Cryptocurrencies bitcoin, blockchain & beyond Roger Wattenhofer - PowerPoint PPT Presentation

Cryptocurrencies bitcoin, blockchain & beyond Roger Wattenhofer ETH Zurich – Distributed Computing Group

Cryptocurrencies

What is Bitcoin? = + +

Technology

The Bank of Bitcoin

The Bank of Bitcoin User Balance A 2 B 5 C 8

The Bank of Bitcoin TX B − → A User Balance A 2 B 5 C 8

The Bank of Bitcoin TX B − → A User Balance A 2 4 B 5 3 C 8

Opening an Account in Bitcoin Private Key Public Key Address

Transferring Bitcoins TX: 41b221

Transferring Bitcoins 0 . 1 B TX: 41b221

Transferring Bitcoins 4 . 899 0 . 1 A B TX: 41b221 4 . 798 A

Transferring Bitcoins 4 . 899 0 . 1 A B TX: 41b221 4 . 798 A

Transferring Bitcoins Outputs Inputs 4 . 899 0 . 1 A B TX: 41b221 4 . 798 A

Transferring Bitcoins Fee Outputs Inputs 0 . 001 4 . 899 0 . 1 A B TX: 41b221 4 . 798 A

Transferring Bitcoins Fee Outputs | Outputs Inputs 0 . 001 4 . 899 4 . 899 0 . 1 A B Prev. TX: 0 TX: 41b221 a1a53743 4 . 798 ... C A 1

Distributing the Bank TX User Balance A 2 B 5 C 8

Distributing the Bank

Distributing the Bank TX

Distributing the Bank TX

Distributing the Bank

Distributing the Bank

Let’s Buy a Snack [Bamert, Decker, Elsen, W, Welten, 2013]

Doublespending TX 1 Inputs 1 A

Doublespending TX 1 Inputs 1 A 1 TX’

Doublespending TX 1 Inputs 1 ✓ A 1 TX’

Transaction Conflicts

Transaction Conflicts TX TX

Transaction Conflicts TX TX

Transaction Conflicts

Resolving Conflicts

Resolving Conflicts Green!

Resolving Conflicts

How to Choose a Leader?

Proof-of-Work TX TX TX TX

Proof-of-Work Block TX TX TX TX

Proof-of-Work Block H(Previous Block) TX TX TX TX

Proof-of-Work Block H(Previous Block) TX TX TX TX I H(Block) → fd2e2055f117bfa261b5a6c7e11df367. . .

Proof-of-Work Block H(Previous Block) TX TX TX TX Nonce I H(Block | 0) → 094d66aa7c844a9dbb516a41259b5877. . .

Proof-of-Work Block H(Previous Block) TX TX TX TX Nonce I H(Block | 0) → 094d66aa7c844a9dbb516a41259b5877. . . I H(Block | 1) → f2496854af8bf989171587a9259f634f. . .

Proof-of-Work Block H(Previous Block) TX TX TX TX Nonce I H(Block | 0) → 094d66aa7c844a9dbb516a41259b5877. . . I H(Block | 1) → f2496854af8bf989171587a9259f634f. . . I H(Block | 2) → aec87c0ca2e5eb3f23111092f1089ada. . .

Proof-of-Work Block H(Previous Block) TX TX TX TX Nonce I H(Block | 0) → 094d66aa7c844a9dbb516a41259b5877. . . I H(Block | 1) → f2496854af8bf989171587a9259f634f. . . I H(Block | 2) → aec87c0ca2e5eb3f23111092f1089ada. . . I H(Block | 3) → 777f75b2a8ecfdc8026c236fc1d2 ff a0. . . . . . I H(Block | 961127) → 0000014823419622d4c133672a7d657e. . .

The Blockchain Time

The Blockchain Time

Is Bitcoin stable?

The Blockchain Time

The Blockchain Time

Propagation Speed http://bitcoinstats.com [Decker, W, 2013]

Propagation Speed http://bitcoinstats.com [Decker, W, 2013]

Blockchain Forks 1.69% [Decker, W, 2013]

Aside: Mining Evolution

Aside: Mining Evolution

Aside: Mining Evolution

500 MW

Summary Green! TX Block H(Previous Block) TX TX TX TX Nonce Time

Stories

How to Lose 500M

Addressing Transaction Malleability: MtGox has detected unusual activity on its Bitcoin wallets and performed investigations during the past weeks.

The MtGox Incident I July 2010: First trade on MtGox I May 2011: Transaction malleability identified as low priority issue I February 7, 2014: MtGox halts withdrawals I February 10, 2014: MtGox announces loss of 850,000 bitcoins (620 millio USD) and cites transaction malleability as root cause I February 28, 2014: MtGox files for bankruptcy I March 7 2014: MtGox finds 200,000 bitcoins I August 2015: MtGox CEO is arrested

Signatures 61 af bb 4d e9 f8 b8 74 86 1e

Signatures 00 00 61 af bb 4d e9 f8 b8 74 86 1e There are multiple ways to serialize a signature: I Multiple push operations (1 byte, 2 byte, 4 byte) I Non-canonical DER encodings I Padding I . . .

Transaction Malleability Attack

Transaction Malleability Attack TX TX

Transaction Malleability Attack TX TX TX

Transaction Malleability Attack

Transaction Malleability Attack Red! TX?

Transaction Malleability Attack Refund

Incident Timeline [Decker, W, 2014]

Incident Timeline 386 BTC [Decker, W, 2014]

Is Bitcoin Secure?

Securing Your Bitcoins [Bamert, Decker, W, 2013]

Does Bitcoin Scale?

The Bitcoin Ecosystem is Growing

Scalability Limits I Disk space: < 500 transactions per second

Scalability Limits I Disk space: < 500 transactions per second I Processing power: < 200 transactions per second

Scalability Limits I Disk space: < 500 transactions per second I Processing power: < 200 transactions per second I Network bandwidth: < 100 transactions per second

Scalability Limits I Disk space: < 500 transactions per second I Processing power: < 200 transactions per second I Network bandwidth: < 100 transactions per second I Artificial 1MB limit: < 3 transactions per second

Scalability Limits I Disk space: < 500 transactions per second I Processing power: < 200 transactions per second I Network bandwidth: < 100 transactions per second I Artificial 1MB limit: < 3 transactions per second Today: I Bitcoin: 1 transaction per second I Credit Cards: > 10 , 000 transactions per second

Payment Network

Payment Network

Payment Network

Micropayment Channels 5

Micropayment Channels 5 5

Micropayment Channels 5 5 T=100 5

Micropayment Channels 5 5 T=100 5

Micropayment Channels 5 5 T=100 5

Micropayment Channels 5 5 5 0 T=100 5

Micropayment Channels 5 4 5 5 0 1 T=100 5

Micropayment Channels 5 4 3 5 5 0 1 2 T=100 5

Micropayment Channels 5 4 3 5 5 0 1 2 T=100 5

Duplex Micropayment Channels T = 100 T = 100 T = 100 T = 99 T = 100 T = 100 T = 99 T = 100 T = 99 Setup Invalidation Tree Micropayment Channels

Summary Red! T = 100 T = 100 T = 100 Refund TX? T = 99 T = 100 T = 100 T = 99 T = 100 T = 99

Economy

BTC in USD

Inflation

Fungibility ? =

Improving Bitcoin? saver miner relay payer payee