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Insane in the Blockchain

tarcieri
August 04, 2018

Insane in the Blockchain

DISCON 2018

tarcieri

August 04, 2018
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  1. That which you can be paid for That which you

    love That which you are good at That which the world needs Passion Mission Profession Vocation Religion
  2. me Rejection That which you can be paid for That

    which you love That which you are good at That which the world needs Passion Mission Profession Vocation Religion
  3. Insane in the BLOCKCHAIN •Decentralization •Delusions of Grandeur •Bitcoin Maximalism

    •Lightning •Economics •Scams •Governance •Ethics
  4. Federation an organization or group within which smaller divisions have

    some degree of internal autonomy BFT Consensus distributed agreement among nodes which is dependable in the event of network failures or malicious manipulation
  5. The Bitcoin Backbone Protocol: Analysis and Applications∗ Juan A. Garay

    Yahoo Research [email protected] Aggelos Kiayias†‡ University of Edinburgh, IOHK [email protected] Nikos Leonardos†§ National and Kapodistrian University of Athens. [email protected] June 23, 2017 Abstract Bitcoin is the first and most popular decentralized cryptocurrency to date. In this work, we extract and analyze the core of the Bitcoin protocol, which we term the Bitcoin backbone, and prove two of its fundamental properties which we call common prefix and chain quality in the static setting where the number of players remains fixed. Our proofs hinge on appropriate and novel assumptions on the “hashing power” of the adversary relative to network synchronicity; we show our results to be tight under high synchronization. Next, we propose and analyze applications that can be built “on top” of the backbone pro- tocol, specifically focusing on Byzantine agreement (BA) and on the notion of a public trans- action ledger. Regarding BA, we observe that Nakamoto’s suggestion falls short of solving it, and present a simple alternative which works assuming that the adversary’s hashing power is bounded by 1/3. The public transaction ledger captures the essence of Bitcoin’s operation as a cryptocurrency, in the sense that it guarantees the liveness and persistence of committed transactions. Based on this notion we describe and analyze the Bitcoin system as well as a more elaborate BA protocol, proving them secure assuming high network synchronicity and that the adversary’s hashing power is strictly less than 1/2, while the adversarial bound needed for security decreases as the network desynchronizes. Finally, we show that our analysis of the Bitcoin backbone protocol for synchronous networks extends with relative ease to the recently considered “partially synchronous” model, where there is an upper bound in the delay of messages that is unknown to the honest parties. 1 Introduction Bitcoin, introduced in [Nak08a], is a decentralized payment system that is based on maintaining a public transaction ledger in a distributed manner. The ledger is maintained by anonymous par- ticipants (“players”) called miners, executing a protocol that maintains and extends a distributed data structure called the blockchain. The protocol requires from miners to solve a “proof of work” ∗An abridged version of this paper appears in Proc. Eurocrypt 2015. †Research partly supported by ERC project CODAMODA, # 259152. ‡Work partly done while at the National and Kapodistrian University of Athens §Work partly done while at LIAFA, Université Paris Diderot–Paris 7. 1
  6. Abstract Bitcoin is the first and most popular decentralized cryptocurrency

    to date. In this work, we extract and analyze the core of the Bitcoin protocol, which we term the Bitcoin backbone, and prove two of its fundamental properties which we call common prefix and chain quality in the static setting where the number of players remains fixed. Our proofs hinge on appropriate and novel assumptions on the “hashing power” of the adversary relative to network synchronicity; we show our results to be tight under high synchronization. Next, we propose and analyze applications that can be built “on top” of the backbone pro- tocol, specifically focusing on Byzantine agreement (BA) and on the notion of a public trans- action ledger. Regarding BA, we observe that Nakamoto’s suggestion falls short of solving it, and present a simple alternative which works assuming that the adversary’s hashing power is bounded by 1/3. The public transaction ledger captures the essence of Bitcoin’s operation as a cryptocurrency, in the sense that it guarantees the liveness and persistence of committed transactions. Based on this notion we describe and analyze the Bitcoin system as well as a more elaborate BA protocol, proving them secure assuming high network synchronicity and that the adversary’s hashing power is strictly less than 1/2, while the adversarial bound needed for security decreases as the network desynchronizes. Finally, we show that our analysis of the Bitcoin backbone protocol for synchronous networks extends with relative ease to the recently considered “partially synchronous” model, where there is an upper bound in the delay of messages that is unknown to the honest parties. 1 Introduction Bitcoin, introduced in [Nak08a], is a decentralized payment system that is based on maintaining a public transaction ledger in a distributed manner. The ledger is maintained by anonymous par- ticipants (“players”) called miners, executing a protocol that maintains and extends a distributed
  7. 20 18 16 14 12 10 8 6 4 2

    0 Parallel portion Number of processors 50% 75% 90% 95% Speedup 1 2 4 8 16 32 64 128 256 512 1024 2048 4096 8192 16384 32768 65536 Amdahl's Law
  8. “I agree with Milton Friedman that once the Crash had

    occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation. So, once again, a badly programmed monetary policy prolonged the depression.” —FRIEDRICH A. VON HAYEK
  9. “I would no longer maintain, as I did in the

    early '30s, that [...] a short period of deflation might be desirable. Today I believe that deflation has no recognizable function whatsoever, and that there is no justification for supporting or permitting a process of deflation.” —FRIEDRICH A. VON HAYEK
  10. • TERNARY COMPUTING!!!#$#$!$!#%%!!!$!!!$@!!!!!!#$!#!!! • Centralized in the Coordinator ("COO") •

    Don't worry, we'll fix it later • "Designed" a trivially collidable has function (Curl-P) • Intentionally! Because DRM!
  11. • The community should almost never engage in technical arguments.This

    allows the FUDsters, who may be more technically proficient than community members, to weave deception and misdirection through their otherwise technically proficient arguments. By engaging with them, you actually legitimize their assertions, in the eyes of the Audience, to a certain extent. https://medium.com/@dan_47238/the-guide-to-effectively-fighting-fud-417d2340678a
  12. • Hit FUDsters where it hurts: Address their motivations and

    hit them where it hurts. If they are FUDding a technically superior project, then the likelihood is that their project is technically inferior for obvious reasons. Hit the project in social media. Are they employed by an organization that doesn’t want to be associated with shady actions? Call out that employer publicly. Is the person trying to build a reputation? Mock them and their reputation in front of their followers. Take a pound of flesh. https://medium.com/@dan_47238/the-guide-to-effectively-fighting-fud-417d2340678a
  13. = $

  14. Legit Fiat On-Ramp Tether provided a liquidity vehicle which allowed

    cryptocurrencies to be traded on exchanges that otherwise couldn't deal in USD SCAAAAAM!!!! Tether was printed out of thin air with the goal of using it to manipulate the price of Bitcoin and other cryptocurrencies
  15. Is Bitcoin Really Un-Tethered? JOHN M. GRIFFIN and AMIN SHAMS*

    June 13, 2018 Abstract This paper investigates whether Tether, a digital currency pegged to U.S. dollars, influences Bitcoin and other cryptocurrency prices during the recent boom. Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryp- tocurrencies. The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.
  16. Anniversaries! • 2 years (June 18th): DAO Hack - 3.6M

    ETH • 1 year (July 19th): Parity Wallet Hack - 150K ETH
  17. "Your scientists were so preoccupied with whether they could that

    they didn't stop to think if they should." -Dr. Jeff Goldblum
  18. Sex, drugs, and bitcoin: How much illegal activity is financed

    through cryptocurrencies? * Sean Foley a, Jonathan R. Karlsen b, Tālis J. Putniņš b, c a University of Sydney b University of Technology Sydney c Stockholm School of Economics in Riga January, 2018 Abstract Cryptocurrencies are among the largest unregulated markets in the world. We find that approximately one-quarter of bitcoin users and one-half of bitcoin transactions are associated with illegal activity. Around $72 billion of illegal activity per year involves bitcoin, which is close to the scale of the US and European markets for illegal drugs. The illegal share of bitcoin activity declines with mainstream interest in bitcoin and with the emergence of more opaque cryptocurrencies. The techniques developed in this paper have applications in cryptocurrency surveillance. Our findings suggest that cryptocurrencies are transforming the way black markets operate by enabling “black e-commerce”. JEL classification: G18, O31, O32, O33 Keywords: blockchain, bitcoin, detection controlled estimation, illegal trade
  19. The Moral Character of Cryptographic Work? Phillip Rogaway Department of

    Computer Science University of California, Davis, USA [email protected] December 2015 (minor revisions March 2016) Abstract. Cryptography rearranges power: it configures who can do what, from what. This makes cryptography an inherently political tool, and it confers on the field an intrinsically moral dimension. The Snowden revelations motivate a reassessment of the political and moral positioning of cryptography. They lead one to ask if our inability to e↵ectively address mass surveillance constitutes a failure of our field. I believe that it does. I call for a community-wide e↵ort to develop more e↵ective means to resist mass surveillance. I plead for a reinvention of our disciplinary culture to attend not only to puzzles and math, but, also, to the societal implications of our work. Keywords: cryptography · ethics · mass surveillance · privacy · Snowden · social responsibility Preamble. Most academic cryptographers seem to think that our field is a fun,
  20. address mass surveillance constitutes a failure of our field. I

    believe that it does. I call for a community-wide e↵ort to develop more e↵ective means to resist mass surveillance. I plead for a reinvention of our disciplinary culture to attend not only to puzzles and math, but, also, to the societal implications of our work. Keywords: cryptography · ethics · mass surveillance · privacy · Snowden · social responsibility Preamble. Most academic cryptographers seem to think that our field is a fun, deep, and politically neutral game—a set of puzzles involving communicating parties and notional adversaries. This vision of who we are animates a field whose work is intellectually impressive and rapidly produced, but also quite inbred and divorced from real-world concerns. Is this what cryptography should be like? Is it how we should expend the bulk of our intellectual capital? For me, these questions came to a head with the Snowden disclosures of 2013. If cryptography’s most basic aim is to enable secure communications, how could it not be a colossal failure of our field when ordinary people lack even a modicum of communication privacy when interacting electronically? Yet I soon realized that most cryptographers didn’t see it this way. Most seemed to feel that the disclosures didn’t even implicate us cryptographers. I think that they do. So I want to talk about the moral obligations of cryp- tographers, and my community as a whole. This is not a topic cryptographers
  21. • How do we stop scammers from using cryptocurrency to

    defraud people? • How can we decrease the number of criminals using cryptocurrencies? • How can we increase the legitimate uses of cryptocurrencies? • How can governance bodies of cryptocurrencies work with national governments to find and stop criminal users of cryptocurrencies?