Guttmann The Bitcoin Bible

All you need to know about bitcoins
1. Auflage 2013
ISBN: 978-3-7322-6580-0
Verlag: BoD - Books on Demand
Format: EPUB
Kopierschutz: 6 - ePub Watermark

E-Book, Englisch, 248 Seiten

The editor of The Bitcoin Bible, Benjamin Guttmann, is currently among the leading experts regarding crypto currencies in general and Bitcoins specifically. He is a journalist, concentrating mainly on politics and economic topics. The book consists partly of his own analysis and insight about Bitcoin and partly of articles collected from the most prominent and knowledgeable experts and authors and media on this topic.

Autoren/Hrsg.

Guttmann, Benjamin

Leseproben

7

THE GHOST OF BITCOIN

Charlie Hall @Charlie_L_Hall

on September 04, 2013 at 12:10p

ANTI-BITCOIN

In search of Satoshi Nakamoto, the man behind the most famous virtual currency, Polygon finds a harrowing digital economy only a gamer could love.

Satoshi Nakamoto doesn’t exist. Or, at least, if he does, he’s one of the rare modern individuals who is practically impossible to locate.

Nakamoto is the creator of Bitcoin. Over the years since the virtual currency’s inception, there have been several quixotic expeditions to find him. Some have been more thorough than others.

Investigators have alternately concluded that he (for the sake of argument) is either an economic sociologist from Finland, an American financial speculator, a student in Dublin or a confabulation of one or more computer scientists. Some theories suggest the pseudonym is an accretion of the names of four corporations: Samsung, Toshiba,Nakamichi, and Motorola.

These theories can’t all be right. They are, quite likely, all wrong.

In a world where anonymity is no longer expected, where privacy is on the way out, this person (or persons) has kept their true identity secret. Even Osama Bin Laden was eventually found. And yet, so far, not Nakamoto. This person is a modern myth.

Polygon set out to find Nakamoto anyway.

The journey began with a small set of clues. Nakamoto published a document in 2008,a whitepaper describing Bitcoin. From it, we can see that his prose is British, his tone is affluent and his name is Japanese.

Looking closer, we can see that at the beginning of that document Nakamoto lists his contact information: a GMX. com address. GMX.com is a free, private, encrypted email service. Short a shady friend at the NSA, this address was useless.

Or was it?

In that same 2008 paper, Nakamoto described Bitcoin as a solution to a problem in the way modern financial institutions manage transactions.

“Commerce on the Internet,” Nakamoto wrote, “has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. But these same institutions have to protect themselves from fraud, which means they must retain the ability to reverse fraudulent transactions on behalf of themselves and their customers.”

You must trust the institution handling your money, and that trust is expensive for an institution to maintain.

Nakamoto suggested Bitcoin was the solution. Transactions in Bitcoin are “non-reversable [sic].” Instead of trust, trade in Bitcoin is based on “cryptographic proof.” The same kinds of algorithms that protected Nakamoto’s identity at GMX.com are what make his peculiar brand of money so unique.

The calm voice and reassuring smile of the teller at the bank, the promise that “I’ll take care of that for you” should something go wrong, is replaced in the Bitcoin economy by the cold calculation of math. Incredibly complex math.

The effect this has on how money flows is revolutionary. Instead of wiring money between accounts, allowing banks and other financial institutions to mediate the exchange, trading Bitcoins is as simple as handing someone a chunk of gold. It is a teleporter for money; smash value into your end of the internet and it squirts out the pipe on the other side of the world. Easy peasy.

In order to follow Nakamoto’s trail any further I would have to learn more about cryptography and the role it played in creating and maintaining the Bitcoin economy. So I decided to call in a favor.

To my knowledge, Eugene Kaspersky, CEO and co-founder of Kaspersky Lab (an internet security company), is the only graduate of a KGB-sponsored university to follow me on Twitter. I asked if, with his background in cryptography and computer security, he could help me find Nakamoto. He said no, but he knew someone who could.

Stefan Tanase is a senior security researcher in Kaspersky’s employ. Part of what he does for a living is trawl the internet looking for the strangest electronic fish in the sea. Viruses, trojans and worms are a delicacy in Tanase’s line of work, and the most exotic specimens end up in his inbox every day.

Kaspersky told me that Tanase specialized in Bitcoin. Perhaps he could tell me who Nakamoto was.

“I would be proud if I could answer that question,” Tanase said. “The short answer is I have no idea.”

The GMX.com address was, more than likely, the endpoint in a long series of fictitious accounts designed to hide Nakamoto’s true identity. Since they were encrypted it would take something like a court order to open them up for investigation, and Nakamoto hasn’t done anything necessarily wrong.

“Even when we take part in criminal investigations involving federal crime cases, it’s usually limited to analyzing the technical capabilities of the malware. So it’s not necessarily our job to try to track [Nakamoto] down. ... We’re more interested in seeing the bigger trends.”

So without the key to open that email account, it was closed permanently. Oddly enough, Tanase said, that’s how Bitcoins work as well. The system that Nakamoto designed depends on incredibly strong cryptography to lock Bitcoins up. Without something called a “private key,” a series of characters that you punch into a keyboard, a Bitcoin is just a piece of code sitting on a hard drive. And it may not necessarily be your hard drive where your Bitcoin lives.

Due to the nature of cryptography, the private key only works to open the coin and not the other way around. Because of this fact, the code for all the Bitcoins in the world is open to all the participants in the Bitcoin economy. Trade in Bitcoins takes place on all the computers that elect to take part in the trade of Bitcoins through a shared, peer-to-peer network.

Nakamoto wrote in his 2008 paper that a “timestamp server” would “generate computational proof of the chronological order of transactions.” Every Bitcoin that moves is marked, in a way, mathematically so that transactions cannot be forged. This creates an incorruptible chain of transactions. The mathematical opening, closing and spending of these coins is verified by all the computers in this peer-to-peer network simultaneously.

And so I began to imagine Bitcoins not as a pile of physical things, but as a vast ocean of code that has been created by Satoshi Nakamoto. The private keys allow people to reach into that ocean and take only the coins that belong to them, and to transfer that ownership however they desire.

What keeps Stefan Tanase employed is the fact that the growth of this large, peer-to-peer network has created an unprecedented opportunity for cybercriminals to make money of of Bitcoins.

When someone connects their computer to the peer-to-peer Bitcoin network they are yoking their CPU to the grand wheel that grinds out all the math, the cryptography, that makes the trade of Bitcoins work. And for their trouble they occasionally get tipped in Bitcoins.

The process is called “mining” for Bitcoins. Anyone can download a miner, install it on their computer and participate in making the math that underpins the Bitcoin happen, and actually earn Bitcoins in return. Feed a computer electrons, and that computer prints virtual money. The more computers involved, the faster money gets generated.

Tanase said this has given cybercriminals the world over something to do with all the computers they have infected with malware, collections of machines called “botnets.” When a botnet isn’t busy participating in a denial-of-service attack on a major website or sending faux-Nigerian money laundering spam, it can be used to mine Bitcoins.

At this moment there are thousands of botnets, big and small, hundreds of thousands of computers earning cybercriminals Bitcoins. High-end graphics cards are better at mining than high-end CPUs, so gaming PCs are actually better at mining coins than others.

“If you try mining yourself,” Tanase said, “and see how good you do with one really good graphics card, and then if you check out the statistics of one mining pool and you see that the top contributors, the top people earning Bitcoin on their specific mining pools, you get the feeling that most of them are probably—I would say the vast majority of them—are running botnet mining operations. Because when you see how much revenue they generate it’s really almost totally impossible to do it with real hardware, by buying thousands of graphics cards.”

Because the Bitcoin has become so popular there are actually more honest miners than cybercriminal miners and that, Tanase said, protects the Bitcoin network from being hacked. It is a sort of virtual gold rush, where more people are opening mines every day, lured in by the rising price of the Bitcoin, somewhere north of $100 each today.

But Nakamoto designed the Bitcoin algorithm so that there are only so many Bitcoins to be mined. Just like in California in 1849, there are only so many stakes in the Bitcoin fortune to be claimed. And as the record of Bitcoin transactions grows, the math needed to keep track of them all gets...