This post is the second in a two-portion interview with University of California-San Diego researcher Sarah Meiklejohn on her new study paper, “A Fistful of Bitcoins: Characterizing Payments Among Men With No Names.” Component One particular gives an introduction to her paper and illustrates her findings on anonymity inside the Bitcoin protocol.
Meiklejohn’s paper, “A Fistful of Bitcoins: Characterizing Payments Among Males With No Names,” offers a snapshot of the bitcoin economy as of April 2013.
The bitcoin economy of nowadays appears a bit different than it did in April, back when notorious black marketplace Silk Road was still facilitating nearly $ 2m in monthly sales, and the value of 1 BTC was edging towards with the $ one hundred mark.
Nonetheless, a lot of of the very same issues remain in the neighborhood nowadays. Namely, with on the web black markets becoming the prime target of law enforcement, will those who participate in such actions face repercussions for their involvement?
University of California, San Diego researcher Sarah Meiklejohn lately completed a paper that traced the movements of bitcoin in April utilizing heuristics, a certain problem-solving technique that permitted her to trace individual bitcoins from consumer-facing exchanges like Mt. Gox to marketplaces such as Silk Road.
Her comments to CoinDesk recommend that the answer is no, and furthermore, the US could take actions against past users. Meiklejohn said:
“I would be surprised if some of the larger drug dealers were not prosecuted, since it appears so straightforward at this point. The FBI now has all the data for Silk Road, they can see how significantly these guys earned, and they can see the addresses they utilised. So it really appears like they have a lot of what they need to be in a position to prosecute them. I would say small-time person users, just getting a tiny bit of weed, are almost certainly not going to be prosecuted.”
In an exclusive interview, Meiklejohn discusses how her research was capable to prove to reporters that coins seized from the account of Ross Ulbricht, the accused Dread Pirate Roberts, had passed by way of Silk Road. Meiklejohn also discusses if it will be feasible to prosecute bitcoin users in connection with the Silk Road case and no matter whether it’s achievable to hide criminal transactions utilizing the block chain these days:
CoinDesk: If it’s so hard to keep anonymous with a massive quantity of income, how are people getting away with massive-scale theft?
Sarah Meiklejohn (SM): The point of the operate was not to fully de-anonymize customers. At ideal, what we can do is cluster these addresses collectively and say, ‘These are all one particular user’ but we nonetheless don’t know who that user is.
The point was that this may possibly erode your anonymity sufficiently to the point where an agency with subpoena powers would be able to step in.
For instance, the thing we identified the most was transactions with solutions. Deposits into Mt. Gox, withdrawals from Mt. Gox, deposits into Silk Road, withdrawals from Silk Road.
Certainly, with all these transactions, we can say: ‘look, there is an person depositing bitcoins into Mt.Gox’, but we surely can’t say which individual, unless that person has identified their addresses publicly, in a forum or anything.
In and of itself, we’re not de-anonymizing the thief or the user, but the point is – after you commence transacting with solutions that know your true-world identity, you’re producing your self vulnerable to these agencies that are going to that service or exchange and saying: ‘I want to know who this is’.
We’re not receiving you all the way there but we’re following these bitcoins to the doorstop of Mt. Gox. One of the most frustrating parts of bitcoin is that you can see this happening and there’s absolutely nothing you can do about it.
I’ve had individuals e-mail me and say, “I had these bitcoins stolen, can you support?” and I create back and say, “I can track them, but it’s not clear what that’s going to do for you.” If I say, “I saw your bitcoins go to Mt.Gox, it’s not clear what that buys you.”
CoinDesk: Have you worked with law enforcement so far, and are they interested in this operate?
SM: I’ve talked to a few various law enforcement agencies. Yep, there is certainly interest.
CoinDesk: Do you know of any bitcoin thieves who have been prosecuted effectively?
SM: No, but I have a favorite story about stolen bitcoins. In April, the mining pool Ozcoin had mined a block, and they wanted to pay their miners. Then someone hacked their script to steal the bitcoins.
Apparently the operator of this mining pool was a nice, respected guy in the bitcoin communtiy, and people really rallied around it – starting this witch hunt to stick to the stolen bitcoins.
They didn’t go very far. They went one particular hop, and then an additional hop to Strongcoin. Luckily Strongcoin is very identifiable, because all of their transactions go to this 1 sturdy address. The bitcoins then sat in Strongcoin, and the members of the bitcoin community really pressured the owners of the Strongcoin wallet service to turn the bitcoins in.
When the thief tried to invest the bitcoins, Strongcoin somehow hacked their own system so that the bitcoins went back to the owner, Ozcoin.
So this wasn’t law enforcement, but this was sort of a sign that if you can track these flows of bitcoins and determine what they’re performing, then you can implore that service to step in – and they did.
CoinDesk: I know you had been not involved in the FBI’s investigation of the Silk Road. But describe what you’ve observed with the Silk Road addresses since the case became public. Does that give you any insight into the FBI’s perform?
With these volumes of bitcoins flowing by means of the network, it’s impossible to miss. 26,000 BTC flowing into an address within a couple of hours, that doesn’t occur all the time.
CoinDesk: Has something exciting happened with these addresses considering that then to make you wonder what the FBI is doing?
SM: The most exciting point with these addresses will be in years when the case is more than. For now, they have to hold these bitcoins in these addresses for proof.
Once the trial is over, it sounds like what they’re supposed to do is money out, liquidate the assets. That’s going to be intriguing to see. Cashing out that volume of bitcoins now would take months, given the volume of trading. And who knows what bitcoin will look like in a year or two or whenever the trial is more than. That will be something fascinating.
In the meantime, the issue I uncover the weirdest about these addresses are these protest messages. I get in touch with it spam or graffiti. You ping the address with some tiny quantity of bitcoins, and you attach a public note.
It ranges from advertisements for gambling web sites to anti-government protest messages. It’s sort of funny. The block chain is the international history of bitcoin, and that graffiti will be about forever.
CoinDesk: Do you anticipate a lot of individual Silk Road buyers to be prosecuted?
SM: I would be surprised if some of the bigger drug dealers have been not prosecuted, since it seems so straightforward at this point.
The FBI now has all the data for Silk Road, they can see how a lot these guys earned, and they can see the addresses they utilized. So it actually appears like they have a lot of what they require to be capable to prosecute them. I would say most likely modest-time person customers, just getting a small bit of weed, are most likely not going to be prosecuted.
CoinDesk: What does the Silk Road case say about bitcoin crime? Do you feel like this case is showing men and women that the party’s over? Or will the criminals just become much more clever?
SM: If you know how bitcoin works and are quite motivated to protect your anonymity, that is feasible. The difficulty is there are more men and women who don’t know.
We saw a lot of individuals buy their bitcoin from Mt. Gox or another exchange, then transfer the bitcoins that they just purchased directly from their Mt. Gox address to the Silk Road account, and that’s how they acquire the drugs.
We saw a lot of that, and that’s the most significant mistake – not understanding that hopping straight from an exchange that knows who you are to the site where you want to buy drugs is possibly not a excellent thought.
CoinDesk: Far more sophisticated criminals would do what?
SM: Let’s say you’re a drug dealer. You’ve taken in a bunch of bitcoins, now you want to money out. The 1st point would be to withdraw to an address that you personal that is outside of Silk Road and outside Mt. Gox. Then you would want to mix those bitcoins. Right now, this is somewhat difficult to do at scale.
Our expertise with mix services was not great – 1 service stole our bitcoins and with the other one, they didn’t come back very mixed. One particular of them was fine – but we only tried to mix 1 or two BTC. So who knows, once you scale.
Once you’ve mixed your bitcoins, you could drop them into an exchange and cash out.
That would be it. We wouldn’t be capable to track that. I don’t know if I genuinely want to be advertising that to future criminals, [laughs].
There’s this tension among privacy and anonymity, and then usability. If you’re not super into bitcoin, if you’re just performing this as a way to make cash, at some point, carrying out what I just described may well be unattractive. That might be adequate of a deterrent to not bother.
We’ve truly been seeking into a form of ransomware not too long ago. The thought is, an individual holds some thing hostage and demands payment in bitcoins. I was attempting to look for information about this, and I located a bunch of customers on the internet complaining about being held ransom – not that they have been getting held ransom, but that dealing with bitcoin was such a pain.
CoinDesk: What type of items have been they getting threatened with if they didn’t pay?
SM: This ransomware can come in a bunch of distinct forms. The most direct thing is, they just lock down your pc and say, ‘Give us two BTC at this address and we’ll unlock your laptop’. It’s a form of malware.
They’ve infected your personal computer, but rather than monetizing it employing a single of the methods that botnets normally do, they monetize really straight – by obtaining you to give them money in exchange for getting your computer back.
Our group just had a paper accepted ["Botcoin: Monetizing Stolen Cycles," lead author Danny Yuxing Huang, published 6th December] exploring bitcoin mining and the usage of botnets to mine bitcoins. The classic way that botnets make income is to send spam, do port scanning or steal credentials.
But it’s this long-term process of monetization. And now there’s ransomware – that’s a far more direct way. This other point we’ve been seeing [over the previous 18 months] is possibly the most direct kind you could picture, which is just mining bitcoins.
So, I compromise your machine, and then I use your machine to mine bitcoins. I’m literally minting bitcoins with your infected machine.
We wanted to look and see how widespread that was, how considerably money these botmasters could make undertaking this, and get a sense of the landscape. It’s undoubtedly taking place, and it undoubtedly appears profitable.
Some of the quite massive botnets like ZeroAccess were carrying out this. [According to lead author Huang, hundreds of thousands of infected computer systems or a lot more are mining bitcons, yielding hundreds of thousands of dollars in profit.]
This interview has been edited for clarity and length. Return to Part A single of our interview with Meiklejohn right here.
FBI image by way of Shutterstock
View Following the Money: Are Bitcoin Black Market Purchases Truly Anonymous? on CoinDesk.
Following the Income: Are Bitcoin Black Industry Purchases Actually Anonymous?
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