134       number belongs to Alice and Alice hasn’t already spent

   134       number belongs to Alice and Alice hasn't already spent

   241 would now be in the ``posession'' of two unspend Bitcoin

   241 would now be in the ``possession'' of two unspend Bitcoin

   519 

   519 \ldots

   520 

   521 \lstinputlisting[language=Scala]{../slides/msg}

   522 

   523 \noindent

   524 The hash in Line 1 is the has of all the data that follows. It

   525 is a kind of serial number for the transaction. Line 2

   526 contains a version number. Line 3 and 4 specify how many

   527 incoming transactions are combined and how many outgoing

   528 transactions there are. In our example there are 1 each. Line

   529 5 specifies a lock time for when the transaction is supposed

   530 to become active---this is usually set to 0 to become active

   531 immediately. Line 6 specifies the size of the message; it has

   532 nothing to do with the Bitcoins that are transferred. Lines 7

   533 to 11 specify where the Bitcoins in the transaction are coming

   534 from. The has in line 9 specifies the incoming transaction and

   535 the \pcode{n} in Line 10 specifies which output of the

   536 transaction is referred to. The signature in line 11 specifies

   537 the address (public key $K^{pub}$) from where the Bitcoins are

   538 taken and the digital signature of the address, that is

   539 $\{K^{pub}\}_{K^{priv}}$. Lines 12 to 15 specify the value of

   540 the first outgoing transaction. In this case 0.319 Bitcoins.

   541 The hash in Line 14 specifies the address to where the

   542 Bitcoins are transferred.

   543  

   544 \ldots

   545 

   546 \subsubsection*{Anonymity and Government Meddling}

   547 

   548 One question one often hears is how anonymous is it actually

   549 to pay with Bitcoins? Paying with paper money in the past was

   550 quite an anonymous act (unlike paying with creditcards), but

   551 this has changed nowadays. You cannot come to a bank anymore

   552 with a suitcase full of money and try to open a bank account.

   553 Strict money laundering and taxation laws mean that not even

   554 Swiss banks are prepared to take such money and open a bank

   555 account. With Bitcoins the situation is different, but I fully

   556 agree with the statement by Nielsen from the blog article I

   557 referenced at the beginning:

   558 

   559 \begin{quote}\it{}``Many people claim that Bitcoin can be used

   560 anonymously. This claim has led to the formation of

   561 marketplaces such as Silk Road (and various successors), which

   562 specialize in illegal goods. However, the claim that Bitcoin

   563 is anonymous is a myth. The block chain is public, meaning

   564 that it’s possible for anyone to see every Bitcoin transaction

   565 ever. Although Bitcoin addresses aren't immediately associated

   566 to real-world identities, computer scientists have done a

   567 great deal of work figuring out how to de-anonymise

   568 `anonymous' social networks. The block chain is a marvellous

   569 target for these techniques. I will be extremely surprised if

   570 the great majority of Bitcoin users are not identified with

   571 relatively high confidence and ease in the near future.''

   572 \end{quote}

   573 

   574 \noindent The only thing I can add is that with Bitcoins we

   575 will have even more fun with many more confessions like the

   576 infamous ``I did not

   577 inhale''.\footnote{\url{www.youtube.com/watch?v=Bktd_Pi4YJw}}

   578 The whole point of the blockchain is that it public and will

   579 always be. There are some precautions that are suggested, like

   580 to use a new public-private key pair for every new transaction

   581 or access Bitcoin only through the Tor network. But the

   582 transactions in Bitcoins are designed such that they allow one

   583 to combine incoming transactions. In such cases we know they

   584 must have been made by the single person who new the

   585 corresponding private keys. So using different public-private

   586 keys for each transaction, might not make the de-anonymisation

   587 task much harder. And the point about de-anonymising

   588 `anonymous' social networks is that the information is

   589 embedded into the structure of the transition graph. And this

   590 cannot be erased with Bitcoins.

   591 

   592 Finally, what are the options for a typical western government

   593 to meddle with Bitcoins? This is of course one feature the

   594 proponents of Bitcoins tout: namely that there aren't any

   595 options. In my opinion this is too naive and far from the

   596 truth. Let us assume some law enforcement agencies would not

   597 have been able to uncover the baddies from Silk Road 2.0 (they

   598 have done so by uncovering the Tor network, and incredible

   599 feat on its own). Would a government have stopped?

   600 

   601 \begin{itemize}

   602 \item The government could compel ``mayor players'' to

   603       blacklist Bitcoins (for example at exchanges). This

   604       would impinge on what is called \emph{fungibility} of

   605       Bitcoins and make them much less attractive to baddies.

   606       This blacklisting can be easily done ``whole-sale'' and

   607       therefore be really be an attractive target for

   608       governments \& Co.      

   609 \item They could attempt to coerce developer community of the

   610       Bitcoin tools. While this might be a bit harder, we know

   611       certain governments are ready to take such actions (we

   612       have seen this with Lavabit, just that the developers

   613       there refused to play ball and shut down their complete

   614       operation).

   615 \item The government could also put pressure on mining pools

   616       in order to blacklist transactions from baddies. Or be

   617       big a miner itself. Given the gigantic facilities that

   618       are built for institutions like the NSA

   619       

   620       \begin{center}

   621       \includegraphics[scale=0.04]{../pics/nsautah1.jpg}

   622       \hspace{3mm}

   623       \includegraphics[scale=0.031]{../pics/nsautah2.jpg}

   624       \end{center}

   625       

   626       this would not be such a high bar to jump over.

   627 \end{itemize} 

   628 

   629 \noindent Finally the government would potentially not need to

   630 follow up with such threads. Just the rumour that it would,

   631 could be enough to get the Bitcoin-house-of-cards to tumble.

   632 Because of all this I would not have too much hope that

   633 Bitcoins are free from government \& Co interference when it

   634 will stand in its way.