The first academic workshop to feature peer-reviewed research on bitcoin took place last week.
The 1st Workshop on Bitcoin Research (aka BITCOIN 14), which was held on 7th March, was part of a larger week-long conference, FC14.
The event was put on by the International Financial Cryptography Association, which has been organizing financial cryptography and data security conferences for the past 18 years.
Conference sponsors included Google, CA Technologies, WorldPay, Silent Circle and the US National Science Foundation. The Bitcoin Foundation also sponsored the event, fittingly providing its financial support to the conference in bitcoin. Many of the foundation’s board members were also in attendance.
The conference took place on the island of Barbados, and of the 120 total FC14 conference attendees from all over the globe approximately 80 people participated in the BITCOIN’14 workshop.
History of academic interest in bitcoin
Scholars have been studying bitcoin for some time now. The first working papers were published as early as 2011, including a controversial article from scholars at the University College Dublin analyzing bitcoin anonymity.
FC14 was also not the first ‘FC-conference’ to include bitcoin research. Papers were presented at last year’s FC13 on transactions, exchange risk, user privacy and the FC12 conference also featured a paper from California-based researchers on how to make bitcoin better.
However, prior to FC14 there had not been another academic event featuring peer-reviewed research which was also fully-dedicated to the topic of bitcoin.
Ten academic papers in total were presented at the BITCOIN 14 workshop, and four additional bitcoin-related papers were also presented at the main FC14 conference.
It should be noted that the vast majority of academic scholarship to date on bitcoin has had a computer science/technology orientation. While academic economists have not shied away from discussing bitcoin, this debate has largely taken place on blogs and newspaper opinion pages.
Turing Award winner, meet Dread Pirate Roberts
One of the most high-profile papers presented at the conference was titled “How Did Dread Pirate Roberts Acquire and Protect His Bitcoin Wealth?” by Dorit Ron and Adi Shamir.
In 2002, Shamir shared the Turing Award, which is considered the Nobel prize of computer science, for his contributions to public-key cryptography through the invention of the widely-used cryptosystem RSA.
Both Ron, who delivered the workshop presentation, and Shamir hail from the Department of Computer Science and Applied Mathematics in the Weizmann Institute of Science in Israel.
Ron and Shamir previously published a paper analysing bitcoin transactions which showed that nearly 80% of bitcoins had never circulated; more recently they were at the centre of a subsequently disproven finding linking a bitcoin transaction between the Silk Road’s infamous Dread Pirate Roberts and Bitcoin’s creator Satoshi Nakamoto.
Ron and Shamir’s BITCOIN 14 paper on the bitcoin holdings of the Dread Pirate Roberts used block chain data to:
“Trace the evolution of his holdings in order to find how he acquired and how he tried to hide them from the authorities […] and show that all his Silk Road commissions from the months of May, June and September 2013, along with numerous other amounts, were not seized by the FBI.”
Table 1 below summarizes all of the transactions by the Dread Pirate Roberts that Ron and Shamir’s analysis uncovered.
Table 1: Bitcoins seemingly received by Dread Pirate Roberts over time. Source: Ron and Shamir (2014)Based on their observations that the months of May, June and September show no earnings the authors conclude that it was likely that the Dread Pirate Roberts was using a different computer than the one seized by the FBI to store bitcoins earned from the Silk Road during these months.
The authors also note that based on estimates that the Silk Road marketplace generated sales revenue of more than 9.5m BTC with an average commission rate of 6.67%, that the Dread Pirate Roberts earned a total of approximately 633,000 BTC, or only one-third of the bitcoins identified by Ron and Shamir in Table 1.
In other words, the FBI only seized 22% of Dread Pirate Roberts’ total bitcoin holdings.
The bigger you are, the more likely you’ll be ‘DDoSed’
Another paper by Marie Vasek, Micah Thornton, and Tyler Moore of Southern Methodist University conducted an empirical analysis of distributed denial-of-service (DDoS) attacks on operators in the bitcoin economy.
The authors note that DDoS attacks are:
“Inexpensive to carry out and quite disruptive. Competing services launch them in order to improve market share, traders target exchanges to buy or sell at favourable prices, and miners outgunned in the rush to increase computational power could try to cripple larger pools in order to increase their odds of solving the hash puzzle first.”
From May 2011 through October 2013, the researchers found 142 unique DDoS attacks on 40 different Bitcoin services. In total, 7% of all known operators in the Bitcoin economy have suffered DDoS attacks.
Figure 1: Distribution of DDoS Attacks on the Bitcoin Economy. Source: Vasek, Thornton, and Moore (2014)Overall, the services which are most commonly the targets of DDoS attacks are currency exchanges (40%), followed closely by mining pools (38%); DDoS attacks on gambling (9%), finance (6%), digital wallets (4%) and other services (3%) are far less common.
Empirical analysis shows that DDoS attacks on large mining pools, defined as those with historical hash rates equal to or greater than 5%, are much more likely to be attacked than smaller pools.
In a related paper which employs a game theoretic analysis to analyze mining pool DDoS attacks, Benjamin Johnson, Aron Laszka, Jens Grossklags, Marie Vasek, and Tyler Moore found that mining pools “have a greater incentive to attack large pools than small ones” and that overall “larger mining pools have a greater incentive to attack than smaller ones”.
Growing scholarly interest in bitcoin
Other papers at BITCOIN 14 covered bitcoin transaction analysis, legal and policy issues, network security, and ideas for improving digital currencies. A full list and link to each of these papers is presented below.
Many academics have found bitcoin’s open architecture and rich data set attractive for research purposes, and the significant presence of bitcoin research papers at last week’s conferences suggests that more and more scholars are catching on.
Full list of the BITCOIN 14 workshop papers:
“Bitcoin: A First Legal Analysis – with reference to German and US-American law” By Franziska Boehm, Paulina Pesch, Institute for Information-, Telecommunication-, and Media Law, Muenster, Germany
“The Bitcoin P2P network” By Joan Antoni Donet Donet, Cristina Pérez-Solà, and Jordi Herrera-Joancomartí, Dept. d’Enginyeria de la Informació i les Comunicacions Universitat Autònoma de Barcelona 08193 Bellaterra, Catalonia, Spain.
“Empirical Analysis of Denial-of-Service Attacks in the Bitcoin Ecosystem” By Marie Vasek, Micah Thornton, and Tyler Moore, Computer Science and Engineering Department Southern Methodist University, TX, USA.
“How Did Dread Pirate Roberts Acquire and Protect His Bitcoin Wealth?” By Dorit Ron and Adi Shamir, Department of Computer Science and Applied Mathematics, The Weizmann Institute of Science, Israel.
“Fair Two-Party Computations via Bitcoin Deposits” By Marcin Andrychowicz, Stefan Dziembowski, Daniel Malinowski and Łukasz Mazurek, University of Warsaw, Poland.
“Increasing Anonymity in Bitcoin” By Amitabh Saxena and Janardan Misra, Accenture Technology Labs, Bangalore 560066, India and Aritra Dhar, Indraprastha Institute of Information Technology, New Delhi, India.
“Game-Theoretic Analysis of DDoS Attacks Against Bitcoin Mining Pools” By Benjamin Johnson, University of California, Berkeley, CA, USA; Aron Laszka, Budapest University of Technology and Economics, Hungary; Jens Grossklags, The Pennsylvania State University, State College, PA, USA; Marie Vasek and Tyler Moore, Southern Methodist University, Dallas, TX, USA.
“Towards Risk Scoring of Bitcoin Transactions” By Malte Möser, Rainer Böhme, and Dominic Breuker, Department of Information Systems, University of Münster, Germany.
“Rational Zero: Economic Security for Zerocoin with Everlasting Anonymity” By Christina Garman, Matthew Green, Ian Miers, and Aviel D. Rubin, The Johns Hopkins University Department of Computer Science, MD, USA.
“Challenges and Opportunities Associated with a Bitcoin-based Transaction Rating System” By David Vandervort, Xerox.
Pirate treasure image via Shutterstock