Bitcoin and Cryptocurrency Technologies

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make a contribution. Hopefully what you've learned in this chapter has given you the right background to do that. Further reading Even more than the topics discussed in previous chapters, anonymity technologies are constantly developing and are an active area of cryptocurrency research. The best way to keep up with the latest in this field is to begin with the papers listed here, and to look for papers that cite them. The “Fistful of bitcoins” paper on transaction graph analysis: Meiklejohn, Sarah, Marjori Pomarole, Grant Jordan, Kirill Levchenko, Damon McCoy, Geoffrey M. Voelker, and Stefan Savage. A fistful of bitcoins: characterizing payments among men with no names. In Proceedings of the 2013 conference on Internet measurement conference, 2013. A study of mixing technologies and the source of the principles for effective mixing that we discussed: Bonneau, Joseph, Arvind Narayanan, Andrew Miller, Jeremy Clark, Joshua A. Kroll, and Edward W. Felten. Mixcoin: Anonymity for Bitcoin with accountable mixes. Financial Cryptography2014. A study of mixing services in practice, showing that many are not reputable: Malte Möser, Rainer Böhme and Dominic Breuker. An Inquiry into Money Laundering Tools in the Bitcoin Ecosystem. 2013 eCrime Researchers Summit. Coinjoin was presented on the Bitcoin forums by Bitcoin Core developer Greg Maxwell: Maxwell, Gregory. CoinJoin: Bitcoin privacy for the real world. Bitcoin Forum, 2013. Zerocoin was developed by cryptographers from Johns Hopkins University. Keep in mind Zerocoin and Zerocash have the most complex cryptography of any scheme we’ve discussed in this book. Miers, Ian, Christina Garman, Matthew Green, and Aviel D. Rubin. Zerocoin: Anonymous distributed E-Cash from Bitcoin. Proceedings of 2013 IEEE Symposium on Security and Privacy, 2013. The Zerocoin authors teamed up with other researchers who had developed the SNARK technique. This collaboration resulted in Zerocash: Ben Sasson, Eli, Alessandro Chiesa, Christina Garman, Matthew Green, Ian Miers, Eran Tromer, and Madars Virza. Zerocash: Decentralized anonymous payments from Bitcoin. Proceedings of 2013 IEEE Symposium on Security and Privacy, 2014. 192
An alternative design to Zerocoin is CryptoNote, which uses different cryptography and offers different anonymity properties. We didn’t discuss in this chapter for lack of space, but it is an interesting design approach: Nicolas van Saberhagen. CryptoNote v. 2.0. This classic book on cryptography includes a chapter on zero-knowledge proofs: Goldreich, Oded. Foundations of Cryptography: Volume 1. Cambridge university press, 2007. The paper that describes the technical design of the anonymous communication network Tor: Dingledine, Roger, Nick Mathewson, and Paul Syverson. Tor: The second-generation onion router. Naval Research Lab Washington DC, 2004. The “systematization of knowledge” paper on Bitcoin and cryptocurrencies, especially Section VII on Anonymity and Privacy: Bonneau, Joseph, Andrew Miller, Jeremy Clark, Arvind Narayanan, Joshua A. Kroll, and Edward W. Felten. Research Perspectives and Challenges for Bitcoin and Cryptocurrencies. Proceedings of 2015 IEEE Security and Privacy Conference, 2015. 193
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Bitcoin and Cryptocurrency Technolo
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Preface — The Long Road to Bitcoi
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work, there is also the issue of co
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Finally, CyberCash has the dubious
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This was the first serious digital
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and so on — powers of two. That w
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Figure 3 shows the user side of the
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initial cost to acquire all the equ
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the system is to record the relativ
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original design. However, after Bit
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A final reason that’s often cited
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Chapter 1: Introduction to Cryptogr
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Figure 1.2 Because the number of
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Property 2: Hiding The second pr
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ecome: ● ● Hiding: Given H(
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SHA‐256 uses a compression functi
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Figure 1.5 Block chain.A block c
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Figure 1.7 Merkle tree. In a Mer
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throughout this book. 1.3 Digital S
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Figure 1.9 Unforgeability game.
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andomness just in making a signatur
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1.5 A Simple Cryptocurrency Now let
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The first key idea is that a design
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Figure 1.13 A PayCoins Transa
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Perusing the NIST standard that def
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Chapter 2: How Bitcoin Achieves Dec
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state of the system. The implicatio
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consensus is somewhat pessimistic,
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Implicit Consensus. This assumpt
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Figure 2.2 A double spend attempt.
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In general, the more confirmations
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Figure 2.4 The block reward is c
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puzzle‐friendliness property from
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possible outcomes, and the probabil
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theory problem that’s not easily
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this interlocking interdependence b
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Further reading The Bitcoin whitepa
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Chapter 3: Mechanics of Bitcoin Thi
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In this example, Alice specifies tw
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3.2 Bitcoin Scripts Each transactio
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the Bitcoin language and one has to
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exactly the same script, which is i
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in the normal case, this isn’t th
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Technically all of these transactio
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The header mostly contains informat
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in turn sends it to all of its peer
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Figure 3.10 Block propagation ti
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that actually affect them. So they
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that the old version would accept a
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Exercises 1. Transaction validation
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Chapter 4: How to Store and Use Bit
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software can automatically turn the
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The cryptographic magic that makes
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may never know (or care) who the co
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Given this stringent requirement, s
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There is a formula called Lagrange
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Ideally, the site will encrypt thos
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seen exchanges that fail due to bre
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Figure 4.5: Proof of liabilities.
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crypto and we won’t cover it here
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Figure 4.8: Payment process involvi
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transaction can't create coins, but
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of U.S. dollars per day pass throug
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Now if you look at a particular sec
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alance of 500,000 BTC. It then sign
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Chapter 5: Bitcoin Mining This chap
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In most cases you'll try every sing
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You can see in Figure 5.3 that over
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steady‐state, the period to find
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TARGET=(65535
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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
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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
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Page 191: We start with Bitcoin itself, which
Page 195 and 196: elieve the same thing. So consensus
Page 197 and 198: of developers who maintain Bitcoin
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Page 201 and 202: eing effectively bankrupt. As of ea
Page 203 and 204: In an important sense it doesn't ma
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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
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features without needing to change
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would just look like a dollar bill.
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you. In particular, you can’t use
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To solve this problem we can once a
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NBA draft lottery.One example th
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that there’s no way for anyone to
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to predict the low‐level fluctuat
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design, because miners have to veri
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Here's another example, this time f
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You can also trade shares for futur
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Order books.The final piece o
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Chapter 10: Altcoins and the Crypto
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Attracting miners has special impor
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with the launch date of the altcoin
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Namecoin is technically interesting
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10.3 Relationship Between Bitcoin a
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Switching costs are certainly not z
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If our altcoin is merge‐mined, we
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When we think about a rational mine
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DepositA [Altcoin block chain] Refu
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Sidechains. The sidechains vision i
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lock themselves could tell us. This
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written in bytecode and executed by
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Bitcoin. In particular, there are c
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The simple binary Merkle tree used
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Chapter 11: Decentralized Instituti
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Bitcoin, Alice can remotely transfe
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only these signatures of limited fo
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11.3 Template for Decentralization
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Sidebar: trust.Some people in th
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competition among intermediaries. P
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To drive home the mismatch between
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Conclusion to the book Some people
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