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Privacy in Bitcoin Transactions: New Challenges from Blockchain Scalability Solutions

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Modeling Decisions for Artificial Intelligence (MDAI 2016)

Part of the book series: Lecture Notes in Computer Science ((LNAI,volume 9880))

Abstract

Bitcoin has emerged as the most successful cryptocurrency since its appearance back in 2009. However, its main drawback to become a truly global payment system is its low capacity in transaction throughput. At present time, some ideas have been proposed to increase the transaction throughput, with different impact on the scalability of the system. Some of these ideas propose to decouple standard transactions from the blockchain core and to manage them through a parallel payment network, relegating the usage of the bitcoin blockchain only to transactions which consolidate multiple of those off-chain movements. Such mechanisms generate new actors in the bitcoin payment scenario, the Payment Service Providers, and new privacy issues arise regarding bitcoin users. In this paper, we provide a comprehensive description of the most relevant scalability solutions proposed for the bitcoin network and we outline its impact on users’ privacy based on the early stage proposals published so far.

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Notes

  1. 1.

    Notice that the terms public key, address or bitcoin account refer to the same concept.

  2. 2.

    Notice that in Fig. 1, there are two input addresses that are exactly the same which indicates that bitcoins have arrived to this bitcoin account in two separate transactions.

  3. 3.

    A transaction is identified in the bitcoin system by its hash value.

  4. 4.

    Although this is the standard form of bitcoin verification for regular bitcoin transfer transactions, the verification of a transaction can be much more complex and is based on the execution of a stack-based scripting language (more details can be found in Chap. 5 of [2]).

  5. 5.

    Note that the non-modifiable property of the blockchain implies that bitcoin payments are non reversible.

  6. 6.

    Notice that the value of the target determines the difficulty of the mining process. Bitcoin adjusts the target value depending on the hash power of the miners in order to set the throughput of new blocks to 1 every 10 min (in mean).

  7. 7.

    The amount of a generation transaction is not constant and it is determined by the bitcoin system. Such value, started in 50 bitcoins, is halved every four years, fixing asymptotically to 21 millions the total number of bitcoins that will ever be created.

  8. 8.

    PayPal Q1 2016 Results [7] reported handling 1.41B payment transactions, which leads to an estimated \(1.41B / 4 / 30 / 24 / 60 / 60 = 136\) transactions per second.

  9. 9.

    https://github.com/bitcoin/bitcoin/blob/a6a860796a44a2805a58391a009ba22752f64e32/src/consensus/consensus.h#L9.

  10. 10.

    https://github.com/bitcoin/bitcoin/commit/a30b56ebe76ffff9f9cc8a6667186179413c6349.

  11. 11.

    https://github.com/bitcoin/bitcoin/commit/8c9479c6bbbc38b897dc97de9d04e4d5a5a36730#diff-118fcbaaba162ba17933c7893247df3aR1421.

  12. 12.

    https://blockchain.info/block-height/79400.

  13. 13.

    Information from http://coinmarketcap.com/ on June 17th, 2016.

  14. 14.

    https://www.torproject.org/.

  15. 15.

    It is difficult to predict at present time whether users will maintain multiple payment channels with multiple payment service providers but multiple channels could be not viable depending on the fees needed to open and close those channels.

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Acknowledgments

This work was partially supported by the Spanish Ministerio funds under grant MINECO/TIN2014-55243-P and FPU-AP2010-0078, and through the Catalan Government funded project AGAUR/2014-SGR-691.

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Authors and Affiliations

  1. Dept. d’Enginyeria de la Informació i les Comunicacions, Universitat Autònoma de Barcelona, 08193, Bellaterra, Catalonia, Spain

    Jordi Herrera-Joancomartí & Cristina Pérez-Solà

Authors
  1. Jordi Herrera-Joancomartí
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  2. Cristina Pérez-Solà
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Corresponding author

Correspondence to Jordi Herrera-Joancomartí .

Editor information

Editors and Affiliations

  1. University of Kövde , Skövde, Sweden

    Vicenç Torra

  2. Toho Gakuen , Kunitachi, Tokyo, Japan

    Yasuo Narukawa

  3. Enginyeria de la Informacio I de les Com, Univ Autonoma de Barcelona, Bellaterra, Spain

    Guillermo Navarro-Arribas

  4. Universitat d'Andorra , Sant Julià de Lòria, Andorra

    Cristina Yañez

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Herrera-Joancomartí, J., Pérez-Solà, C. (2016). Privacy in Bitcoin Transactions: New Challenges from Blockchain Scalability Solutions. In: Torra, V., Narukawa, Y., Navarro-Arribas, G., Yañez, C. (eds) Modeling Decisions for Artificial Intelligence. MDAI 2016. Lecture Notes in Computer Science(), vol 9880. Springer, Cham. https://doi.org/10.1007/978-3-319-45656-0_3

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  • DOI: https://doi.org/10.1007/978-3-319-45656-0_3

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