that the measures recommended by Bitcoin developers for the use of Bitcoin in fast payments are not always effective in detecting double-spending; we show that if those recommendations are integrated in future Bitcoin implementations, double-spending attacks on Bitcoin will still be possible. Finally, we propose and implement a modification to the existing Bitcoin implementation that ensures the detection of double-spending attacks against fast payments.

Vipul Goyal, Chen-Kuei Lee, Rafail Ostrovsky, Ivan Visconti

We propose the first black-box construction of non-malleable commitments according to the standard notion of non-malleability with respect to commitment. Our construction additionally only requires a constant number of rounds and is based only on (black-box use of) one-way functions. Prior to our work, no black-box construction of non-malleable commitments was known (except for relaxed notions of security) in any (polynomial) number of rounds based on any cryptographic assumption. This closes the wide gap existent between black-box and non-black-box constructions for the problem of non-malleable commitments. Our construction relies on (and can be seen as a generalization of) the recent non-malleable commitment scheme of Goyal (STOC 2011). We also show how to get black-box constructions for a host of other cryptographic primitives. We extend our construction to get constant-round concurrent non-malleable commitments, constant-round multi-party coin tossing, and non-malleable statistically hiding commitments (satisfying the notion of non-malleability with respect to opening). All of the mentioned results make only a black-box use of one-way functions. Our primary technical contribution is a novel way of implementing the proof of consistency typically required in the constructions of non-malleable commitments (and other related primitives). We do this by relying on ideas from the ``zero-knowledge from secure multi-party computation" paradigm of Ishai, Kushilevitz, Ostrovsky, and Sahai (STOC 2007). We extend in a novel way this ``computation in the head" paradigm (which can be though of as bringing powerful error-correcting codes into purely computational setting). To construct a non-malleable commitment scheme, we apply our computation in the head techniques to the recent (constant-round) construction of Goyal. Along the way, we also present a simplification of the construction of Goyal where a part of the protocol is implemented in an information theoretic manner. Such a simplification is crucial for getting a black-box construction. This is done by making use of pair wise-independent hash functions and strong randomness extractors. We show that our techniques have multiple applications, as elaborated in the paper. Hence, we believe our techniques might be useful in other settings in future.

Yan Zhu, Shanbiao Wang, Hongxin Hu, Gail‐Joon Ahn · 5 authors

A hybrid cloud is a cloud computing environment in which an organization provides and manages some internal resources and has others provided externally. However, this new environment could bring irretrievable losses to the clients due to a lack of integrity verification mechanism for distributed data outsourcing. To support scalable service and data migration, in this paper we address the construction of a collaborative integrity verification mechanism in hybrid clouds where we consider the existence of multiple cloud service providers to collaboratively store and maintain the clients' data. We propose a collaborative provable data possession scheme adopting the techniques of homomorphic verifiable responses and hash index hierarchy. In addition, we articulate the performance optimization mechanisms for our scheme and prove the security of our scheme based on multi-prover zero-knowledge proof system, which can satisfy the properties of completeness, knowledge soundness, and zero-knowledge. Our experiments also show that our proposed solution only incurs a small constant amount of communications overhead.