The Miner's Dilemma
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Asymmetric Proof-Of-Work Based on the Generalized Birthday Problem
Equihash: Asymmetric Proof-of-Work Based on the Generalized Birthday Problem Alex Biryukov Dmitry Khovratovich University of Luxembourg University of Luxembourg [email protected] [email protected] Abstract—The proof-of-work is a central concept in modern Long before the rise of Bitcoin it was realized [20] that cryptocurrencies and denial-of-service protection tools, but the the dedicated hardware can produce a proof-of-work much requirement for fast verification so far made it an easy prey for faster and cheaper than a regular desktop or laptop. Thus the GPU-, ASIC-, and botnet-equipped users. The attempts to rely on users equipped with such hardware have an advantage over memory-intensive computations in order to remedy the disparity others, which eventually led the Bitcoin mining to concentrate between architectures have resulted in slow or broken schemes. in a few hardware farms of enormous size and high electricity In this paper we solve this open problem and show how to consumption. An advantage of the same order of magnitude construct an asymmetric proof-of-work (PoW) based on a compu- is given to “owners” of large botnets, which nowadays often tationally hard problem, which requires a lot of memory to gen- accommodate hundreds of thousands of machines. For prac- erate a proof (called ”memory-hardness” feature) but is instant tical DoS protection, this means that the early TLS puzzle to verify. Our primary proposal Equihash is a PoW based on the schemes [8], [17] are no longer effective against the most generalized birthday problem and enhanced Wagner’s algorithm powerful adversaries. -
Piecework: Generalized Outsourcing Control for Proofs of Work
(Short Paper): PieceWork: Generalized Outsourcing Control for Proofs of Work Philip Daian1, Ittay Eyal1, Ari Juels2, and Emin G¨unSirer1 1 Department of Computer Science, Cornell University, [email protected],[email protected],[email protected] 2 Jacobs Technion-Cornell Institute, Cornell Tech [email protected] Abstract. Most prominent cryptocurrencies utilize proof of work (PoW) to secure their operation, yet PoW suffers from two key undesirable prop- erties. First, the work done is generally wasted, not useful for anything but the gleaned security of the cryptocurrency. Second, PoW is natu- rally outsourceable, leading to inegalitarian concentration of power in the hands of few so-called pools that command large portions of the system's computation power. We introduce a general approach to constructing PoW called PieceWork that tackles both issues. In essence, PieceWork allows for a configurable fraction of PoW computation to be outsourced to workers. Its controlled outsourcing allows for reusing the work towards additional goals such as spam prevention and DoS mitigation, thereby reducing PoW waste. Meanwhile, PieceWork can be tuned to prevent excessive outsourcing. Doing so causes pool operation to be significantly more costly than today. This disincentivizes aggregation of work in mining pools. 1 Introduction Distributed cryptocurrencies such as Bitcoin [18] rely on the equivalence \com- putation = money." To generate a batch of coins, clients in a distributed cryp- tocurrency system perform an operation called mining. Mining requires solving a computationally intensive problem involving repeated cryptographic hashing. Such problem and its solution is called a Proof of Work (PoW) [11]. As currently designed, nearly all PoWs suffer from one of two drawbacks (or both, as in Bitcoin). -
Bypassing Non-Outsourceable Proof-Of-Work Schemes Using Collateralized Smart Contracts
Bypassing Non-Outsourceable Proof-of-Work Schemes Using Collateralized Smart Contracts Alexander Chepurnoy1;2, Amitabh Saxena1 1 Ergo Platform [email protected], [email protected] 2 IOHK Research [email protected] Abstract. Centralized pools and renting of mining power are considered as sources of possible censorship threats and even 51% attacks for de- centralized cryptocurrencies. Non-outsourceable Proof-of-Work schemes have been proposed to tackle these issues. However, tenets in the folk- lore say that such schemes could potentially be bypassed by using es- crow mechanisms. In this work, we propose a concrete example of such a mechanism which is using collateralized smart contracts. Our approach allows miners to bypass non-outsourceable Proof-of-Work schemes if the underlying blockchain platform supports smart contracts in a sufficiently advanced language. In particular, the language should allow access to the PoW solution. At a high level, our approach requires the miner to lock collateral covering the reward amount and protected by a smart contract that acts as an escrow. The smart contract has logic that allows the pool to collect the collateral as soon as the miner collects any block reward. We propose two variants of the approach depending on when the collat- eral is bound to the block solution. Using this, we show how to bypass previously proposed non-outsourceable Proof-of-Work schemes (with the notable exception for strong non-outsourceable schemes) and show how to build mining pools for such schemes. 1 Introduction Security of Bitcoin and many other cryptocurrencies relies on so called Proof-of- Work (PoW) schemes (also known as scratch-off puzzles), which are mechanisms to reach fast consensus and guarantee immutability of the ledger. -
Short Selling Attack: a Self-Destructive but Profitable 51% Attack on Pos Blockchains
Short Selling Attack: A Self-Destructive But Profitable 51% Attack On PoS Blockchains Suhyeon Lee and Seungjoo Kim CIST (Center for Information Security Technologies), Korea University, Korea Abstract—There have been several 51% attacks on Proof-of- With a PoS, the attacker needs to obtain 51% of the Work (PoW) blockchains recently, including Verge and Game- cryptocurrency to carry out a 51% attack. But unlike PoW, Credits, but the most noteworthy has been the attack that saw attacker in a PoS system is highly discouraged from launching hackers make off with up to $18 million after a successful double spend was executed on the Bitcoin Gold network. For this reason, 51% attack because he would have to risk of depreciation the Proof-of-Stake (PoS) algorithm, which already has advantages of his entire stake amount to do so. In comparison, bad of energy efficiency and throughput, is attracting attention as an actor in a PoW system will not lose their expensive alternative to the PoW algorithm. With a PoS, the attacker needs mining equipment if he launch a 51% attack. Moreover, to obtain 51% of the cryptocurrency to carry out a 51% attack. even if a 51% attack succeeds, the value of PoS-based But unlike PoW, attacker in a PoS system is highly discouraged from launching 51% attack because he would have to risk losing cryptocurrency will fall, and the attacker with the most stake his entire stake amount to do so. Moreover, even if a 51% attack will eventually lose the most. For these reasons, those who succeeds, the value of PoS-based cryptocurrency will fall, and attempt to attack 51% of the PoS blockchain will not be the attacker with the most stake will eventually lose the most. -
Coinbase Explores Crypto ETF (9/6) Coinbase Spoke to Asset Manager Blackrock About Creating a Crypto ETF, Business Insider Reports
Crypto Week in Review (9/1-9/7) Goldman Sachs CFO Denies Crypto Strategy Shift (9/6) GS CFO Marty Chavez addressed claims from an unsubstantiated report earlier this week that the firm may be delaying previous plans to open a crypto trading desk, calling the report “fake news”. Coinbase Explores Crypto ETF (9/6) Coinbase spoke to asset manager BlackRock about creating a crypto ETF, Business Insider reports. While the current status of the discussions is unclear, BlackRock is said to have “no interest in being a crypto fund issuer,” and SEC approval in the near term remains uncertain. Looking ahead, the Wednesday confirmation of Trump nominee Elad Roisman has the potential to tip the scales towards a more favorable cryptoasset approach. Twitter CEO Comments on Blockchain (9/5) Twitter CEO Jack Dorsey, speaking in a congressional hearing, indicated that blockchain technology could prove useful for “distributed trust and distributed enforcement.” The platform, given its struggles with how best to address fraud, harassment, and other misuse, could be a prime testing ground for decentralized identity solutions. Ripio Facilitates Peer-to-Peer Loans (9/5) Ripio began to facilitate blockchain powered peer-to-peer loans, available to wallet users in Argentina, Mexico, and Brazil. The loans, which utilize the Ripple Credit Network (RCN) token, are funded in RCN and dispensed to users in fiat through a network of local partners. Since all details of the loan and payments are recorded on the Ethereum blockchain, the solution could contribute to wider access to credit for the unbanked. IBM’s Payment Protocol Out of Beta (9/4) Blockchain World Wire, a global blockchain based payments network by IBM, is out of beta, CoinDesk reports. -
Liquidity Or Leakage Plumbing Problems with Cryptocurrencies
Liquidity Or Leakage Plumbing Problems With Cryptocurrencies March 2018 Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies Liquidity Or Leakage Plumbing Problems With Cryptocurrencies Rodney Greene Quantitative Risk Professional Advisor to Z/Yen Group Bob McDowall Advisor to Cardano Foundation Distributed Futures 1/60 © Z/Yen Group, 2018 Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies Foreword Liquidity is the probability that an asset can be converted into an expected amount of value within an expected amount of time. Any token claiming to be ‘money’ should be very liquid. Cryptocurrencies often exhibit high price volatility and wide spreads between their buy and sell prices into fiat currencies. In other markets, such high volatility and wide spreads might indicate low liquidity, i.e. it is difficult to turn an asset into cash. Normal price falls do not increase the number of sellers but should increase the number of buyers. A liquidity hole is where price falls do not bring out buyers, but rather generate even more sellers. If cryptocurrencies fail to provide easy liquidity, then they fail as mediums of exchange, one of the principal roles of money. However, there are a number of ways of assembling a cryptocurrency and a number of parameters, such as the timing of trades, the money supply algorithm, and the assembling of blocks, that might be done in better ways to improve liquidity. This research should help policy makers look critically at what’s needed to provide good liquidity with these exciting systems. Michael Parsons FCA Chairman, Cardano Foundation, Distributed Futures 2/60 © Z/Yen Group, 2018 Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies Contents Foreword .............................................................................................................. -
Bitcoin and Cryptocurrencies Law Enforcement Investigative Guide
2018-46528652 Regional Organized Crime Information Center Special Research Report Bitcoin and Cryptocurrencies Law Enforcement Investigative Guide Ref # 8091-4ee9-ae43-3d3759fc46fb 2018-46528652 Regional Organized Crime Information Center Special Research Report Bitcoin and Cryptocurrencies Law Enforcement Investigative Guide verybody’s heard about Bitcoin by now. How the value of this new virtual currency wildly swings with the latest industry news or even rumors. Criminals use Bitcoin for money laundering and other Enefarious activities because they think it can’t be traced and can be used with anonymity. How speculators are making millions dealing in this trend or fad that seems more like fanciful digital technology than real paper money or currency. Some critics call Bitcoin a scam in and of itself, a new high-tech vehicle for bilking the masses. But what are the facts? What exactly is Bitcoin and how is it regulated? How can criminal investigators track its usage and use transactions as evidence of money laundering or other financial crimes? Is Bitcoin itself fraudulent? Ref # 8091-4ee9-ae43-3d3759fc46fb 2018-46528652 Bitcoin Basics Law Enforcement Needs to Know About Cryptocurrencies aw enforcement will need to gain at least a basic Bitcoins was determined by its creator (a person Lunderstanding of cyptocurrencies because or entity known only as Satoshi Nakamoto) and criminals are using cryptocurrencies to launder money is controlled by its inherent formula or algorithm. and make transactions contrary to law, many of them The total possible number of Bitcoins is 21 million, believing that cryptocurrencies cannot be tracked or estimated to be reached in the year 2140. -
Transparent and Collaborative Proof-Of-Work Consensus
StrongChain: Transparent and Collaborative Proof-of-Work Consensus Pawel Szalachowski, Daniël Reijsbergen, and Ivan Homoliak, Singapore University of Technology and Design (SUTD); Siwei Sun, Institute of Information Engineering and DCS Center, Chinese Academy of Sciences https://www.usenix.org/conference/usenixsecurity19/presentation/szalachowski This paper is included in the Proceedings of the 28th USENIX Security Symposium. August 14–16, 2019 • Santa Clara, CA, USA 978-1-939133-06-9 Open access to the Proceedings of the 28th USENIX Security Symposium is sponsored by USENIX. StrongChain: Transparent and Collaborative Proof-of-Work Consensus Pawel Szalachowski1 Daniel¨ Reijsbergen1 Ivan Homoliak1 Siwei Sun2;∗ 1Singapore University of Technology and Design (SUTD) 2Institute of Information Engineering and DCS Center, Chinese Academy of Sciences Abstract a cryptographically-protected append-only list [2] is intro- duced. This list consists of transactions grouped into blocks Bitcoin is the most successful cryptocurrency so far. This and is usually referred to as a blockchain. Every active pro- is mainly due to its novel consensus algorithm, which is tocol participant (called a miner) collects transactions sent based on proof-of-work combined with a cryptographically- by users and tries to solve a computationally-hard puzzle in protected data structure and a rewarding scheme that incen- order to be able to write to the blockchain (the process of tivizes nodes to participate. However, despite its unprece- solving the puzzle is called mining). When a valid solution dented success Bitcoin suffers from many inefficiencies. For is found, it is disseminated along with the transactions that instance, Bitcoin’s consensus mechanism has been proved to the miner wishes to append. -
3Rd Global Cryptoasset Benchmarking Study
3RD GLOBAL CRYPTOASSET BENCHMARKING STUDY Apolline Blandin, Dr. Gina Pieters, Yue Wu, Thomas Eisermann, Anton Dek, Sean Taylor, Damaris Njoki September 2020 supported by Disclaimer: Data for this report has been gathered primarily from online surveys. While every reasonable effort has been made to verify the accuracy of the data collected, the research team cannot exclude potential errors and omissions. This report should not be considered to provide legal or investment advice. Opinions expressed in this report reflect those of the authors and not necessarily those of their respective institutions. TABLE OF CONTENTS FOREWORDS ..................................................................................................................................................4 RESEARCH TEAM ..........................................................................................................................................6 ACKNOWLEDGEMENTS ............................................................................................................................7 EXECUTIVE SUMMARY ........................................................................................................................... 11 METHODOLOGY ........................................................................................................................................ 14 SECTION 1: INDUSTRY GROWTH INDICATORS .........................................................................17 Employment figures ..............................................................................................................................................................................................................17 -
Evolutionary Game for Mining Pool Selection in Blockchain
1 Evolutionary Game for Mining Pool Selection in Blockchain Networks Xiaojun Liu∗†, Wenbo Wang†, Dusit Niyato†, Narisa Zhao∗ and Ping Wang† ∗Institute of Systems Engineering, Dalian University of Technology, Dalian, China, 116024 †School of Computer Engineering, Nanyang Technological University, Singapore, 639798 Abstract—In blockchain networks adopting the proof-of-work studies [3] have shown that the Nakamoto protocol is able schemes, the monetary incentive is introduced by the Nakamoto to guarantee the persistence and liveness of a blockchain in consensus protocol to guide the behaviors of the full nodes (i.e., a Byzantine environment. In other words, when a majority block miners) in the process of maintaining the consensus about the blockchain state. The block miners have to devote their of the mining nodes honestly follow the Nakamoto protocol, computation power measured in hash rate in a crypto-puzzle the transactional data on the blockchain are guaranteed to be solving competition to win the reward of publishing (a.k.a., immutable once they are recorded. mining) new blocks. Due to the exponentially increasing difficulty In the Nakamoto protocol, the financial incentive mecha- of the crypto-puzzle, individual block miners tends to join mining nism consists of two parts: (a) a computation-intensive crypto- pools, i.e., the coalitions of miners, in order to reduce the income variance and earn stable profits. In this paper, we study the puzzle solving process to make Sybil attacks financially unaf- dynamics of mining pool selection in a blockchain network, where fordable, and (b) a reward generation process to award the mining pools may choose arbitrary block mining strategies. -
A View from Mining Pools
1 Measurement and Analysis of the Bitcoin Networks: A View from Mining Pools Canhui Wang, Graduate Student Member, IEEE, Xiaowen Chu, Senior Member, IEEE, and Qin Yang, Senior Member, IEEE Abstract—Bitcoin network, with the market value of $68 billion as of January 2019, has received much attention from both industry and the academy. Mining pools, the main components of the Bitcoin network, dominate the computing resources and play essential roles in network security and performance aspects. Although many existing measurements of the Bitcoin network are available, little is known about the details of mining pool behaviors (e.g., empty blocks, mining revenue and transaction collection strategies) and their effects on the Bitcoin end users (e.g., transaction fees, transaction delay and transaction acceptance rate). This paper aims to fill this gap with a systematic study of mining pools. We traced over 1.56 hundred thousand blocks (including about 257 million historical transactions) from February 2016 to January 2019 and collected over 120.25 million unconfirmed transactions from March 2018 to January 2019. Then we conducted a board range of measurements on the pool evolutions, labeled transactions (blocks) as well as real-time network traffics, and discovered new interesting observations and features. Specifically, our measurements show the following. 1) A few mining pools entities continuously control most of the computing resources of the Bitcoin network. 2) Mining pools are caught in a prisoner’s dilemma where mining pools compete to increase their computing resources even though the unit profit of the computing resource decreases. 3) Mining pools are stuck in a Malthusian trap where there is a stage at which the Bitcoin incentives are inadequate for feeding the exponential growth of the computing resources. -
Balaci 18 U.S.C
2017R00326/DVIF/APT/JLH UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY UNITED STATES OF AMERICA Hon. Claire C. Cecchi V. Crim. No. 19-877 (05) SILVIU CATALIN BALACI 18 U.S.C. § 371 SUPERSEDING INFORMATION The defendant, Silviu Catalin Balaci, having waived in open court prosecution by Indictment, the United States Attorney for the District of New Jersey charges: BACKGROUND 1. At times relevant to this Superseding Information: Individuals and Entities a. BitClub Network ("BCN") was a worldwide fraudulent scheme that solicited money from investors in exchange for shares of pooled investments in cryptocurrency mining and that rewarded existing investors for recruiting new investors. b. Defendant SILVIU CATALIN BALACI assisted in creating and operating BCN and served as programmer for BCN. c. Coconspirator Matthew Brent Goettsche created and operated BCN. d. Coconspirator Russ Albert Medlin created, operated, and promoted BCN. e. Coconspirator Jobadiah Sinclair Weeks promoted BCN. f. Coconspirator Joseph Frank Abel promoted BCN. Relevant Terminology g. "Cryptocurrency" was a digital representation of value that could be traded and functioned as a medium of exchange; a unit of account; and a store of value. Its value was decided by consensus within the community of users of the cryptocurrency. h. "Bitcoin" was a type of cryptocurrency. Bitcoin were generated and controlled through computer software operating via a decentralized, peer-to-peer network. Bitcoin could be used for purchases or exchanged for other currency on currency exchanges. 1. "Mining" was the way new bitcoin were produced and the way bitcoin transactions were verified. Individuals or entities ran special computer software to solve complex algorithms that validated groups of transactions in a particular cryptocurrency.