Blockchain Papers

Marie Claire Van Hout, Tim Bingham

No abstract is available for this record.

George Danezis, Cédric Fournet, Markulf Kohlweiss, Bryan Parno

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.

Alyssa Botelho

No abstract is available for this record.

Authors unavailable

No abstract is available for this record.

Hal Hodson

No abstract is available for this record.

Danny Bradbury

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.

Ittay Eyal, Emin Gün Sirer

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.

Nicolas T. Courtois, Marek Grajek, Rahul Naik

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.

Beat Weber

No abstract is available for this record.

Christoph Sorge, Artus Krohn-Grimberghe

No abstract is available for this record.

Jürgen Muthig

No abstract is available for this record.

D. van Wijk

Only recently developed by the Japanese academic Satoshi Nakamoto (2008), the Bitcoin is a virtual currency that can be traded all over the world. Even though the money has been printed on several occasions the essence of the Bitcoin lies in the fact that it exists entirely on the digital highway. The coins themselves are a string of code that can be stored in the so-called wallet on your own computer. Subsequently, the Bitcoins can be used in transactions all over the internet, provided that the other person accepts the Bitcoin as a means of payment. The most remarkable thing about all this is that neither a government nor any financial institution is involved in any part of this transaction or in the regulation of the currency. Currently, the main users of the Bitcoin are technologically interested geeks who want to use the newest innovations, anarchists who have lost trust in the governments and the banking systems, and speculative risk-seekers looking for a new gamble. However, this is quickly changing due to the increase in the value of the Bitcoin and the attention that it gets in the news. In the academic sphere, little research has been done on the subject and the research that has been done is mostly technical and concerns cryptography rather than economics. However, my belief is that the Bitcoin is a rare, new phenomenon worth researching on the economic level as well. The fact is that this string of code, of which the Bitcoin exists, is worth intrinsically nothing. So, people are willing to spend an increasing amount of money on something that is literally worthless, with no guarantee that the Bitcoin will be worth anything in the future. If an explanation could be found where the value of the Bitcoin is derived from or what influences the value of the Bitcoin, a future for the Bitcoin can be predicted much better than before. Therefore the question is raised: “How does day-to-day financial data influence the value of the Bitcoin?” The literature that is investigated concerns the theory of fiat money, money without intrinsic value, and investigates what drives the value of this fiat money. Subsequently, financial data will be collected and used in the analysis to see what affects the value of the Bitcoin. Finally, a conclusion will be drawn from the results of this analysis that will show what has an effect on the value of the Bitcoin. After that, several suggestions will be given for an expansion of this research in several ways.

Tyler Moore

No abstract is available for this record.

Craig Warmke

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.

Michael Taylor

Recently, the Bitcoin cryptocurrency has been an international sensation. This paper tells the story of Bitcoin hard-ware: how a group of early-adopters self-organized and financed the creation of an entire new industry, leading to the development of machines, including ASICs, that had orders of magnitude better performance than what Dell, Intel, NVidia, AMD or Xilinx could provide. We examine this story for clues as to how we can foster greater innovation in the semiconductor industry and enable this phenomenon to occur more broadly for more application areas, spawning a new age of hardware innovation tailored to emerging application domains-an Age of Bespoke Silicon.

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.

Malte Möser, Rainer Böhme, Dominic Breuker

We provide a first systematic account of opportunities and limitations of anti-money laundering (AML) in Bitcoin, a decentralized cryptographic currency proliferating on the Internet. Our starting point is the observation that Bitcoin attracts criminal activity as many say it is an anonymous transaction system. While this claim does not stand up to scrutiny, several services offering increased transaction anonymization have emerged in the Bitcoin ecosystem - such as Bitcoin Fog, BitLaundry, and the Send Shared functionality of Blockchain.info. Some of these services routinely handle the equivalent of 6-digit dollar amounts. In a series of experiments, we use reverse-engineering methods to understand the mode of operation and try to trace anonymized transactions back to our probe accounts. While Bitcoin Fog and Blockchain.info successfully anonymize our test transactions, we can link the input and output transactions of BitLaundry. Against the backdrop of these findings, it appears unlikely that a Know-Your-Customer principle can be enforced in the Bitcoin system. Hence, we sketch alternative AML strategies accounting for imperfect knowledge of true identities but exploiting public information in the transaction graph, and discuss the implications for Bitcoin as a decentralized currency.

Christian Decker, Roger Wattenhofer

Bitcoin is a digital currency that unlike traditional currencies does not rely on a centralized authority. Instead Bitcoin relies on a network of volunteers that collectively implement a replicated ledger and verify transactions. In this paper we analyze how Bitcoin uses a multi-hop broadcast to propagate transactions and blocks through the network to update the ledger replicas. We then use the gathered information to verify the conjecture that the propagation delay in the network is the primary cause for blockchain forks. Blockchain forks should be avoided as they are symptomatic for inconsistencies among the replicas in the network. We then show what can be achieved by pushing the current protocol to its limit with unilateral changes to the client's behavior.

Artus Krohn-Grimberghe, Christoph Sorge

Digital payment schemes show an ever increasing importance. Out of the countless different schemes available this article focuses on the popular Bitcoin system. The authors provide a description of Bitcoin's unique technological basis and its accompanying ecosystem of users, miners, trading platforms and vendors. Furthermore, this article discusses Bitcoin's currency-like features and the first regulatory actions take in the European Union and in the United States of America.

Dániel Kondor, Márton Pósfai, István Csabai, Gábor Vattay

The possibility to analyze everyday monetary transactions is limited by the scarcity of available data, as this kind of information is usually considered highly sensitive. Present econophysics models are usually employed on presumed random networks of interacting agents, and only macroscopic properties (e.g. the resulting wealth distribution) are compared to real-world data. In this paper, we analyze BitCoin, which is a novel digital currency system, where the complete list of transactions is publicly available. Using this dataset, we reconstruct the network of transactions, and extract the time and amount of each payment. We analyze the structure of the transaction network by measuring network characteristics over time, such as the degree distribution, degree correlations and clustering. We find that linear preferential attachment drives the growth of the network. We also study the dynamics taking place on the transaction network, i.e. the flow of money. We measure temporal patterns and the wealth accumulation. Investigating the microscopic statistics of money movement, we find that sublinear preferential attachment governs the evolution of the wealth distribution. We report a scaling relation between the degree and wealth associated to individual nodes.

Joshua J. Doguet

No abstract is available for this record.

Beat Weber

The virtual currency and payment project Bitcoin intends to challenge the current monetary and payment system that finds itself in a legitimacy crisis in the aftermath of the financial market turmoil of 2008. In examining the governance of the Bitcoin system, I try to assess its potential to create input and output legitimacy as a payment system and as a monetary system in comparison with current practice.

Jansen, Mark A.

This paper concerns the open source software project Bitcoin, which is often described as virtual cash. The paper investigates what ‘virtual’ signifies when applied to ‘cash’ and in turn what ‘virtual cash’ says about Bitcoin. Bitcoin is the latest cryptographic effort to create digital cash-like tokens, where Bitcoin’s designer Nakamoto argues that users now no longer have to trust a third party, traditionally the bank. Paradoxically, for Bitcoin it is key that nodes in the network agree on the status of the shared block chain database. Trust remains to be established, albeit in a different manner. Power is not destroyed, but transferred from banks to Bitcoin’s protocol. The paper concludes that ‘virtual’ refers to Bitcoin’s model of how cash appears to function in everyday exchange, allowing user privacy. Bitcoin does not model another aspect of cash, its function as a credential referring to debt. Bitcoin discontinues the concept of debt.