How “untrustworthy” is Bitcoin?

Cryptocurrencies are said to be egalitarian, decentralized, and almost anonymous. However, scientists have found that this is not the case.

Alyssa Blackburn, a data scientist at Rice University and Baylor College of Medicine in Houston, spent several years conducting digital reconnaissance work with her trusted lab assistant, Hail Mary, a black computer with an orange border. She has been collecting and analyzing leaks from the Bitcoin blockchain, an immutable public ledger that records all transactions since Bitcoin’s launch in January 2009.

Bitcoin represents a techno-utopian dream. Its pseudonymous inventor, Satoshi Nakamoto, proposed that the world operates not on a centralized financial institution, but on an egalitarian, math-based electronic money system distributed through a computer network. And the system will be “trustless”, that is, it will not rely on a trusted party, such as a bank or government, to arbitrate transactions. Instead, as Satoshi Nakamoto wrote in his 2008 white paper, the system will be based on “cryptographic proof, not trust.”

It turns out that the reality is complicated. The price volatility was enough to cause Bitcoin’s price to drop, and the system was environmentally damaging due to the excessive use of electricity by the computing network.

Blackburn said her project ignores the pros and cons of bitcoin. Her goal is to push the limits of anonymity, track transaction flows, and study how the world’s largest cryptocurrency economy was born.

Satoshi Nakamoto has stated that Bitcoin is anonymous: in Bitcoin transactions (buy, sell, send, receive, etc.), users use pseudonyms or addresses to hide their real identities. They clearly have faith in anonymity. In 2011, WikiLeaks announced that it would accept bitcoin donations. But over time, research uncovered data breaches. Identity protection is not infallible after all.

“Information leaks erode once-indestructible blocks, opening up new horizons in socioeconomic data,” Blackburn and her collaborators wrote in their new paper, which has yet to be published in a peer-reviewed journal .

Blackburn has compiled multiple leaks, consolidating Bitcoin addresses that appear to represent many miners into a handful. She cobbled together a directory of proxies and concluded that in the first two years, 64 key players mined most of the bitcoin that existed at the time.

“It’s a scientific finding that they found that early bitcoin mining and usage was very concentrated,” said Eric Budish, an economist at the University of Chicago . Dr. Budish, who has conducted research in this area, watched with the authors for two hours. video preview. When he started to understand what they were doing, he said, he thought, “Wow, that’s cool detective work.” Referring to these early key figures, Budish suggested naming the paper “Bitcoin 64” ( the Bitcoin 64).

Computer scientist Jaron Lanier, one of the paper’s early readers, called the survey’s goals and societal implications “significant and meaningful.” “I’m a nerd who is interested in math,” said Mr. Lanier, who is based in Berkeley, Calif. “The techniques used to extract information are interesting.”

He noted that the demonstration of the blockchain leak would surprise some people and not others. “This stuff isn’t completely secret,” Lanier said. He added: “I don’t think that’s the end of the story. I think there’s going to be further innovation happening by pulling information out of these types of systems.”

One of Blackburn’s strategies is perseverance. More precisely, Blackburn developed his hacking techniques during a period of particular interest: from the birth of cryptocurrencies to when Bitcoin achieved parity with the U.S. dollar in February 2011, which coincided with the opening of the Bitcoin-based black market Silk Road. Establish. She exploits human error, the operational properties inherent in Bitcoin’s software, and existing technology for linking anonymous addresses. In addition, she has developed new technologies. Ms Blackburn is particularly interested in miners, who validate transactions by participating in elaborate computational competitions. This is similar to a guessing game where miners earn bitcoin when they win.

64 The number is more or less depending on how close they are to the cryptocurrency wave. Academics have questioned whether Bitcoin is a truly decentralized currency. From Dr Lieberman Aiden’s perspective, the population surveyed was “more concentrated than it seems”. Although the analysis showed the number of big players to be 64 over a two-year period, the effective size of the group at any given moment was only five to six, according to the researchers’ model. In many cases, only one or two people hold most of the mining rights.

Few people “wear the crown” as arbiters of the network, as Ms. Blackburn describes it. “This is not the spirit of decentralized trustless cryptocurrencies,” she said.

How "untrustworthy" is Bitcoin?

▵ Data scientist Alyssa Blackburn (left) and geneticist and computer scientist Erez Lieberman Aiden test Bitcoin’s identity protection and decentralization claims.

For Ms Blackburn and Dr Lieberman Aiden, bitcoin’s data is a lure. Dr. Lieberman Aiden’s laboratory studies biophysics and a wide range of applied mathematics. One focus is the three-dimensional genome map. But as an academic, he is also interested in using new types of data to explore complex phenomena. In 2011, together with Google Books and collaborators, he published a quantitative cultural analysis using more than 5 million digitized books from 1800 to 2000. He called it “Culturomics”. For example, the team introduced the Google Ngram Viewer, which allows users to enter a word or phrase and observe how it has been used over the centuries.

In the same spirit, he wonders what treasures might be buried in Bitcoin’s data lake. “We actually have a record of every single transaction,” he said. “These are amazing economic and sociological datasets. Obviously, if you can get it, there’s a lot of information in there.”

It’s not easy to do this. Ms Blackburn was banned from the university’s supercomputing cluster because her folder was marked “Bitcoin” and she was suspected of mining cryptocurrency. She said she tried to convince an administrator that she was conducting research, but “they were completely unimpressed.”

A key strategy for Blackburn should, in theory, be to look for patterns in random and meaningless numbers. In one case, she was tracking the “extranonce” part of the mining puzzle. This is a short field containing 0s and 1s hidden in a longer string that encodes each transaction block or bundle. extranonce leaks information about computer activity. This allows Blackburn to reconstruct the behavior of miners: when they mine, when they stop, and when they start again. She speculates that the extranonce leak was tolerated because it allowed Bitcoin’s creators to spy on miners. The source code was modified to close the loophole shortly before Satoshi Nakamoto disappeared from the public Bitcoin community in December 2010.

Once Ms. Blackburn started using various methods that allowed her to weaken identity-masking protections, she started merging addresses, connecting nodes on the graph, and consolidating the number of active mining agents. She then cross-checked and validated the results with information gleaned from Bitcoin forums and blogs. Initially, the directory of proxies mining most of the Bitcoin was in the thousands; after that the number hovered around 200 for a while. Ultimately, Hail Mary narrowed it down to 64 people.

The purpose of this study was not to name names. It is the job of the FBI and the IRS to arrest Bitcoin criminals. But the researchers pointed to the identities of several public Bitcoin criminals. Agent No. 19 is Michael Mancil Brown, aka “Dr. Evil,” who was convicted in 2012 of fraud and extortion in a scheme involving then-presidential candidate Mitt Romney. Agent 67 is related to Ross Ulbricht (aka “The Fearless Pirate”), the creator of the Silk Road. Of course, the No. 1 agent is Satoshi Nakamoto, and the researchers did not attempt to determine his true identity.

Mark Gerstein, a professor of bioinformatics at Yale University, found the implications for data privacy in the study. He recently stored a genome on a private blockchain, which makes the records secure and tamper-proof. But he noted that in a public environment like the Bitcoin blockchain, the scale and subtle patterns of datasets make it vulnerable to corruption, even if the data remains the same. (Blackburn did not tamper with the records of the Bitcoin blockchain.)

“That’s the magic of big data,” Dr. Gerstein said. “If you have a large enough dataset, it starts leaking information in unexpected ways.” That’s even more the case when data from disparate sources is connected, he said. “When you combine one dataset with another to form a larger dataset, there are not obvious connections.”

Decentralized Drama

How "untrustworthy" is Bitcoin?

▵ A map of the Bitcoin blockchain built by Ms. Blackburn and Dr. Lieberman Aiden using data breaches. “Each agent corresponds to a map tile whose area is proportional to the number of bitcoins mined by the agent,” they state in their recent paper.

After Blackburn compiled a list of agents, he analyzed how much they earned from mining. She found that within a few months of Bitcoin’s inception, a typically unequal income distribution emerged, with a small group of miners holding most of the wealth and power.

The lab inadvertently replicated this dynamic when it invented “CO2 coins,” a cryptocurrency that can be used to buy snacks from student-run stores. Over time, some CO2 miners became more successful than others, and stores raised the price of snacks to cater to the wealthy.

Dr. Lieberman Aiden recalled: “People with a lot of crypto resources had a lot of control over what the store had to offer, and others weren’t happy with it.” When stores started charging CO2 for the use of coffee machines, the economy collapsed , which means there is resistance.

In formal research, Ms Blackburn also observed that the concentration of resources threatens the security of the network, as miners’ computing resources are proportional to their mining revenue. In some cases, individual miners use more than 50% of their computing power, so a so-called “51% attack” can be used to take over like a tyrant. For example, they could trick the system into using the same bitcoin over and over in different transactions.

Assuming the findings are correct, it will provide empirical confirmation for an “intuition that has been circulating in the field for some time,” said Sarah Meiklejohn, a cryptographer at University College London. (Dr. Meiklejohn developed some of the address linking techniques used in the investigation, and more recently devised a technique for tracking the flow of transactions known as stripped chains.)

“We all know that mining is pretty centralized, and there aren’t that many miners. Of course, even today, even more so in the beginning,” she said. As for what to do about it, she said, “We really need to look into it. The question.” “How can we make mining more decentralized?” She thinks the findings of the survey may encourage the field to take the issue more seriously.

But more interestingly, Blackburn found that while some miners were capable of carrying out 51% attacks, they repeatedly chose not to. Instead, they act altruistically, preserving the integrity of the cryptocurrency even if decentralization-based fraud prevention mechanisms have been broken.

In analyzing this finding, Blackburn’s team turned to the tools of experimental economics. They convened some human subjects online to participate in a game-theoretic scenario that simulates the “social dilemma” faced by founders. That is, how people behave when they find themselves a trustee of an item of value.

Dr. Lieberman Aiden observed: “In this case, people don’t seem to like killing the goose that lays the golden egg — they don’t like to undermine the interests of the group.” He said that whether you believe the “Bitcoin 64” What is the motivation, the fact that this network is vulnerable to individual decision makers changes the understanding of its security.

He said: “Certainly, decentralization protects the blockchain. But even as mining pools become centralized, the dominant miners refuse to attack it. This is in line with the idealized model people have of the security of these cryptocurrencies. with large differences.”

As the authors conclude in the paper: “Although Bitcoin was designed to rely on a decentralized, trustless network of anonymous agents, its early success relied on the cooperation of a small group of altruistic founders .”

Glen Weyl, an economist at Microsoft Research, participated in the study. He believes that this finding shows that decentralization is only playing a rhetorical role, not a substantive role. “This rhetoric is so powerful that it connects the group in the same way other myths connect other groups, such as the state,” said Dr. Weyl, who wrote the research for CoinDesk with Mr. Lanier. But he said there was a contradiction between this myth and promise and the reality that emerged. “It’s a fascinating and predictable irony that it’s simply repeating the historical patterns it aspires to erase.”

Mr. Lanier calls it “the drama of decentralization.” Cryptocurrencies create an illusion: “‘Now we are in a utopia. Everything is decentralized. Everyone is equal.’ There is a sense of democracy without worries.”

But, he said, these systems end up hiding an old elite that might just be in a new arena. The technology goes both ways. “Anything you think can be achieved with new algorithms or big data can be used against you,” Mr. Lanier said. “Scientists can use the same algorithms to interrogate and investigate these castles built by new elites.”

The moral of the story, Blackburn said, is simple: “You have to be careful.” Cryptocurrencies have a finite time limit, “after which it is no longer useful.” When you encrypt private data and make it public , you can’t assume it will always be private. “

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