A blockchain, such as Bitcoin, is an append-only, secure, transparent, distributed ledger. A fair blockchain is expected to have healthy metrics; high honest mining power, low processing latency, i.e., low wait times for transactions and stable price of consumption, i.e., the minimum transaction fee required to have a transaction processed. As Bitcoin matures, the influx of transactions increases and the block rewards become insignificant. We show that under these conditions, it becomes hard to maintain the health of the blockchain. In Bitcoin, under these mature operating conditions (MOC), the miners would find it challenging to cover their mining costs as there would be no more revenue from merely mining a block. It may cause miners not to continue mining, threatening the blockchain's security. Further, as we show in this paper using simulations, the cost of acting in favor of the health of the blockchain, under MOC, is very high in Bitcoin, causing all miners to process transactions greedily. It leads to stranded transactions, i.e., transactions offering low transaction fees, experiencing unreasonably high processing latency. To make matters worse, a compounding effect of these stranded transactions is the rising price of consumption. Such phenomena not only induce unfairness as experienced by the miners and the users but also deteriorate the health of the blockchain.
We propose BitcoinF transaction processing protocol, a simple, yet highly effective modification to the existing Bitcoin protocol to fix these issues of unfairness. BitcoinF resolves these issues of unfairness while preserving the ability of the users to express urgency and have their transactions prioritized.
The Bitcoin payment system involves two agent types: Users that transact with the currency and pay fees and miners in charge of authorizing transactions and securing the system in return for these fees. Two of Bitcoin's challenges are (i) securing sufficient miner revenues as block rewards decrease, and (ii) alleviating the throughput limitation due to a small maximal block size cap. These issues are strongly related as increasing the maximal block size may decrease revenue due to Bitcoin's pay-your-bid approach. To decouple them, we analyze the "monopolistic auction", showing: (i) its revenue…
In Bitcoin system, transactions are prioritized according to transaction fees. Transactions without fees are given low priority and likely to wait for confirmation. Because the demand of micro payment in Bitcoin is expected to increase due to low remittance cost, it is important to quantitatively investigate how transactions with small fees of Bitcoin affect the transaction-confirmation time. In this paper, we analyze the transaction-confirmation time by queueing theory. We model the transaction-confirmation process of Bitcoin as a priority queueing system with batch service, deriving the mean…
The ability to assess the reputation of a member in a web community is a need addressed in many different ways according to the many different stages in which the nature of communities has evolved over time. In the case of reputation of goods/services suppliers, the solutions available to prevent the feedback abuse are generally reliable but centralized under the control of few big Internet companies. In this paper we show how a decentralized and distributed feedback management system can be built on top of the Bitcoin blockchain
Off-chain transaction channels represent one of the leading techniques to scale the transaction throughput in cryptocurrencies. However, the economic effect of transaction channels on the system has not been explored much until now. We study the economics of Bitcoin transaction channels, and present a framework for an economic analysis of the lightning network and its effect on transaction fees on the blockchain. Our framework allows us to reason about different patterns of demand for transactions and different topologies of the lightning network, and to derive the resulting fees for transacti…
Most public blockchain protocols, including the popular Bitcoin and Ethereum blockchains, do not formally specify the order in which miners should select transactions from the pool of pending (or uncommitted) transactions for inclusion in the blockchain. Over the years, informal conventions or "norms" for transaction ordering have, however, emerged via the use of shared software by miners, e.g., the GetBlockTemplate (GBT) mining protocol in Bitcoin Core. Today, a widely held view is that Bitcoin miners prioritize transactions based on their offered "transaction fee-per-byte." Bitcoin users are…
Mining pools, the main components of the Bitcoin network, dominate the computing resources and play essential roles in network security and performance aspects. Although many existing measurements of the Bitcoin network are available, little is known about the details of mining pool behaviors (e.g., empty blocks, mining revenue and transaction collection strategies) and their effects on the Bitcoin end users (e.g., transaction fees, transaction delay and transaction acceptance rate). This paper aims to fill this gap with a systematic study of mining pools. We traced over 1.56 hundred thousand …
Blockchain is a technology that provides a distributed ledger that stores previous records while maintaining consistency and security. Bitcoin is the first and largest decentralized electronic cryptographic system that uses blockchain technology. It faces a challenge in making all the nodes synchronize and have the same overall view with the cost of scalability and performance. In addition, with miners' financial interest playing a significant role in choosing transactions from the backlog, small fee or small fee per byte value transactions will exhibit more delays. To study the issues related…
As the core technology behind Bitcoin, Blockchain's decentralized, tamper-proof, and traceable features make it the preferred platform for organizational innovation. In current Bitcoin, block reward is halved every four years, and transaction fees are expected to become the majority of miner revenues around 2140. When transaction fee dominates mining rewards, strategic deviations such as Selfish Mining, Undercutting, and Mining Gap could threaten the integrity and security of the Blockchain. This paper proposes a set of Dynamic Transaction Storage (DTS) strategies for maintaining a sustainable…
Bitcoin-NG, a scalable blockchain protocol, divides each block into a key block and many micro blocks to effectively improve the transaction processing capacity. Bitcoin-NG has a special incentive mechanism (i.e. splitting transaction fees to the current and the next leader) to maintain its security. However, this design of the incentive mechanism ignores the joint effect of transaction fees, mint coins and mining duration lengths on the expected mining reward. In this paper, we identify the advanced mining attack that deliberately ignores micro blocks to enlarge the mining duration length to …
Orphan transactions are those whose parental income-sources are missing at the time that they are processed. These transactions are not propagated to other nodes until all of their missing parents are received, and they thus end up languishing in a local buffer until evicted or their parents are found. Although there has been little work in the literature on characterizing the nature and impact of such orphans, it is intuitive that they may affect throughput on the Bitcoin network. This work thus seeks to methodically research such effects through a measurement campaign of orphan transactions …
Bitcoin has become the leading cryptocurrency system, but the limit on its transaction processing capacity has resulted in increased transaction fees and delayed transaction confirmation. As such, it is pertinent to understand and probably predict how transactions are handled by Bitcoin such that a user may adapt the transaction requests and a miner may adjust the block generation strategy and/or the mining pool to join. To this aim, the present paper introduces results from an analysis of transaction handling in Bitcoin. Specifically, the analysis consists of two-part. The first part is an ex…
Lightning Network (LN) is designed to amend the scalability and privacy issues of Bitcoin. It's a payment channel network where Bitcoin transactions are issued off chain, onion routed through a private payment path with the aim to settle transactions in a faster, cheaper, and private manner, as they're not recorded in a costly-to-maintain, slow, and public ledger. In this work, we design a traffic simulator to empirically study LN's transaction fees and privacy provisions. The simulator relies on publicly available data of the network structure and generates transactions under assumptions we a…
The mining of bitcoin is modeled using system dynamics, showing that the past evolution of the network hash rate can be explained to a large extent by an efficient market hypothesis applied to the mining of blocks. The possibility of a decrease in the network hash rate from the next halving event (May 2020) is exposed, implying that the network may be close to 'peak hash', if the price of bitcoin and the revenues from transaction fees will remain at approximately the present level.
The digital currency Bitcoin has had remarkable growth since it was first proposed in 2008. Its distributed nature allows currency transactions without a central authority by using cryptographic methods and a data structure called the blockchain. In this paper we use the no-cloning theorem of quantum mechanics to introduce Quantum Bitcoin, a Bitcoin-like currency that runs on a quantum computer. We show that our construction of quantum shards and two blockchains allows untrusted peers to mint quantum money without risking the integrity of the currency. The Quantum Bitcoin protocol has several …
Off-Chain transactions allow for the immediate transfer of Cryptocurrency between two parties, without delays or unavoidable transaction fees. Such capabilities are critical for mainstream Cryptocurrency adaption. They allow for the "Coffee-Coin Criteria"; under which a customer orders a coffee and pays for that coffee in bitcoins. This is not possible with On-Chain transactions today. Unfortunately, all existing Off-Chain transaction protocols are notoriously unreliable The current generation of third-party facilitators are vulnerable to hacker-based attacks. As Mt. Gox tragically demonstrate…
Bitcoin is a peer-to-peer cryptographic currency system. Since its introduction in 2008, Bitcoin has gained noticeable popularity, mostly due to its following properties: (1) the transaction fees are very low, and (2) it is not controlled by any central authority, which in particular means that nobody can "print" the money to generate inflation. Moreover, the transaction syntax allows to create the so-called contracts, where a number of mutually-distrusting parties engage in a protocol to jointly perform some financial task, and the fairness of this process is guaranteed by the properties of B…
We present two models of the block chain of Bitcoin in the interactive theorem prover Agda. The first one is based on a simple model of bank accounts, while having transactions with multiple inputs and outputs. The second model models transactions, which refer directly to unspent transaction outputs, rather than user accounts. The resulting blockchain gives rise to a transaction tree. That model is formalised using an extended form of induction-recursion, one of the unique features of Agda. The set of transaction trees and transactions is defined inductively, while simultaneously recursively d…
Mining processes of Bitcoin and similar cryptocurrencies are currently incentivized with voluntary transaction fees and fixed block rewards which will halve gradually to zero. In the setting where optional and arbitrary transaction fee becomes the remaining incentive, Carlsten et al.\ [CCS~2016] find that an undercutting attack can become the equilibrium strategy for miners. In undercutting, the attacker deliberately forks an existing chain by leaving wealthy transactions unclaimed to attract petty complaint miners to its fork. We observe that two simplifying assumptions in [CCS~2016] of fees …
Smart Contracts and transactions allow users to implement elaborate constructions on cryptocurrency blockchains like Bitcoin and Ethereum. Many of these constructions, including operational payment channels and atomic swaps, use a building block called Hashed Time-Locked Contract (HTLC). In this work, we distill from HTLC a specification (HTLC-Spec), and present an implementation called Mutual-Assured-Destruction Hashed Time-Locked Contract (MAD-HTLC). MAD-HTLC employs a novel approach of utilizing the existing blockchain operators, called miners, as part of the design. If a user misbehaves, M…
Blockchain-based cryptocurrencies prioritize transactions based on their fees, creating a unique kind of fee market. Empirically, this market has failed to yield stable equilibria with predictable prices for desired levels of service. We argue that this is due to the absence of a dominant strategy equilibrium in the current fee mechanism. We propose an alternative fee setting mechanism that is inspired by generalized second price auctions. The design of such a mechanism is challenging because miners can use any criteria for including transactions and can manipulate the results of the auction a…
Background: During the last years, there has been a lot of discussion and estimations on the energy consumption of Bitcoin miners. However, most of the studies are focused on estimating energy consumption, not in exploring the factors that determine it. Goal: To explore the factors that determine maximum energy consumption of Bitcoin miners. In particular, analyze the limits of energy consumption, and to which extent variations of the factors could produce its reduction. Method: Estimate the overall profit of all Bitcoin miners during a certain period of time, and the costs (including energy) …
Popular cryptocurrencies continue to face serious scalability issues due to their ever-growing blockchains. Thus, modern blockchain designs began to prune old blocks and rely on recent snapshots for their bootstrapping processes instead. Unfortunately, established systems are often considered incapable of adopting these improvements. In this work, we present CoinPrune, our block-pruning scheme with full Bitcoin compatibility, to revise this popular belief. CoinPrune bootstraps joining nodes via snapshots that are periodically created from Bitcoin's set of unspent transaction outputs (UTXO set)…
The Lightning Network promises to alleviate Bitcoin's known scalability problems. The operation of such second layer approaches relies on the ability of participants to turn to the blockchain to claim funds at any time, which is assumed to happen rarely. One of the risks that was identified early on is that of a wide systemic attack on the protocol, in which an attacker triggers the closure of many Lightning channels at once. The resulting high volume of transactions in the blockchain will not allow for the proper settlement of all debts, and attackers may get away with stealing some funds. Th…
Blockchain-based cryptocurrencies, such as Bitcoin, have seen on the rise in their popularity and value, making them a target to several forms of Denial-of-Service (DoS) attacks, and calling for a better understanding of their attack surface from both security and distributed systems standpoints. In this paper, and in the pursuit of understanding the attack surface of blockchains, we explore a new form of attack that can be carried out on the memory pools (mempools) and mainly targets blockchain-based cryptocurrencies. We study this attack on Bitcoin mempool and explore the attack effects on t…
In Proof-of-Work blockchains, difficulty algorithms serve the crucial purpose of maintaining a stable transaction throughput by dynamically adjusting the block difficulty in response to the miners' constantly changing computational power. Blockchains that may experience severe hash rate fluctuations need difficulty algorithms that quickly adapt the mining difficulty. However, without careful design, the system could be gamed by miners using coin-hopping strategies to manipulate the block difficulty for profit. Such miner behavior results in an unreliable system due to the unstable processing o…
Bitcoin's success as a cryptocurrency enabled it to penetrate into many daily life transactions. Its problems regarding the transaction fees and long validation times are addressed through an innovative concept called the Lightning Network (LN) which works on top of Bitcoin by leveraging off-chain transactions. This made Bitcoin an attractive micro-payment solution that can also be used within certain IoT applications (e.g., toll payments) since it eliminates the need for traditional centralized payment systems. Nevertheless, it is not possible to run LN and Bitcoin on resource-constrained IoT…
Blockchain is a decentralized transaction and data management solution, the technological weapon-of-choice behind the success of Bitcoin and other cryptocurrencies. As the number and variety of existing blockchain implementations continues to increase, adopters should focus on selecting the best one to support their decentralized applications (dApps), rather than developing new ones from scratch. In this paper we present a framework to aid software architects, developers, tool selectors and decision makers to adopt the right blockchain technology for their problem at hand. The framework expose…
Blockchain is a decentralized transaction and data management solution, the technological leap behind the success of Bitcoin and other cryptocurrencies. As the variety of existing blockchains and distributed ledgers continues to increase, adopters should focus on selecting the solution that best fits their needs and the requirements of their decentralized applications, rather than developing yet another blockchain from scratch. In this paper we present a conceptual framework to aid software architects, developers, and decision makers to adopt the right blockchain technology. The framework expo…
Bitcoin is the first of its kind, a truly decentralized and anonymous cryptocurrency. To realize it, it has developed blockchain technology using the concept of `Proof of Work' (PoW). The miners, nodes responsible for writing transaction databases, solve a cryptographic puzzle to claim the right to write to the database. Though bitcoin and many other relevant cryptocurrencies, such as ether use revolutionary ideas, the main criticism involves computing resources and energy consumption to solve puzzles that have otherwise no use. There are attempts to use the PoW to do something useful, commonl…
Transactions represent a fundamental component in blockchains as they are the primary means for users to change the blockchain state. Current blockchain systems such as Bitcoin and Ethereum require users to constantly observe the state changes of interest or the events taking place in a blockchain and requires the user to explicitly release the required transactions to respond to the observed events in the blockchain. This paper proposes EventWarden, a decentralized event-driven proxy service for users to outsource transactions in Ethereum-like blockchains. EventWarden employs a novel combinat…
Proof-of-work blockchains must implement a difficulty adjustment algorithm (DAA) in order to maintain a consistent inter-arrival time between blocks. Conventional DAAs are essentially feedback controllers, and as such, they are inherently reactive. This approach leaves them susceptible to manipulation and often causes them to either under- or over-correct. We present Bonded Mining, a proactive DAA that works by collecting hash rate commitments secured by bond from miners. The difficulty is set directly from the commitments and the bond is used to penalize miners who deviate from their commitme…
Permissionless blockchains (e.g., Bitcoin, Ethereum, etc) have shown a wide success in implementing global scale peer-to-peer cryptocurrency systems. In such blockchains, new currency units are generated through the mining process and are used in addition to transaction fees to incentivize miners to maintain the blockchain. Although it is clear how currency units are generated and transacted on, it is unclear how to use the infrastructure of permissionless blockchains to manage other assets than the blockchain's currency units (e.g., cars, houses, etc). In this paper, we propose a global asset…
After the success of the Bitcoin blockchain, came several cryptocurrencies and blockchain solutions in the last decade. Nonetheless, Blockchain-based systems still suffer from low transaction rates and high transaction processing latencies, which hinder blockchains' scalability. An entire class of solutions, called Layer-1 scalability solutions, have attempted to incrementally improve such limitations by adding/modifying fundamental blockchain attributes. Recently, a completely different class of works, called Layer-2 protocols, have emerged to tackle the blockchain scalability issues using un…
Ethereum is the largest public blockchain by usage. It applies an account-based model, which is inferior to Bitcoin's unspent transaction output model from a privacy perspective. Due to its privacy shortcomings, recently several privacy-enhancing overlays have been deployed on Ethereum, such as non-custodial, trustless coin mixers and confidential transactions. In our privacy analysis of Ethereum's account-based model, we describe several patterns that characterize only a limited set of users and successfully apply these quasi-identifiers in address deanonymization tasks. Using Ethereum Name S…
