Bitcoin and Cryptocurrency Technologies

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known xat the time we published H(r | x), because there is no other feasible way to have generated that data. Applications of timestamping. What could we do with this kind of secure timestamping? One possible use is to prove prior knowledge of some idea. Suppose we wanted to prove that some invention we filed a patent on was actually in our heads much earlier. We could do this by publishing the hash of a design document or schematic when we first thought of the invention — without revealing to anybody what the idea is. Later on, when we file our patent or when we publicize the idea, we can publish the original documents and information and anybody can look backwards in time and confirm we must have known it earlier when we published the commitment to it. We can also prove that someone has else has received a message we sent them. Suppose Alice hires Bob to perform a programming job; their contract requires Bob to submit his work to Alice by a specific time. Both parties want to make sure that if there is a dispute later about whether Bob submitted the work or whether the code performed to specification, they have proof of what was submitted and when. To ensure this, they can mutually agree to publish a hash of Bob’s submitted work signed by both parties. If either party later lies about what was submitted or when, the other party can prove them wrong (say, in a court of arbitration) by revealing the input to the hash. Many other interesting things can be built just from secure timestamping. There's even an entire public‐key signature scheme (called the Guy Fawkes signature scheme) that just uses hash functions and an append‐only log. It doesn't require any of the heavy‐weight cryptography that’s usually used for public‐key signatures. Attacks on Proofs‐of‐“Clairvoyance”. One thing that we can’tdo with secure timestamping alone — although it would be very nice if we could — is to prove clairvoyance, the ability to predict the future. This might seem possible. The idea would be to publish a commitment to a description of an event that’s about to occur (such as the outcome of a sporting event or of an election) and then later reveal that information to prove we predicted the event ahead of time. But does this work? In late 2014, during the final match of the World Cup, someone used this method to “prove” that FIFA, the organization running the World Cup, was corrupt. After the match was over, a Twitter account received significant attention for having tweeted about several events that occurred during the game, timestamped before the match even began. For example, it correctly tweeted that Germany would win in extra time and that Mario Götze would score. Seemingly this proves that either the owner of this Twitter account could tell the future or that the match was rigged. But in fact the account had tweeted every possible outcomebefore the match started. For every player involved in the match, there was a tweet predicting that he would score; there was a tweet for every conceivable final score of the game; and so on (see Figure 9.1). Before the match ended, all of the false predictions were deleted, leaving the Twitter account with only true “predictions.” This same basic attack can be performed against any secure timestamping system. You simply commit to a variety of possible outcomes, and then only reveal the commitments that turn out to be true. This 238
means that if you actuallydo have the ability to predict the future and want to prove it, you must prove that you are timestamping one specific predictionrather than that multiple predictions. If you are publishing hash‐based commitments, this is difficult to do. This is especially true in Bitcoin, since our secure timestamping system does not tie commitments to any individual’s public identity. If you don’t reveal them, it is easy to publish a large number of commitments and the ones you never reveal cannot easily be traced back to you. Figure 9.1:A Twitter account which attempted to “prove” that the 2014 FIFA Men’s World Cup Final was rigged by “predicting” the outcome of the match. The first, third and fourth tweets ended up being true, the rest were deleted after the match. Secure timestamping the old‐fashioned way. Here’s a simple low‐tech way to do secure timestamping: publish the hash of your data in a newspaper, or some other media which is widely seen by the public, by purchasing an advertisement. Archives of old newspaper issues are maintained at libraries and online. This method provides a high degree of assurance that you knew that data on the day the newspaper was published. Later, when you want to reveal the data you committed, you can even take out a second advertisement to publish the data in the same newspaper. 239
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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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Disadvantages of GPU mining. GPU
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may be the fastest turnaround time
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Figure 5.10: Evolution of mining
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Hopefully, over time the embodied e
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Still, if we could replace Bitcoin
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Figure 5.11: Illustration of uncert
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Figure 5.13: Mining rewards. Thr
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Some mining hardware even supports
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By April 2015, the situation looks
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Figure 5.15 Forking attack.A mal
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Temporary block‐withholding attac
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the transaction from address X
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Chapter 6: Bitcoin and Anonymity
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Unlinkability. To understand unl
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eason is that use cases that we cla
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But this reveals something. The tra
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the other hand, are often not new a
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Figure 6.5. Labeled clusters.
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Luckily, this is a problem of commu
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they are unhappy with anonymity pro
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Fees should be all-or-nothing. M
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Somebody looking at this transactio
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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
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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
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Page 233 and 234: schemes also require a small amount
Page 235 and 236: to provide an effective solution, t
Page 237: Chapter 9: Bitcoin as a Platform In
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Page 243 and 244: features without needing to change
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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
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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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