Bitcoin-The New Age of Crime Economy?

Jens Getreu, v1.5, 26.20.2015

Abstract

Cyber warfare and conflict differs fundamentally from traditional warfare by dissolving state against state relations. Even though the adversary could be some state agency, its organisational structure is best described by organized crime. This article discusses the change in these organisations since the emergence of digital currencies like Bitcoin allowing essential functions in criminal operations being outsourced. Starting from the technical principals of Bitcoin the impact on self-organisation of criminal entities are shown.

Myth

bitcoin miner bitcoin miner2

Bitcoin

combines a

  • State Transition System (for bookkeeping)

  • Consensus System (for trust)

State Transition System

Transaction2
Figure 1. Transactions [2]

Consensus system

Ensure that everyone agrees on the order of transactions.

Mining page07
Figure 2. Blockchain [3]

Miners are bookkeeper

Mining2 page07
Figure 3. Miner’s tasks [4]

Making mining hard

Mining = bookkeeping + proof of work

  • Proof of work:
    Mining is a hard (senseless and polluting) racing game!
    Be the first who finds (brute forces) a nonce N that the SHA256 hash of the block B.N, is less than a dynamically adjusted target T.

    SHA256(SHA256((B.N))) < T
    `B`=string representing TX tree, `.`=concatenation operator, `N`=nonce,
    `T`=target
  • To whom we trust?

    • To those who accumulate the most computational power.

Mining - Environmental impact

  • Mining: “The energy used by Bitcoin mining is comparable to Irish national energy consumption” [8, 4].

  • To whom we trust?

    • To those who can effort wasting the most electrical energy.

Bitcoin’s impact on crime

  • Bitcoin: anonymous international cash flow

     Anonymous ownership and transactions of Bitcoins
     +
     Anonymous communication via the TOR network
     =
     Enables crime economy.
     Impairs catching criminals.
  • Total sales volume of the Silk Road market place in 2012 over 1,220 million USD per month (4.5%-9% of all bitcoin trades) [3, 8]

The new age of crime economy