Bitfury Group

This white paper focuses on the existing tangling techniques of “shared send” transactions and presents an approach to detect usage of mixing schemes.

Digital asset management is one of promising applications of blockchain technology. Blockchains could provide principal disintermediation between digital asset issuers,application developers and consumers and decouple tasks related to asset management,such as issuance,transaction processing,securing users’ funds and establishing users’ identities. This paper outlines basic components of blockchain-based asset ledgers,as well as their use cases for financial services and for emerging Internet of Things and consumer-to-consumer markets. We describe existing and prospective deployment models for asset ledgers,including multi-asset blockchains,colored coin and metacoin protocols. This paper focuses primarily on Bitcoin-based services and,to a lesser degree,on public blockchains in general.

This white paper studies the two major incentive mechanisms which provide for the security and immutability of the Bitcoin blockchain: block rewards and transaction fees. We examine the role such incentives play in providing the resilience of the Bitcoin blockchain to blockchain reorganization and denial of service attacks,and the sources of blockchain security in the context of emerging off-chain payment methods. Machine-to-machine / Internet of Things payments are also examined due to the enabling impact blockchain technology could have in organizing the decentralized economy. Lastly,we present a methodology for estimating the aggregate transaction fees over the Bitcoin network in the medium term based on existing and emerging Bitcoin applications.

Blockchain-based solutions are one of the major areas of research for financial institutions and in other applications across the globe. There is currently an ongoing debate whether the existing blockchain-based systems (such as Bitcoin and other cryptocurrencies) can be utilized as is in proprietary contexts,and whether their openness and censorship resistance are fitting properties in this case. We provide arguments for the use of permissionless blockchains and open blockchain protocols in creating ledgers and registries,devoting particular attention to the Bitcoin blockchain as the most commercially successful and secure permissionless blockchain. We study potential applications of permissionless chains in proprietary environments,such as colored coins,peer-to-peer payment channels and transaction processing by known validators.

Blockchain-based solutions are one of the major areas of research for institutions,particularly in the financial and the government sectors. There is little disagreement that backbone technologies currently used in these sectors are outdated and need an overhaul to conform to the needs of the times. Distributed or decentralized ledgers in the form of blockchains are one of the most discussed potential solutions to the stated problem. We provide a description of permissioned blockchain systems that could be used in creating secure ledgers or timestamped registries. We contend that the blockchain protocol and data should be accessible to end users to provide a higher level of decentralization and transparency and argue that proof of work could be effectively used in permissioned blockchains as a means of providing and diversifying security.

Proof of stake is a consensus mechanism for digital currencies that is an alternative to proof of work used in Bitcoin. The main declared advantages of proof of stake approaches are the absence of expensive computations and hence a lower entry barrier for block generation rewards. In this report,we examine the pros and cons of both consensus systems and show that existing implementations of proof of stake are vulnerable to attacks which are highly unlikely in Bitcoin and proof of work approaches in general.

We propose a mathematical formalism for the voting process in Bitcoin ecosystem. This formalism can be used to algorithmically determine the best value of a certain parameter (e.g.,a block size limit) which will be considered appropriate by all voters. The proposed approach is aimed to clarify vagueness of some proposed voting processes that potentially allows a party with marginal voting power to dictate their conditions to the rest of the network. To solve the problem,we introduce a non-negative dissatisfaction function and minimize its value summed over all votes. The value of the block size limit (and,potentially,other parameters of the protocol) found this way will satisfy voters provided the dissatisfaction function is chosen appropriately.

Plans of block size increase are a subject of a heated debate in the Bitcoin community. The subject has gained increasing attention since the beginning of 2015,when the size of blocks started to approach the current hard limit of one megabyte. We study arguments or and against block size increase,and we analyze existing proposals by influential Bitcoin developers to increase the block size limit.