Bitcoin and Cryptocurrency Technologies

More documents

Recommendations

Info

going to want to use Bitcoin to mediate transactions in the future. That kind of economic modeling is important to do and very informative, and surely there are people who are doing it in some detail today, but a detailed economic model of this market is beyond the scope of this text. Further reading Securing bitcoins has some similarities, as well as important differences, to the way banks secure money. Chapter 10 of Ross Anderson’s security textbook, titled “Banking and bookkeeping”, is a great read. The entire book is freely available online. Anderson, Ross. Security engineering. John Wiley & Sons, 2008. The study analyzing closures of Bitcoin exchanges that we referenced: Moore, Tyler, and Nicolas Christin. Beware the middleman: Empirical analysis of bitcoin-exchange risk.Financial Cryptography and Data Security 2013. Adi Shamir’s paper on secret sharing: Shamir, Adi. How to share a secret. Communications of the ACM 22.11 (1979). Paper describing Provisions, a protocol for privacy-preserving solvency proofs: Dagher, Gaby and Benedikt Bünz and Joseph Bonneau and Jeremy Clark and Dan Boneh. Provisions: Privacy-preserving proofs of solvency for Bitcoin exchanges. In ACM CCS, 2015. It’s difficult for users to pick memorable yet hard-to-guess passwords because modern password-cracking techniques are quite clever and effective. This paper presents one such technique: Weir, Matt, Sudhir Aggarwal, Breno De Medeiros, and Bill Glodek. Password cracking using probabilistic context-free grammars. In Security and Privacy, 2009. A survey of transaction fees in practice through 2014: Möser, Malte and Böhme, Rainer. Trends, Tips, Tolls: A Longitudinal Study of Bitcoin Transaction Fees. 2nd Workshop on Bitcoin Research, 2015. Exercises 1. Proof of reserve. TransparentExchange claims that it controls at least 500,000 BTC and wants to prove this to its customers. To do this it publishes a list of addresses that have a total 128
alance of 500,000 BTC. It then signs the statement “TransparentExchange controls at least 500,000 BTC” with each of the corresponding private keys, and presents these signatures as proof. What are some ways in which TransparentExchange might be able to produce such a proof even if it doesn’t actually currently control 500,000 BTC? How would you modify the proof to make it harder for the exchange to cheat? 2. Proof of liabilities. TransparentExchange implements a Merkle Tree based protocol to prove an upper bound on its total deposits. (Combined with a proof of reserve, this proves that the exchange is solvent.) Every customer is assigned a leaf node containing an ID which is the hash of her username and a value which is her BTC balance. The protocol specifies that TransparentExchange should propagate IDs and values up the tree by the following recursive definition — for any internal node: node.value = node.left_child.value + node.right_child.value node.id = Hash(node.left_child.id ‖ node.right_child.id ‖ node.value) The exchange publishes the root ID and value, and promises to prove to any customer that her node is included in the tree (by the standard Merkle tree proof of inclusion). The idea is that if the exchange tries to claim a lower total than the actual sum of deposits by leaving some customers out of the tree or by making their node value less than their balance, it will get caught when any of those customers demand a proof of inclusion. 2.1. Why can’t the exchange include fake customers with negative values to lower the total? 2.2. Show an attack on this scheme that would allow the exchange to claim a total less than the actual sum of deposits. 2.3. Fix this scheme so that it is not vulnerable to the attack you identified. 2.4. Ideally, the proof that the exchange provides to a customer shouldn’t leak information about other customers. Does this scheme have this property? If not, how can you fix it? 3. Transaction fees. 3.1. Alice has a large number of coins each of small value v, which she would like to combine into one coin. She constructs a transaction to do this, but finds that the transaction fee she’d have to spend equals the sum of her coin values. Based on this information (and the default transaction fee policy specified in slide 50), estimate v. 3.2. Can Alice somehow consolidate her coins without incurring any transaction fee under the default policy? 3.3. Compared to a fee structure that doesn’t factor the age of the inputs into the transaction fee, what effect might the current default fee structure have on the behavior of users and services? 4. Multi-signature wallet 4.1. BitCorp has just noticed that Mallory has compromised one of their servers holding their Bitcoin private keys. Luckily, they are using a 2-of-3 multi-signature wallet, so Mallory has learnt only one of the three sets of keys. The other two sets of keys are on 129
Page 1 and 2:
Bitcoin and Cryptocurrency Technolo
Page 3 and 4:
Preface — The Long Road to Bitcoi
Page 5 and 6:
work, there is also the issue of co
Page 7 and 8:
Finally, CyberCash has the dubious
Page 9 and 10:
This was the first serious digital
Page 11 and 12:
and so on — powers of two. That w
Page 13 and 14:
Figure 3 shows the user side of the
Page 15 and 16:
initial cost to acquire all the equ
Page 17 and 18:
the system is to record the relativ
Page 19 and 20:
original design. However, after Bit
Page 21 and 22:
A final reason that’s often cited
Page 23 and 24:
Chapter 1: Introduction to Cryptogr
Page 25 and 26:
Figure 1.2 Because the number of
Page 27 and 28:
Property 2: Hiding The second pr
Page 29 and 30:
ecome: ● ● Hiding: Given H(
Page 31 and 32:
SHA‐256 uses a compression functi
Page 33 and 34:
Figure 1.5 Block chain.A block c
Page 35 and 36:
Figure 1.7 Merkle tree. In a Mer
Page 37 and 38:
throughout this book. 1.3 Digital S
Page 39 and 40:
Figure 1.9 Unforgeability game.
Page 41 and 42:
andomness just in making a signatur
Page 43 and 44:
1.5 A Simple Cryptocurrency Now let
Page 45 and 46:
The first key idea is that a design
Page 47 and 48:
Figure 1.13 A PayCoins Transa
Page 49 and 50:
Perusing the NIST standard that def
Page 51 and 52:
Chapter 2: How Bitcoin Achieves Dec
Page 53 and 54:
state of the system. The implicatio
Page 55 and 56:
consensus is somewhat pessimistic,
Page 57 and 58:
Implicit Consensus. This assumpt
Page 59 and 60:
Figure 2.2 A double spend attempt.
Page 61 and 62:
In general, the more confirmations
Page 63 and 64:
Figure 2.4 The block reward is c
Page 65 and 66:
puzzle‐friendliness property from
Page 67 and 68:
possible outcomes, and the probabil
Page 69 and 70:
theory problem that’s not easily
Page 71 and 72:
this interlocking interdependence b
Page 73 and 74:
Further reading The Bitcoin whitepa
Page 75 and 76:
Chapter 3: Mechanics of Bitcoin Thi
Page 77 and 78: In this example, Alice specifies tw
Page 79 and 80: 3.2 Bitcoin Scripts Each transactio
Page 81 and 82: the Bitcoin language and one has to
Page 83 and 84: exactly the same script, which is i
Page 85 and 86: in the normal case, this isn’t th
Page 87 and 88: Technically all of these transactio
Page 89 and 90: The header mostly contains informat
Page 91 and 92: in turn sends it to all of its peer
Page 93 and 94: Figure 3.10 Block propagation ti
Page 95 and 96: that actually affect them. So they
Page 97 and 98: that the old version would accept a
Page 99 and 100: Exercises 1. Transaction validation
Page 101 and 102: Chapter 4: How to Store and Use Bit
Page 103 and 104: software can automatically turn the
Page 105 and 106: The cryptographic magic that makes
Page 107 and 108: may never know (or care) who the co
Page 109 and 110: Given this stringent requirement, s
Page 111 and 112: There is a formula called Lagrange
Page 113 and 114: Ideally, the site will encrypt thos
Page 115 and 116: seen exchanges that fail due to bre
Page 117 and 118: Figure 4.5: Proof of liabilities.
Page 119 and 120: crypto and we won’t cover it here
Page 121 and 122: Figure 4.8: Payment process involvi
Page 123 and 124: transaction can't create coins, but
Page 125 and 126: of U.S. dollars per day pass throug
Page 127: Now if you look at a particular sec
Page 131 and 132: Chapter 5: Bitcoin Mining This chap
Page 133 and 134: In most cases you'll try every sing
Page 135 and 136: You can see in Figure 5.3 that over
Page 137 and 138: steady‐state, the period to find
Page 139 and 140: TARGET=(65535
Page 141 and 142: Disadvantages of GPU mining. GPU
Page 143 and 144: may be the fastest turnaround time
Page 145 and 146: Figure 5.10: Evolution of mining
Page 147 and 148: Hopefully, over time the embodied e
Page 149 and 150: Still, if we could replace Bitcoin
Page 151 and 152: Figure 5.11: Illustration of uncert
Page 153 and 154: Figure 5.13: Mining rewards. Thr
Page 155 and 156: Some mining hardware even supports
Page 157 and 158: By April 2015, the situation looks
Page 159 and 160: Figure 5.15 Forking attack.A mal
Page 161 and 162: Temporary block‐withholding attac
Page 163 and 164: the transaction from address X
Page 165 and 166: Chapter 6: Bitcoin and Anonymity
Page 167 and 168: Unlinkability. To understand unl
Page 169 and 170: eason is that use cases that we cla
Page 171 and 172: But this reveals something. The tra
Page 173 and 174: the other hand, are often not new a
Page 175 and 176: Figure 6.5. Labeled clusters.
Page 177 and 178: Luckily, this is a problem of commu
Page 179 and 180:
they are unhappy with anonymity pro
Page 181 and 182:
Fees should be all-or-nothing. M
Page 183 and 184:
Somebody looking at this transactio
Page 185 and 186:
a single transaction that combines
Page 187 and 188:
just minting one doesn’t automati
Page 189 and 190:
Efficiency. Recall the statement
Page 191 and 192:
We start with Bitcoin itself, which
Page 193 and 194:
An alternative design to Zerocoin i
Page 195 and 196:
elieve the same thing. So consensus
Page 197 and 198:
of developers who maintain Bitcoin
Page 199 and 200:
The interesting case is if the fork
Page 201 and 202:
eing effectively bankrupt. As of ea
Page 203 and 204:
In an important sense it doesn't ma
Page 205 and 206:
of illegal items becomes potentiall
Page 207 and 208:
arrest. So although Ulbricht was th
Page 209 and 210:
kind of business that will handle l
Page 211 and 212:
een enough time for sellers to buil
Page 213 and 214:
The text refers to “activities in
Page 215 and 216:
A book that looks at the history of
Page 217 and 218:
It’s easy to see how Bitcoin’s
Page 219 and 220:
Why might memory‐hard and memory
Page 221 and 222:
Until recently, it wasn’t known i
Page 223 and 224:
meaning the exponential growth peri
Page 225 and 226:
Next, consider the problem that SET
Page 227 and 228:
In Permacoin, each miner Msto
Page 229 and 230:
Interestingly, these concerns have
Page 231 and 232:
they can perform the signatures on
Page 233 and 234:
schemes also require a small amount
Page 235 and 236:
to provide an effective solution, t
Page 237 and 238:
Chapter 9: Bitcoin as a Platform In
Page 239 and 240:
means that if you actuallydo
Page 241 and 242:
CommitCoin exploits this property.
Page 243 and 244:
features without needing to change
Page 245 and 246:
would just look like a dollar bill.
Page 247 and 248:
you. In particular, you can’t use
Page 249 and 250:
To solve this problem we can once a
Page 251 and 252:
NBA draft lottery.One example th
Page 253 and 254:
that there’s no way for anyone to
Page 255 and 256:
to predict the low‐level fluctuat
Page 257 and 258:
design, because miners have to veri
Page 259 and 260:
Here's another example, this time f
Page 261 and 262:
You can also trade shares for futur
Page 263 and 264:
Order books.The final piece o
Page 265 and 266:
Chapter 10: Altcoins and the Crypto
Page 267 and 268:
Attracting miners has special impor
Page 269 and 270:
with the launch date of the altcoin
Page 271 and 272:
Namecoin is technically interesting
Page 273 and 274:
10.3 Relationship Between Bitcoin a
Page 275 and 276:
Switching costs are certainly not z
Page 277 and 278:
If our altcoin is merge‐mined, we
Page 279 and 280:
When we think about a rational mine
Page 281 and 282:
DepositA [Altcoin block chain] Refu
Page 283 and 284:
Sidechains. The sidechains vision i
Page 285 and 286:
lock themselves could tell us. This
Page 287 and 288:
written in bytecode and executed by
Page 289 and 290:
Bitcoin. In particular, there are c
Page 291 and 292:
The simple binary Merkle tree used
Page 293 and 294:
Chapter 11: Decentralized Instituti
Page 295 and 296:
Bitcoin, Alice can remotely transfe
Page 297 and 298:
only these signatures of limited fo
Page 299 and 300:
11.3 Template for Decentralization
Page 301 and 302:
Sidebar: trust.Some people in th
Page 303 and 304:
competition among intermediaries. P
Page 305 and 306:
To drive home the mismatch between
Page 307 and 308:
Conclusion to the book Some people
show all

Bitcoin and Cryptocurrency Technologies

Create successful ePaper yourself

Delete template?

Save as template?