Bitcoin Is No Paradise for Criminals

This brief article helps to clear up a common misconception about Bitcoin. Bitcoin is frequently portrayed as the chosen currency of crooks. There is no doubt that criminal activity has been associated with the Bitcoin ecosystem, but I would argue that cash is still king in the underworld. Jason Bloomberg writes in his recent Forbes article [1]: “Professional criminals’ number one requirement is a secure, anonymous way to move and store money, and Bitcoin fits the bill perfectly.” There’s a really big problem with that statement: it is simply and provably not true. It displays ignorance in how Bitcoin really works. In fact, Bitcoin is a potential nightmare for criminals. If they want to minimize getting caught, they’ll stick with

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Bitcoin Remittances in the Developing World

Introduction Numerous challenges to Bitcoin remittances are discussed in the course videos, especially during the interview with Luis Buenaventura, who was very informative as an entrepreneur with firsthand experience in the “rebittance” trenches of the Philippines [1]. This paper will identify the most imposing challenge facing Bitcoin remittances to LDCs and propose methods of surmounting it using BitPesa and Abra as case studies because I agree with their approaches. My view of how the Bitcoin ecosystem may evolve in the coming years, and thereby eliminate any and all obstacles to truly global P2P money transference, will also be discussed in this context. Background Developing countries depend on foreign resources to varying degrees to improve their economic destiny. The primary sources

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Case Study: A Rural Farmer in a Less Developed Country

Background and Assumptions The premise of this paper is that I am a farmer living in a rural region of a LDC; Mexico in my case. I have an entrepreneurial streak. My farm is a modestly successful enterprise, and in order to increase my profits, I have plans to expand and purchase 10 hectares of land next to my present farm. Fortunately, I live in a region with cell phone and Internet access, and use a smartphone to help manage my business affairs. I have also had the good fortune to be educated in a MDC institution of higher learning and am fully aware of the potential digital currencies and blockchain technologies can bring to my situation. My parents made

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Case Study: Demographic Influence on Digital Currency Adoption

Introduction This essay is a mini case study that compares and contrasts the lifestyles of two men and their families, and the potential for digital currency succeeding in their respective countries. Anrom Bulla hails from a rural section of a LDC which is very low on the spectrum of development. In contrast, Rana Tilla lives an affluent life in a thriving coastal city located in a MDC. The lifestyles of Anrom and Tilla are taken as data points and assumed to be representative of their respective nations. These family circumstances will be used to infer the broader demographics of each country and the corresponding style of living implied in each case. Based on these conjectures, the likelihood for digital currency to be adopted and make positive impacts in both

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Bitcoin Capital – Analysing Daily Dividends

Introduction I am writing this article to address recurring questions regarding calculating the investment returns from the daily dividends paid by the Bitcoin Capital (BC) Funds. The BC Funds are made available to professional investors on the BnkToTheFuture (BF) platform created by Simon Dixon and Max Keiser. A detailed explanation would make for an exceptionally long forum post, so the plan is to simply post a link to this document for BF investors to reference. Hopefully, this will be fairly easy and fun to read while remaining accurate in its analysis. Comments and criticism are welcome. Email me at pdq.jones(at)gmail.com. Qualifications Why me? Of course, the BF platform is for sophisticated and accredited investors, but not everyone is steeped in the minutia of finance and bitcoin. I

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Bitcoin as Time-based source of randomness

by Albert Szmigielski Bitcoin mining involves finding a suitable nonce so that the resulting hash meets a certain criteria. The hash is not predictable and can only be found by exhaustive search. Therefore the hash cannot be trivially guessed in advance. This allows the creation of a random seed that is time depended. Clearly the hash of some block in the future cannot be guessed without expending considerable effort and computing resources, and as a result the hash together with the Merkle tree root of a future block can be used as a random seed. According to researchers Bitcoin produces 68 bits of min-entropy every 10 minutes, of which 32 near-uniform bits can be extracted [1]. The biggest benefit of

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Ripple vs. Bitcoin (security and privacy)

by Albert Szmigielski Fairness Bitcoin’s public ledger, the blockchain, allows any entity to check the transactions in the system. Furthermore, as long as 66.7% of the miners are honest no entity can change the history of transactions. Both of those properties ensure fairness. However in light of recent research into attacks on the Bitcoin network, several double-spending attacks have been identified. Such attacks negate the fairness property. Ripple has not been studied as extensively as Bitcoin. Ripple relies on ledgers that can be inspected. However, Ripple’s validating nodes are currently run and therefore controlled by Ripple labs, it seems that there are not sufficient incentives to run a Ripple validating node. Double spending attacks have not been identified in Ripple

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Coin tainting in Bitcoin

by Albert Szmigielski Coin tainting in Bitcoin is a way to mark certain coins for the purpose of devaluing them. Since all transaction are stored on the blockchain, a history of a coin can be traced all the way to its coinbase transaction. This fact enables tracking of coins belonging to any address. Certain addresses can be marked by some powerful entity as bad. As a result peers may choose not to accept funds from those addresses. If these entities gain support of the core developers then a blacklist of addresses can be hard-coded into the Bitcoin core software. Coin tainting can be used to incorporate measures of accountability in Bitcoin, but can also lead to abuses of the system.

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Secure storage of Bitcoin private keys

by Albert Szmigielski Bitcoins on the Bitcoin network are controlled by private keys. Only the entity in control of a given private key behind some bitcoins can sign the ownership of those bitcoins to another entity. That is why it is of utmost importance to store the private keys securely to avoid theft of them and as a result theft of the funds on the blockchain. Hardware wallets One way to store keys in a secure manner is by the use of dedicated hardware wallets. Such wallets offer good security against cyber-attacks as they are disconnected from the internet most (or all) of the time. The wallets are tamper resistant, and they do not rely on any third party to

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Bitcoin and blockchains are here to stay.

by Albert Szmigielski This post will argue why Bitcoin, blockchains, and blockchain-based applications are here to stay and thrive. Bitcoin The Bitcoin network and ecosystem is enormous. The computational power of the Bitcoin network is mind boggling (around 600 Petahashes per second as of Dec 2015). The amount of investment in the Bitcoin ecosystem is already in the Billions. Currently Bitcoin’s market cap is only around five billion US dollars, but this is a lot for a peer-to-peer, open source project. Bitcoin also solves a problem that has eluded people for quite some time, how to send money cheaply, efficiently, and quickly? The services that exist now do not have any of these traits. Just ask anyone who routinely sends

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Countermeasures to information leakage of Bloom Filters in Bitcoin lightweight clients

by Albert Szmigielski Keep the state about the seed. When a device restarts and uses a different seed (as well as other filter information) to create a new bloom filter, the probability of having the same false positives is very low. Therefore an adversary with access to two bloom filters from the same client, created with different seeds can easily check if addresses appear in both filters. If so, they are addresses of the SPV client, otherwise they are false positives. Keeping the state about the seed would not give that advantage to the adversary. When an SPV client restarts it will create the exact same filter. Disadvantages The need to store a seed and some other information about the

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Bitcoin Basics #002 – Blockchain

By Albert Szmigielski This post will attempt to describe in simple terms what a blockchain is. Append only Data Structure A blockchain is a data structure. What is a data structure you ask. Simply put, a container to store some data. What is so special about the blockchain then? The blockchain is an append only data structure, which means we can add to it, but never delete from it. This simple fact opens up vast possibilities. All kinds of record keeping is possible with blockchains, including a ledger of accounts. What about the chain part? Yes, the chain is very important in the blockchain. Data is stored in bunches, just because it is more efficient that way. Those bunches are

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