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Register a new userMixing Strategies in Cryptocurrencies and An Alternative Implementation
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Xinyuan Zhang
Publication date
2020
fields
Informatics Engineering
and research's language is
English
Authors
Xinyuan Zhang
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Since the initial launch of Bitcoin by Satoshi Nakamoto in 2009, decentralized digital currencies have long been of major interest in both the academia and the industry. Till today, there are more than 3000 different cryptocurrencies over the internet. Each one relies on mathematical soundness and cryptographic wit to provide unique properties in addition to securing basic correctness. A common misbelief for cryptocurrencies is that they provide complete anonymity by replacing peoples real-life identity with a randomly generated wallet address in payments. However, this pseudonymity is easily breakable under the public ledger. Many attacks demonstrate ways to deanonymize people through observing the transaction patterns or network interactions. Thus, cryptocurrency fungibility has become a popular topic in the research community. This report reviews a partial list of existing schemes and describes an alternative implementation, Eth-Tumbler. Eth-Tumbler utilizes layered encryption and multiple signatures and thus efficiently hides a user under k-anonymity.
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In the proof-of-stake (PoS) paradigm for maintaining decentralized, permissionless cryptocurrencies, Sybil attacks are prevented by basing the distribution of roles in the protocol execution on the stake distribution recorded in the ledger itself. However, for various reasons this distribution cannot be completely up-to-date, introducing a gap between the present stake distribution, which determines the parties current incentives, and the one used by the protocol. In this paper, we investigate this issue, and empirically quantify its effects. We survey existing provably secure PoS proposals to observe that the above time gap between the two stake distributions, which we call stake distribution lag, amounts to several days for each of these protocols. Based on this, we investigate the ledgers of four major cryptocurrencies (Bitcoin, Bitcoin Cash, Litecoin and Zcash) and compute the average stake shift (the statistical distance of the two distributions) for each value of stake distribution lag between 1 and 14 days, as well as related statistics. We also empirically quantify the sublinear growth of stake shift with the length of the considered lag interval. Finally, we turn our attention to unusual stake-shift spikes in these currencies: we observe that hard forks trigger major stake shifts and that single real-world actors, mostly exchanges, account for major stake shifts in established cryptocurrency ecosystems.
As the most popular blockchain that supports smart contracts, there are already more than 296 thousand kinds of cryptocurrencies built on Ethereum. However, not all cryptocurrencies can be controlled by users. For example, some money is permanently locked in wallets accounts due to attacks. In this paper, we conduct the first systematic investigation on locked cryptocurrencies in Ethereum. In particular, we define three categories of accounts with locked cryptocurrencies and develop a novel tool named CLUE to discover them. Results show that there are more than 216 million dollars value of cryptocurrencies locked in Ethereum. We also analyze the reasons (i.e., attacks/behaviors) why cryptocurrencies are locked. Because the locked cryptocurrencies can never be controlled by users, avoid interacting with the accounts discovered by CLUE and repeating the same mistakes again can help users to save money.
In the past year, a new spamming scheme has emerged: sexual extortion messages requiring payments in the cryptocurrency Bitcoin, also known as sextortion. This scheme represents a first integration of the use of cryptocurrencies by members of the spamming industry. Using a dataset of 4,340,736 sextortion spams, this research aims at understanding such new amalgamation by uncovering spammers operations. To do so, a simple, yet effective method for projecting Bitcoin addresses mentioned in sextortion spams onto transaction graph abstractions is computed over the entire Bitcoin blockchain. This allows us to track and investigate monetary flows between involved actors and gain insights into the financial structure of sextortion campaigns. We find that sextortion spammers are somewhat sophisticated, following pricing strategies and benefiting from cost reductions as their operations cut the upper-tail of the spamming supply chain. We discover that one single entity is likely controlling the financial backbone of the majority of the sextortion campaigns and that the 11-month operation studied yielded a lower-bound revenue between $1,300,620 and $1,352,266. We conclude that sextortion spamming is a lucrative business and spammers will likely continue to send bulk emails that try to extort money through cryptocurrencies.
Proof-of-stake (PoS) is a promising approach for designing efficient blockchains, where block proposers are randomly chosen with probability proportional to their stake. A primary concern with PoS systems is the rich getting richer phenomenon, whereby wealthier nodes are more likely to get elected, and hence reap the block reward, making them even wealthier. In this paper, we introduce the notion of equitability, which quantifies how much a proposer can amplify her stake compared to her initial investment. Even with everyone following protocol (i.e., honest behavior), we show that existing methods of allocating block rewards lead to poor equitability, as does initializing systems with small stake pools and/or large rewards relative to the stake pool. We identify a emph{geometric} reward function, which we prove is maximally equitable over all choices of reward functions under honest behavior and bound the deviation for strategic actions; the proofs involve the study of optimization problems and stochastic dominances of Polya urn processes, and are of independent mathematical interest. These results allow us to provide a systematic framework to choose the parameters of a practical incentive system for PoS cryptocurrencies.
Bitcoin and many other similar Cryptocurrencies have been in existence for over a decade, prominently focusing on decentralized, pseudo-anonymous ledger-based transactions. Many protocol improvements and changes have resulted in new variants of Cryptocurrencies that are known for their peculiar characteristics. For instance, Storjcoin is a Proof-of-Storage-based Cryptocurrency that incentivizes its peers based on the amount of storage owned by them. Cryptocurrencies like Monero strive for user privacy by using privacy-centric cryptographic algorithms. While Cryptocurrencies strive to maintain peer transparency by making the transactions and the entire ledger public, user privacy is compromised at times. Monero and many other privacy-centric Cryptocurrencies have significantly improved from the original Bitcoin protocol after several problems were found in the protocol. Most of these deficiencies were related to the privacy of users. Even though Bitcoin claims to have pseudo-anonymous user identities, many attacks have managed to successfully de-anonymize users. In this paper, we present some well-known attacks and analysis techniques that have compromised the privacy of Bitcoin and many other similar Cryptocurrencies. We also analyze and study different privacy-preserving algorithms and the problems these algorithms manage to solve. Lastly, we touch upon the ethics, impact, legality, and acceptance of imposing these privacy algorithms.
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