On-Chain Vote Buying and the Rise of Dark DAOs

blockchain | cybercrime | hardware | identity | issues/conflicts | papers | Research Notes | trust

Dark DAO operators can further muddy the waters by launching attacks on choices the vote buyers actually oppose as potential false flag operations or smear campaigns; for example, Bob could run a Dark DAO working in Alice’s favor to delegitimize the outcome of an election Bob believes he is likely to lose.  The activation threshold, payout schedule, full attack strategy, number of users in the system, total amount of money pledged to the system, and more can be kept private or revealed either selectively or globally, making such DAOs ultimately tunable for structured incentive changes.Because the organization exists off-chain, no cartel of block producers or other system participants can detect, censor, or stop the attack.

Source: On-Chain Vote Buying and the Rise of Dark DAOs

A 200-Year-Old Idea Offers a New Way to Trace Stolen Bitcoins | WIRED

bitcoin | cybercrime | justice | law

Tracing bitcoins has long been easy in theory: The blockchain’s public record allows anyone to follow the trail of coins from one address to another as they’re spent or stolen, though not always to identify who controls those address. But that tracing becomes far dicier when Bitcoin users put their coins through a “mix” or “laundry” service—sometimes in the form of an unregulated exchange—that jumbles up many people’s coins at a single address, and then returns them to confuse anyone trying to trace their path. In other cases, users bundle together their transactions through a process called Coinjoin that gives each spender and recipient deniability about where their money came from or ended up.For companies like Chainanalyis, Coinfirm, and Ciphertrace that offer to trace stolen or “tainted” coins—and who generally don’t make their methodology public— that leaves limited options. They can either treat any coin that comes out of a mix that includes tainted coins as fully “dirty,” or more reasonably, average out the dirt among all the resulting coins; put one stolen coin into a mix address with nine legit ones, and they’re all 10 percent tainted. Some academics have called this the “haircut” method.But Anderson argues that haircut tracing quickly leads to enormous parts of the blockchain being a little bit tainted, with no clear answers about how to treat an infinitesimally unclean coin. Often the fraction can be so small it has to be rounded up, leading to artificial increases in the total “taint” recorded.But when Anderson mentioned this problem in January to David Fox, a professor of law at Edinburgh Law School, Fox pointed out that British law already provides a solution: An 1816 precedent known as Clayton’s Case, which dealt with who should be paid back from the remaining funds of a bankrupted financial firm. The answer, according to the presiding judge, was that whoever put their money in first should take it out first. The resulting first-in-first-out—or FIFO—rule became the standard way under British law to identify whose money is whose in mixed-up assets, whether to resolve debts or reclaim stolen property.

Source: A 200-Year-Old Idea Offers a New Way to Trace Stolen Bitcoins | WIRED

Legalised marijuana on the blockchain concept was awarded by police in the public safety track of the blockchain hackathon 2018! 

applications | blockchain | cybercrime | Research Notes

We won! Legalised marijuana on the blockchain concept was awarded by police in the public safety track of the blockchain hackathon 2018! #bc1718 #TNO @ministerieJenV @VNGemeenten @gem_groningen @blockchaingers http://www.blockchaingers.org

The Regulation of Cryptocurrencies – between a Currency and a Financial Product by Hadar Yoana Jabotinsky :: SSRN

cryptocurrencies | cybercrime | law | papers | regulation | Research Notes

As cryptocurrencies gain popularity, the issue of how to regulate them becomes more pressing. The attractiveness of cryptocurrencies is due in part to their decentralized, peer-to-peer structure. This makes them an alternative to national currencies which are controlled by central banks. Given that these cryptocurrencies are already replacing some of the “regular” national currencies and financial products, the question then arises: should they be regulated? And if so, how? This paper draws the legal distinction between cryptocurrencies which are in fact currency and those which are securities disguised as currency. It further suggests that in cases where a token is indeed a security, regular securities regulation should apply. In all other cases anti-fraud measures should be in place in order to protect investors. Further regulation should only be put in place if the cryptocurrency starts increasing systemic risk in the general financial system.

Source: The Regulation of Cryptocurrencies – between a Currency and a Financial Product by Hadar Yoana Jabotinsky :: SSRN

Legislative Regulations to Prevent Terrorism and Organized Crime from Using Cryptocurrencies and Its Effect on the Economy and Society by Stephan Breu, Theodor G. Seitz :: SSRN

cryptocurrencies | cybercrime | papers | regulation | Research Notes

First it has to be stated that Cryptocurrencies are mostly used for legal transfers between legitimate partners and are becoming more and more popular in our society. Any heavy regime of new regulations would make all transactions costlier and less convenient. Such negative economic impact is opposing the need of monitoring the financing structures of organized criminal and terrorist organisations. With the increasing importance of cryptocurrencies, a completely new field of complex problems is arising through the implied anonymity and complexity or sheer impossibility to track transfers in the dark net. As regulations in this new financial market will be difficult to enforce, it is necessary to establish international cooperation and capacity building to implement some possibilities for law-enforcement and intelligence entities to monitor the illegal parts of the capital flowing in these systems. To solve this situation, the focus should lie on the attempts to make the risk of detection of such transfers higher for the parties involved. Without interfering too strongly with the new financing system developing, this process asks for improved compliance and cooperation on all levels and capacities.

Source: Legislative Regulations to Prevent Terrorism and Organized Crime from Using Cryptocurrencies and Its Effect on the Economy and Society by Stephan Breu, Theodor G. Seitz :: SSRN

A Fistful of Bitcoins: Characterizing Payments Among Men with No Names | April 2016 | Communications of the ACM

bitcoin | cryptocurrencies | cybercrime | papers | quantitative analysis | Research Notes | tools

Bitcoin is a purely online virtual currency, unbacked by either physical commodities or sovereign obligation; instead, it relies on a combination of cryptographic protection and a peer-to-peer protocol for witnessing settlements. Consequently, Bitcoin has the unintuitive property that while the ownership of money is implicitly anonymous, its flow is globally visible. In this paper we explore this unique characteristic further, using heuristic clustering to group Bitcoin wallets based on evidence of shared authority, and then using re-identification attacks (i.e., empirical purchasing of goods and services) to classify the operators of those clusters. From this analysis, we consider the challenges for those seeking to use Bitcoin for criminal or fraudulent purposes at scale.

Source: A Fistful of Bitcoins: Characterizing Payments Among Men with No Names | April 2016 | Communications of the ACM

Price Manipulation in the Bitcoin Ecosystem – ScienceDirect

bitcoin | cryptocurrencies | cybercrime | finance | Research Notes

To its proponents, the cryptocurrency Bitcoin offers the potential to disrupt payment systems and traditional currencies. It has also been subject to security breaches and wild price fluctuations. This paper identifies and analyzes the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired. During both periods, the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity. Based on rigorous analysis with extensive robustness checks, the paper demonstrates that the suspicious trading activity likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.KeywordsBitcoincryptocurrenciesfraudexchange rate manipulationJEL classification

Source: Price Manipulation in the Bitcoin Ecosystem – ScienceDirect