The potential effect off-chain instant payments will have on cryptocurrency scalability issues – The Lightning Network

The rapid increase in popularity regarding cryptocurrency and specifically Bitcoin has been unprecedented over the past number of years. However, scalability has become a major barrier keeping it from gaining wide spread mass adoption. The purpose of this paper will be to investigate the potential effect off-chain instant payments will have on cryptocurrency scalability issues, with a focus on the Lightning Network. This will be achieved by means of a quantitative study through the process of testing various factors associated with the Lightning Network against another potential scalability solution, increasing block size limit. This study will provide comprehensive insight into off-chain instant payments generally and the Lightning Network specifically. This research paper will, therefore, primarily add to the body of knowledge indicating whether the Lightning Network is a potential solution to scaling the Bitcoin blockchain. In addition, it will lay a foundation for future research into the scalability of cryptocurrency

Designing a Blockchain Model for the Paris Agreement’s Carbon Market Mechanism

This paper examines the benefits and constraints of applying blockchain technology for the Paris Agreement carbon market mechanism and develops a list of technical requirements and soft factors as selection criteria to test the feasibility of two different blockchain platforms. The carbon market mechanism, as outlined in Article 6.2 of the Paris Agreement, can accelerate climate action by enabling cooperation between national Parties. However, in the past, carbon markets were limited by several constraints. Our research investigates these constraints and translates them into selection criteria to design a blockchain platform to overcome these past limitations. The developed selection criteria and assumptions developed in this paper provide an orientation for blockchain assessments. Using the selection criteria, we examine the feasibility of two distinct blockchains, Ethereum and Hyperledger Fabric, for the specific use case of Article 6.2. These two blockchain systems represent contrary forms of design and governance; Ethereum constitutes a public and permissionless blockchain governance system, while Hyperledger Fabric represents a private and permissioned governance system. Our results show that both blockchain systems can address present carbon market constraints by enhancing market transparency, increasing process automation, and preventing double counting. The final selection and blockchain system implementation will first be possible, when the Article 6 negotiations are concluded, and governance preferences of national Parties are established. Our paper informs about the viability of different blockchain systems, offers insights into governance options, and provides a valuable framework for a concrete blockchain selection in the future.DFG, 414044773, Open Access Publizieren 2019 - 2020 / Technische Universität Berli

An Empirical Analysis of Privacy in the Lightning Network

Payment channel networks, and the Lightning Network in particular, seem to offer a solution to the lack of scalability and privacy offered by Bitcoin and other blockchain-based cryptocurrencies. Previous research has focused on the scalability, availability, and crypto-economics of the Lightning Network, but relatively little attention has been paid to exploring the level of privacy it achieves in practice. This paper presents a thorough analysis of the privacy offered by the Lightning Network, by presenting several attacks that exploit publicly available information about the network in order to learn information that is designed to be kept secret, such as how many coins a node has available or who the sender and recipient are in a payment routed through the network.Comment: 26 pages, 5 figure

New kid on the block: a strategic archetypes approach to understanding the Blockchain

Emerging Blockchain technologies have received considerable attention in the financial services domain. This is due to the potential of those technologies to radically disrupt existing financial systems by introducing new types of assets and new ways of managing transactions. Yet many of these technologies are so new and seemingly complex that strategic decision-makers may not fully understand the alternative Blockchain technologies on offer, let alone the costs and benefits associated with specific instantiations. This paper reviews the Blockchain literature and identifies eight key system design characteristics. From this, four Blockchain archetypes emerge, each of which is presented using a recognizable existing system to allow tangible discussion of similarities and differences across archetypes. The identification of these archetypes provides an important foundation for future research, enabling in-depth research to be conducted that will outline the costs, benefits, risks, and issues associated with each archetype

An Empirical Analysis of Privacy in Cryptocurrencies

Cryptocurrencies have emerged as an important technology over the past decade and have, undoubtedly, become blockchain’s most popular application. Bitcoin has been by far the most popular out of the thousands of cryptocurrencies that have been created. Some of the features that made Bitcoin such a fascinating technology include its transactions being made publicly available and permanently stored, and the ability for anyone to have access. Despite this transparency, it was initially believed that Bitcoin provides anonymity to its users, since it allowed them to transact using a pseudonym instead of their real identity. However, a long line of research has shown that this initial belief was false and that, given the appropriate tools, Bitcoin transactions can indeed be traced back to the real-life entities performing them. In this thesis, we perform a survey to examine the anonymity aspect of cryptocurrencies. We start with early works that made first efforts on analysing how private this new technology was. We analyse both from the perspective of a passive observer with eyes only to the public immutable state of transactions, the blockchain, as well as from an observer who has access to network layer information. We then look into the projects that aimed to enhance the anonymity provided in cryptocurrencies and also analyse the evidence of how much they succeeded in practice. In the first part of our own contributions we present our own take on Bitcoin’s anonymity, inspired by the research already in place. We manage to extend existing heuristics and provide a novel methodology on measuring the confidence we have in our anonymity metrics, instead of looking into the issue from a binary perspective, as in previous research. In the second part we provide the first full-scale empirical work on measuring anonymity in a cryptocurrency that was built with privacy guarantees, based on a very well established cryptography, Zcash. We show that just building a tool which provides anonymity in theory is very different than the privacy offered in practice once users start to transact with it. Finally, we look into a technology that is not a cryptocurrency itself but is built on top of Bitcoin, thus providing a so-called layer 2 solution, the Lightning network. Again, our measurements showed some serious privacy concerns of this technology, some of which were novel and highly applicable