Nearly every aspect of a hacked computer and a users online life can be and has been commoditized. Recent trends into crypto currencies have made the former even more true as cyber criminals are now committing crime for monetary benefit and not just to out smart each other. In this study, I look more closely at Bitcoin, a de-centralized crypto currency which has become increasingly popular in the last six months. This study focuses on the analysis of the bitcoin economy, the involvement of malware and botnets and its effect to the currency.
In January 2009, the Japanese software designer Satoshi Nakamoto invented a virtual currency named Bitcoin and released software for managing transactions in the new money. It consists solely of bits and bytes, but we cannot see it as a coin or banknote on the market. There is no cover in terms of gold or stocks, in fact, nothing but the source code of the software which consists of 31 000 lines of code. The payment system is completely decentralised and so contains no central organisation which monitors transactions. Many people use this new currency to pay for services or products on the Internet, since it is not less safe than traditional payment systems. The anonym currency can be a perfect tool in the hands of criminals to reach their goals. Law enforcement authorities like the FBI have dealt with the question in a long report that recently leaked to the Internet. It can be interesting to examine the ‘Bitcoin problem’ from this point of view too, because the anonymous money transferring possibility seems to be the root of money laundering at first sight.
With the rise and extensive usage of Bit coin, a peer-to-peer electronic cash system beginning at 2008, the number of transactions is growing. In order to analyze the activity in this currency system, we present a parallel analysis approach for meeting the need of building the transaction graph of this financial system. In order to test the performance and the realistic possibility of our approach, we implemented our approach and conducted some comparing to test the performance of our system. Through the experiment, we confirmed that this method is highly efficient and reliable compared with the traditional method.
The Bitcoin crypto-currency has come under attack from multiple directions over the past few weeks, including massive thefts. And given the intrinsically anonymous nature of the system, it may be impossible to track down the thieves.
Technological development and the increased use of the internet have led to the proliferation of virtual communities. Some of these communities have created and circulated their own currency for exchanging goods and services. Bitcoin is currently the most popular among these virtual or digital currencies and has been in news recently because of the wild fluctuations in its "value" and also significant venture capital investment in entities associated with it.1 Bitcoin is relevant in several areas of the financial system and is therefore of interest to central banks, consumers and investors. Digital currencies are part of a broader group of virtual currencies that include credit card points, air miles, loyalty points and coupons (Chart 1). With the advent of the Internet, mobile devices and detailed consumer information, companies are increasingly using digital currencies as a marketing tool. As a result, there has been a sharp increase in the use of digital currencies, particularly for app-based coins and tokens, mobile coupons, and personal data exchanged for digital content. As these trends evolve, digital currencies have the potential to become more popular and compete with traditional currencies. This paper aims to provide some clarity in particular on Bitcoin, its role and potential future use in the financial system and the risks associated with this form of digital currency.. It will begin by providing a short introduction to the Bitcoin network as well as describe the benefits of allowing the Bitcoin network to develop and innovate. It will highlight concerns for consumers, policymakers and financial regulators. Next it will analyze the role that Bitcoin could play in the financial system. The paper will conclude by providing recommendations to address policymakers' concerns while allowing for further innovation within the Bitcoin network. An initial comprehensive overview of this kind is absent from the existing literature. This paper intends to fill that gap in the literature.
Bitcoin is a digital currency that was launched in 2009, and it has attracted much attention recently. This article reviews the mechanics of the currency and offers some thoughts on its characteristics.
This Note discusses the relationship of Bitcoins, a cyber-currency, to the Bank Secrecy Act and discusses money laundering and tax evasion. This Note highlights the use and potentially problematic implications of Bitcoins in commerce and discusses their current regulation by the government, both within the United States and internationally, to guard against these threats. This Note addresses the regulation of Bitcoin exchanges, the exchanges' vulnerability to cyber-attacks, and the value of trust to the users of Bitcoin exchanges. This Note concludes that well known exchanges that operate both within and outside the United States generally self-regulate in order to gain the trust of their users despite the cyber-attacks on exchanges in the past. This Note also addresses the tax-reporting implications of foreign Bitcoin exchanges, looking by analogy at attempts to gain information from known tax havens.This Note argues that, given the applicability of the BSA to Bitcoin exchanges, the Bitcoin system poses serious questions relating to money laundering and tax reporting, mostly with regard to the less trustworthy exchanges known for their illegal activity. Some Bitcoin exchanges and e-wallets may also have the potential to become the next tax havens. Many exchanges voluntarily implement measures amounting to self-regulation in attempts to appear more trustworthy to wary consumers or in attempts to avoid criminal or civil sanctions. Whether this self-regulation is sufficient to achieve the goals of preventing money laundering and other criminal activity is debatable. Exchanges that have no need to appear trustworthy, however, still pose the same risks of money laundering and other illegal activity contemplated by the FBI. Moreover, ways exist in which criminals can work around the current regulatory scheme to achieve criminal goals; in that respect, the current regulatory scheme is ineffective to prevent the targeted criminal activity. This Note recommends a supplemental regulatory scheme that would target the areas that current regulation fails to address in combating money laundering, tax evasion, and other criminal activity.
Bitcoin is the first widely adopted distributed e-cash system and Zerocoin is a recent proposal to extend Bitcoin with anonymous transactions. The original Zerocoin protocol relies heavily on the Strong RSA assumption and double-discrete logarithm proofs, long-standing techniques with known performance restrictions. We show a variant of the Zerocoin protocol using instead elliptic curves and bilinear pairings. The proof system makes use of modern techniques based on quadratic arithmetic programs resulting in smaller proofs and quicker verification. We remark on several extensions to Zerocoin that are enabled by the general-purpose nature of these techniques.
The Bitcoin network was launched in 2009 by the mysterious Satoshi Nakamoto, a developer who worked extensively on the project but only interacted with people on developer forums. At the end of 2010, Nakamoto disappeared from view, announcing his departure and handing off the project to the open source community . No one knows his (or her) true identity, but what is known is Nakamoto's wealth. He is said to have roughly $100m worth of bitcoins by today's value, and hasn't spent any of it. Bitcoin's decentralised financial network is not immune to attack. It has already been subject to attacks on numerous occasions, and is in danger of experiencing more. While the concept behind the crypto-currency is designed to minimise interference , both researchers and criminals have found ways to subvert it. Danny Bradbury explores some of the vulnerabilities surrounding this alternative to conventional fiat currency, and describes some of the changes being made to ensure it remains secure and stable.
The Bitcoin cryptocurrency records its transactions in a public log called the blockchain. Its security rests critically on the distributed protocol that maintains the blockchain, run by participants called miners. Conventional wisdom asserts that the protocol is incentive-compatible and secure against colluding minority groups, i.e., it incentivizes miners to follow the protocol as prescribed. We show that the Bitcoin protocol is not incentive-compatible. We present an attack with which colluding miners obtain a revenue larger than their fair share. This attack can have significant consequences for Bitcoin: Rational miners will prefer to join the selfish miners, and the colluding group will increase in size until it becomes a majority. At this point, the Bitcoin system ceases to be a decentralized currency. Selfish mining is feasible for any group size of colluding miners. We propose a practical modification to the Bitcoin protocol that protects against selfish mining pools that command less than 1/4 of the resources. This threshold is lower than the wrongly assumed 1/2 bound, but better than the current reality where a group of any size can compromise the system.
Bitcoin is a "crypto currency", a decentralized electronic payment scheme based on cryptography which has recently gained excessive popularity. Scientific research on bitcoin is less abundant. A paper at Financial Cryptography 2012 conference explains that it is a system which "uses no fancy cryptography", and is "by no means perfect". It depends on a well-known cryptographic standard SHA-256. In this paper we revisit the cryptographic process which allows one to make money by producing bitcoins. We reformulate this problem as a Constrained Input Small Output (CISO) hashing problem and reduce the problem to a pure block cipher problem. We estimate the speed of this process and we show that the cost of this process is less than it seems and it depends on a certain cryptographic constant which we estimated to be at most 1.86. These optimizations enable bitcoin miners to save tens of millions of dollars per year in electricity bills. Miners who set up mining operations face many economic incertitudes such as high volatility. In this paper we point out that there are fundamental incertitudes which depend very strongly on the bitcoin specification. The energy efficiency of bitcoin miners have already been improved by a factor of about 10,000, and we claim that further improvements are inevitable. Better technology is bound to be invented, would it be quantum miners. More importantly, the specification is likely to change. A major change have been proposed in May 2013 at Bitcoin conference in San Diego by Dan Kaminsky. However, any sort of change could be flatly rejected by the community which have heavily invested in mining with the current technology. Another question is the reward halving scheme in bitcoin. The current bitcoin specification mandates a strong 4-year cyclic property. We find this property totally unreasonable and harmful and explain why and how it needs to be changed.
Sarah Meiklejohn, Marjori Pomarole, Grant Jordan, Kirill Levchenko · 7 authors
Bitcoin is a purely online virtual currency, unbacked by either physical commodities or sovereign obligation; instead, it relies on a combination of cryptographic protection and a peer-to-peer protocol for witnessing settlements. Consequently, Bitcoin has the unintuitive property that while the ownership of money is implicitly anonymous, its flow is globally visible. In this paper we explore this unique characteristic further, using heuristic clustering to group Bitcoin wallets based on evidence of shared authority, and then using re-identification attacks (i.e., empirical purchasing of goods and services) to classify the operators of those clusters. From this analysis, we characterize longitudinal changes in the Bitcoin market, the stresses these changes are placing on the system, and the challenges for those seeking to use Bitcoin for criminal or fraudulent purposes at scale.
Many want to know what bitcoin is and how it works. But bitcoin is as complex as it is controversial, and relatively few have the technical background to understand it. In this paper, I offer an accessible on-ramp for understanding bitcoin in the form of a model. My model reveals both what bitcoin is and how it works. More specifically, it reveals that bitcoin is a fictional substance in a massively coauthored story on a network that automates and distributes jobs normally entrusted to centralized publishing institutions. My model therefore falsifies a popular view according to which each bitcoin is a chunk of code.
Tobias Bamert, Christian Decker, Lennart Elsen, Roger Wattenhofer · 5 authors
Cashless payments are nowadays ubiquitous and decentralized digital currencies like Bitcoin are increasingly used as means of payment. However, due to the delay of the transaction confirmation in Bitcoin, it is not used for payments that rely on quick transaction confirmation. We present a concept that addresses this drawback of Bitcoin and allows it to be used for fast transactions. We evaluate the performance of the concept using double-spending attacks and show that, employing our concept, the success of such attacks diminishes to less than 0.09%. Moreover, we present a real world application: We modified a snack vending machine to accept Bitcoin payments and make use of fast transaction confirmations.