Bitcoin and Cryptocurrency Technologies

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10.5 Atomic Cross‐chain Swaps In Bitcoin it’s straightforward to create a single transaction that swaps currency or assets controlled by different people or entities. This is the intuition behind Coinjoin, which we studied in Chapter 6. It is also useful for trading smart property, which we looked at briefly in Chapter 9 and will return to in Chapter 11. The same idea enables selling domain names in Namecoin, as mentioned earlier in this chapter. But in all these cases, the swap transactions are confined to a single block chain, even if they involve different types of assets within that block chain. In general, a transaction on one altcoin is entirely independent of and has no way of referring to a transaction that happens on some other altcoin’s transaction history. But is this a fundamental limitation, or is there some way to swap one type of coin for another? That is, if Alice wants to sell a quantity a of altcoin to Bob in exchange for a quantity bof his bitcoin, can they do so in an atomic fashion, without having to trust each other or relying on an intermediary, such as an exchange service? At first sight this seems impossible, because there is no way to force transactions on two different block chains to happen simultaneously. If one of them, say Alice, carries out her transfer before the other, what prevents him from reneging on his side of the bargain? The solution is clever, and involves cryptographic commitments and time‐locked deposits, both of which are techniques we’ve seen before. Figure 10.6 describes the protocol. For the moment, assume that blocks in the two block chains are generated in lockstep: one block is generated every time unit. Let T represent the time at the start of the protocol. 1. Alice generates a refundable deposit of aaltcoins as follows: 1.1 Alice generates a random string xand computes the hash h=H(x) 1.2 Alice generates DepositAas shown below, but doesn’t publish it yet 1.3 Alice generates RefundA, and gets Bob’s signature on it 1.4 Once Bob signs RefundA, she publishes DepositA (but doesn’t publish RefundA) 2. Bob generates a refundable deposit of bbitcoins as follows: 2.1 Bob generates DepositB as shown below, but doesn’t publish it yet 2.2 Bob generates RefundB, and gets Alice’s signature on it 2.2 Once Alice signs RefundB, he publishes DepositB(but doesn’t publish RefundB) 3. Case 1: Alice goes through with the swap 3.1 Alice claims the bitcoins by time T 1 , revealing xto Bob (and everyone) in the process 3.2 Bob claims the altcoins by time T 2 Case 2: Alice changes her mind, does not claim the altcoins, does not reveal xto Bob 3.1 Bob claims his altcoin refund at time T 1 3.2 Alice claims her Bitcoin refund at time T 2 280
DepositA [Altcoin block chain] RefundA [Altcoin block chain] Input: ScriptPubkey: Alice’s coins of value a Redeemable by providing either (sigA and sigB) or sigB and xs.t. H(x) = → Input: DepositA Output: AddrA Timelock: T 2 ScriptSig: sigA, sigB DepositB [Bitcoin block chain] RefundB [Bitcoin block chain] Input: ScriptPubkey: Bob’s coins of value b Redeemable by providing either (sigA and sigB) or sigA and xs.t. H(x) = → Input: DepositB Output: AddrB Timelock: T 1 ScriptSig: sigA, sigB Figure 10.6: Atomic cross‐chain swap protocol In step 1, Alice deposits altcoins of value aso that can be redeemed in one of two ways (a “deposit” simply means sending those coins to a ScriptPubkey that specifies two possible conditions for spending it). First, if Alice and Bob mutually agree, they can redeem it. Indeed, Alice publishes the deposit only after making sure to get a refund transaction signed by Bob — this allows her to redeem her deposit if 2 time units elapse and it hasn’t already been claimed. The other way to claim Alice’s deposit, at any time, is by providing Bob’s signature as well as the value x which opens the hash commitment h.Note that we write in DepositAto indicate that Alice literally writes the value of hinto the ScriptPubkey. Since xis known only to Alice, at the end of stage 1 neither party is able to claim the deposit this way. The idea is that Bob will learn the value x, enabling him to claim the altcoins, if and only if Alice claims his bitcoins, as we’ll see. Step 2 is roughly the reverse of step 1: Bob deposits bitcoins of value bso that it can be redeemed in one of two ways. The key difference is that he doesn’t pick a new secret; instead, he uses the same hash value h(he would just copy the value from the DepositAtransaction to the DepositB transaction). This is the key to tying together transactions on the two block chains. At this point the ball is in Alice’s court. She could change her mind about the swap — if at time T 1 Alice hasn’t done anything to reveal xto Bob, he will simply claim his deposit and quit the protocol. Alice’s other option is to claim Bob’s bitcoins before time T 1 . But she can only do this by creating and broadcasting a ScriptSig which contains the value x; Bob can listen to this broadcast and use the value same x to claim Alice’s altcoins, completing the swap. Note that if Alice tries to claim Bob’s bitcoins a tad too late (after time T 1 but before time T 2 ), Bob might be able to claim bothdeposits. Similarly if Alice claims Bob’s bitcoins on time but Bob waits too 281
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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
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just minting one doesn’t automati
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Efficiency. Recall the statement
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We start with Bitcoin itself, which
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An alternative design to Zerocoin i
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elieve the same thing. So consensus
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of developers who maintain Bitcoin
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The interesting case is if the fork
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eing effectively bankrupt. As of ea
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In an important sense it doesn't ma
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of illegal items becomes potentiall
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arrest. So although Ulbricht was th
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kind of business that will handle l
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een enough time for sellers to buil
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The text refers to “activities in
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A book that looks at the history of
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It’s easy to see how Bitcoin’s
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Why might memory‐hard and memory
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Until recently, it wasn’t known i
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meaning the exponential growth peri
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Next, consider the problem that SET
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In Permacoin, each miner Msto
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Page 239 and 240: means that if you actuallydo
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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
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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
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Page 267 and 268: Attracting miners has special impor
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Page 271 and 272: Namecoin is technically interesting
Page 273 and 274: 10.3 Relationship Between Bitcoin a
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Page 277 and 278: If our altcoin is merge‐mined, we
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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
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