Eli Ben‐Sasson, Alessandro Chiesa, Christina Garman, Matthew Green · 7 authors
Bit coin is the first digital currency to see widespread adoption. While payments are conducted between pseudonyms, Bit coin cannot offer strong privacy guarantees: payment transactions are recorded in a public decentralized ledger, from which much information can be deduced. Zero coin (Miers et al., IEEE S&P 2013) tackles some of these privacy issues by unlinking transactions from the payment's origin. Yet, it still reveals payments' destinations and amounts, and is limited in functionality. In this paper, we construct a full-fledged ledger-based digital currency with strong privacy guarantees. Our results leverage recent advances in zero-knowledge Succinct Non-interactive Arguments of Knowledge (zk-SNARKs). First, we formulate and construct decentralized anonymous payment schemes (DAP schemes). A DAP scheme enables users to directly pay each other privately: the corresponding transaction hides the payment's origin, destination, and transferred amount. We provide formal definitions and proofs of the construction's security. Second, we build Zero cash, a practical instantiation of our DAP scheme construction. In Zero cash, transactions are less than 1 kB and take under 6 ms to verify - orders of magnitude more efficient than the less-anonymous Zero coin and competitive with plain Bit coin.
Adam Back, Matt Corallo, Luke Dashjr, Mark Friedenbach · 9 authors
Since the introduction of Bitcoin[Nak09] in 2009, and the multiple computer science and electronic cash innovations it brought, there has been great interest in the potential of decentralised cryptocurrencies. At the same time, implementation changes to the consensuscritical parts of Bitcoin must necessarily be handled very conservatively. As a result, Bitcoin has greater difficulty than other Internet protocols in adapting to new demands and accommodating new innovation. We propose a new technology, pegged sidechains, which enables bitcoins and other ledger assets to be transferred between multiple blockchains. This gives users access to new and innovative cryptocurrency systems using the assets they already own. By reusing Bitcoin’s currency, these systems can more easily interoperate with each other and with Bitcoin, avoiding the liquidity shortages and market fluctuations associated with new currencies. Since sidechains are separate systems, technical and economic innovation is not hindered. Despite bidirectional transferability between Bitcoin and pegged sidechains, they are isolated: in the case of a cryptographic break (or malicious design) in a sidechain, the damage is entirely confined to the sidechain itself. This paper lays out pegged sidechains, their implementation requirements, and the work needed to fully benefit from the future of interconnected blockchains.
Blockchain Technology Applications and Security
Cryptography and Data Security
Advanced Steganography and Watermarking Techniques
This paper proposes a new microblogging architecture based on peer-to-peer networks overlays. The proposed platform is comprised of three mostly independent overlay networks. The first provides distributed user registration and authentication and is based on the Bitcoin protocol. The second one is a Distributed Hash Table (DHT) overlay network providing key/value storage for user resources and tracker location for the third network. The last network is a collection of possibly disjoint "swarms" of followers, based on the Bittorrent protocol, which can be used for efficient near-instant notification delivery to many users. By leveraging from existing and proven technologies, twister provides a new microblogging platform offering security, scalability and privacy features. A mechanism provides incentive for entities that contribute processing time to run the user registration network, rewarding such entities with the privilege of sending a single unsolicited ("promoted") message to the entire network. The number of unsolicited messages per day is defined in order to not upset users.
A widespread security claim of the Bitcoin system, presented in the original Bitcoin white-paper, states that the security of the system is guaranteed as long as there is no attacker in possession of half or more of the total computational power used to maintain the system. This claim, however, is proved based on theoretically flawed assumptions. In the paper we analyze two kinds of attacks based on two theoretical flaws: the Block Discarding Attack and the Difficulty Raising Attack. We argue that the current theoretical limit of attacker's fraction of total computational power essential for the security of the system is in a sense not $\frac{1}{2}$ but a bit less than $\frac{1}{4}$, and outline proposals for protocol change that can raise this limit to be as close to $\frac{1}{2}$ as we want. The basic idea of the Block Discarding Attack has been noted as early as 2010, and lately was independently though-of and analyzed by both author of this paper and authors of a most recently pre-print published paper. We thus focus on the major differences of our analysis, and try to explain the unfortunate surprising coincidence. To the best of our knowledge, the second attack is presented here for the first time.
Open access
2 source records
cs.CR
Blockchain Technology Applications and Security
Advanced Steganography and Watermarking Techniques
Marcelo Arenas, Juan L. Reutter, Etienne Toussaint, Martín Ugarte · 6 authors
In the consensus protocols used in most cryptocurrencies, participants called miners must find valid blocks of transactions and append them to a shared tree-like data structure. Ideally, the rules of the protocol should ensure that miners maximize their gains if they follow a default strategy, which consists on appending blocks only to the longest branch of the tree, called the blockchain. Our goal is to understand under which circumstances are miners encouraged to follow the default strategy. Unfortunately, most of the existing models work with simplified payoff functions, without considering the possibility that rewards decrease over time because of the game rules (like in Bitcoin), nor integrating the fact that a miner naturally prefers to be paid earlier than later (the economic concept of discount). In order to integrate these factors, we consider a more general model where issues such as economic discount and decreasing rewards can be set as parameters of an infinite stochastic game. In this model, we study the limit situation in which a miner does not receive a full reward for a block if it stops being in the blockchain. We show that if rewards are not decreasing, then miners do not have incentives to create new branches, no matter how high their computational power is. On the other hand, when working with decreasing rewards similar to those in Bitcoin, we show that miners have an incentive to create such branches. Nevertheless, this incentive only occurs when a miner controls a proportion of the computational power which is close to half of the computational power of the entire network.
Marcin Andrychowicz, Stefan Dziembowski, Daniel Malinowski, Łukasz Mazurek
BitCoin transactions are malleable in a sense that given a transaction an adversary can easily construct an equivalent transaction which has a different hash. This can pose a serious problem in some BitCoin distributed contracts in which changing a transaction's hash may result in the protocol disruption and a financial loss. The problem mostly concerns protocols, which use a "refund" transaction to withdraw a deposit in a case of the protocol interruption. In this short note, we show a general technique for creating malleability-resilient "refund" transactions, which does not require any modification of the BitCoin protocol. Applying our technique to our previous paper "Fair Two-Party Computations via the BitCoin Deposits" (Cryptology ePrint Archive, 2013) allows to achieve fairness in any Two-Party Computation using the BitCoin protocol in its current version.
Designed to compete with fiat currencies, bitcoin proposes it is a crypto-currency alternative. Bitcoin makes a number of false claims, including: solving the double-spending problem is a good thing; bitcoin can be a reserve currency for banking; hoarding equals saving, and that we should believe bitcoin can expand by deflation to become a global transactional currency supply. Bitcoin's developers combine technical implementation proficiency with ignorance of currency and banking fundamentals. This has resulted in a failed attempt to change finance. A set of recommendations to change finance are provided in the Afterword: Investment/venture banking for the masses; Venture banking to bring back what investment banks once were; Open-outcry exchange for all CDS contracts; Attempting to develop CDS type contracts on investments in startup and existing enterprises; and Improving the connection between startup tech/ideas, business organization and investment.
Bitcoin is the latest fantasy object of utopian thinkers far and wide. Angry with the banks? It sidesteps them. Fed up with governments? They can’t regulate it. Annoyed by corporations? Bitcoin transcends them. Worried about fraud? Bitcoin uses the latest cryptography. Keen to make a buck (so to speak) by participating in a boom? Come on down and plug in.
Digital currencies have emerged as a new fascinating phenomenon in the financial markets. Recent events on the most popular of the digital currencies--BitCoin--have risen crucial questions about behavior of its exchange rates and they offer a field to study dynamics of the market which consists practically only of speculative traders with no fundamentalists as there is no fundamental value to the currency. In the paper, we connect two phenomena of the latest years--digital currencies, namely BitCoin, and search queries on Google Trends and Wikipedia--and study their relationship. We show that not only are the search queries and the prices connected but there also exists a pronounced asymmetry between the effect of an increased interest in the currency while being above or below its trend value.
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.
In einem Umfeld kriseninduzierter Verunsicherung über das Funktionieren des Geld-und Finanzsystems finden Forderungen nach einer grundsätzlichen Reform des Geldwesens verstärkte media-le Beachtung. Das elektronische Währungsprojekt Bitcoin und das Konzept Vollgeld sind zwei Varianten von Ideen zur Geldreform. Im Prinzip können diese Reformideen auf zwei Positionen der ordoliberalen Diskussion zurückgeführt werden. Der Beitrag diskutiert ihre Gemeinsamkeiten und Unterschiede sowie Möglichkeiten und Grenzen ihrer Verwirklichung auf Basis einer Analyse ihres Geldverständnisses. <bold>Summary</bold> The recent economic crisis has shattered widely held beliefs in the functioning of the current monetary and financial system. In this context, calls for a fundamental reform of money have received considerable attention in the media. Bitcoin, a project for a private electronic currency, and the “positive money“ (in German: “Vollgeld“) concept are two variants of ideas for monetary reform. Their roots can be traced back to two views held within ordoliberal economics. The paper discusses their commonalities and differences, as well as their limits based on an analysis of their concepts of money. JEL Classification: E42, E 52, E 58
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.
Prabhjot Singh, B. R. Chandavarkar, Srishti Arora, Neha Agrawal
In this paper, we study Bit coin network for electronic cash transactions, and compare the extension to the BTCs network which inculcates provision of executing fast transactions with greater security and assurance with the former method of Proof-Of-Work for executing transactions. Above milestones are achieved by introducing the concepts of mutual trust and verifiable code execution between the payer and the payee in the network. Our work proposes a significant modification of the Pioneer model to provide a two-party trust framework for Bit coin transactions, considerably faster compared to the generic trust platform of Bit coin networks based on slow proof-of-work. The scheme proposed can promote the use of Bit coin transactions in real life scenarios, where fast transactions are desirable due time constraints between the payment and the service.
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.