Cryptocurrencies, Blockchains,
and Smart Contracts
By Arvind Narayanan
and Andrew Miller
Research into cryptocurrencies has a
decades-long pedigree in academia,
but decentralized cryptocurrencies
(starting with Bitcoin in 2009) have
taken the world by storm. Aside from
being a payment mechanism “native
to the Internet,” the underlying blockchain technology is touted as a way
to store and transact everything from
property records to certificates for art
and jewelry. Much of this innovation
happens in the broader hobbyist and
entrepreneurial communities (with
increasing interest from established
industry players); Bitcoin itself came
from outside academia. Researchers,
however, have embraced cryptocurrencies with gusto and have contributed important insights.
Here we have selected three prominent areas of inquiry from this young
field. Our selections of research papers
within each area focus on relevance to
practitioners and avoid such areas as
scalability that are of interest primarily to cryptocurrency designers. Overall, the research not only exposes important limitations and pitfalls of the
technology, but also suggests ways to
overcome them.
Anonymity, Privacy,
and Confidentiality
Meiklejohn, S. et al.
A fistful of Bitcoins: Characterizing payments
among men with no names. In Proceedings of
the Internet Measurement Conference, 2012,
127–140. https://www.usenix.org/system/files/
login/articles/03_meiklejohn-online.pdf.
Bitcoin exists in a state of tension be-
tween anonymity (in the sense that real
identities are not required to use the sys-
tem) and traceability (in that all transac-
tions are recorded on the blockchain,
which is a public, immutable, and
global ledger). In practice, the privacy
of vanilla Bitcoin comes from obscurity:
users may create as many addresses as
they like and shuffle their coins around,
Anonymity in cryptocurrencies is a
matter of not just personal privacy, but
also confidentiality for enterprises. Giv-
en advanced transaction graph analysis
techniques, without precautions, the
blockchain could easily reveal cash flow
and other financial details.
Sasson, E.B. et al.
Zerocash: Decentralized anonymous payments
from Bitcoin. In Proceedings of the IEEE
Symposium on Security and Privacy, 2014.
http://zerocash-project.org/media/pdf/
zerocash-extended-20140518.pdf.
There are many different proposals
for improving the privacy of cryptocurrencies. These range from Bitcoin-compatible methods of “mixing” (or
“joining”) coins with each other, to designs for entirely new cryptocurrency
protocols that build in privacy from
the beginning. Perhaps the most radical proposal is Zerocash, an alternative
cryptocurrency design that uses cut-ting-edge cryptography to hide all information from the blockchain except
for the existence of transactions; each
transaction is accompanied by a cryptographic, publicly verifiable proof of
its own validity. Roughly, the proof ensures that the amount being spent is
no more than the amount available to
spend from that address. The paper is
long and intricate, and the underlying
mathematical assumptions are fairly
new by cryptographic standards. But
this fact itself is food for thought: to
what extent does the security of a cryptocurrency depend on the ability to
comprehend its workings?
Endpoint Security
The Achilles’ heel of cryptocurrencies
has been the security of endpoints, or
the devices that store the private keys
that control one’s coins. The cryptocurrency ecosystem has been plagued
by thefts and losses resulting from
lost devices, corrupted hard drives,
malware, and targeted intrusions.
Unlike fiat currencies, cryptocurrency
theft is instantaneous, irreversible,
and typically anonymous.
Bitcoin itself
came from
outside academia.
Researchers,
however, have
embraced
cryptocurrencies
with gusto and
have contributed
important insights.