Рубрика: bitcoin blog

How fraudsters bring Bitcoin users around their coins

Lightning: Capacity exceeds 2.000 Bitcoin
A flash strikes. Image of Kent Rasmussen via Flickr.com. License: Creative Commons

Finally: The Lightning network is growing. More nodes, more channels, and, above all: more bitcoins. An interesting trend is emerging: the users seem to trust Lightning increasingly. Will it still be something with the offchain network?

A lot is written about Lightning. For some, the offchain network for Bitcoin The Salvation Bringer for the perfect scaling, the others a brazen concept that can actually never work. The truth may be somewhere in between.

After the network has stagnated for a long time, there is now gratifying news: it grows. And rapid. Nothing illustrates that as much as a chart of the number of payment channels and the entire capacity in Bitcoin:

First of all, Lightning grew quickly after the network went live in early 2018. But as early as spring 2019 it reached a first climax to stagnate after a mild waste for almost two years. It was only from February 2021 that a clear trend towards further growth emerged. The capacity in Bitcoin in particular shows this by using around 1.000 BTC on a good 2.000 BTC has increased. It formally explodes.

Two more charts illustrate this trend:

Here we see the number of knots in the Lightning network. Unlike the capacity, it never stopped growing. Apparently there was a long -lasting phase of experimentation in which people have set up knots, but have not yet dared to entrust it a lot of money. Lightning aroused curiosity, but no trust. This trend has been reversed since the spring of 2021: the capacity of the network increases significantly faster than the number of nodes.

After all, we have the capcoat of the network again in a different chart here. It is not astonishing that the capacity in dollars with the increase in the price increase in the second half of 2020, while Lightning was more stagnant. It is interesting, on the other hand, that Lightning has been going towards the price of the price since April — the price falls, but the capacity in Lightning is growing. It should be difficult to produce a more optimistic signal.

It is also very clear that the growth of Lightning is currently accelerating rapidly.

Why is it? It’s hard to say. The trend towards Lightning payments in El Salvador and the appointment of Bitcoin has made a contribution to the official means of payment in the Central American country; Lightning may work better and better due to the continuous further development; Possibly a kind of tipping point was simply reached, the Lightning-still in small circles-made the standard, for example for international transfers.

But is that «why?“Really important? What matters is that Lightning is growing. Because when a network grows, the network effects grip — it not only becomes bigger, but also better; It not only has more participants, it also works better for every participant. You can doubt whether Lightning has already “won”. But it’s on the right track.

Bitcoin Euro Course: Development of the price for bitcoins

Celsius will probably change old coins in Bitcoin and ether
In the past, debtors were thrown into a tower, as in Nuremberg. Today they are forced to change their old coins against BTC and ETH.

The processing of the Lending platform Celsius continues. Now the debtors want to exchange countless old coins for Bitcoin and Ether in order to stabilize the value of the bankruptcy estate.

The bankruptcy Lending platform Celsius is sitting on a lot of debt and a handsome but colorful portfolio of cryptocurrencies. According to an admission to court, the debtors now want to. July exchange all coins in Bitcoin and Ether.

According to a public list, this is 51 old coins worth more than $ 140 million. I don’t know how trustworthy this list is. According to her, it is more than 650 million Celsius coins ($ 72 million), a good 3 million chainlink token (Link, 16 million. Dollar) and 21 million Matic (12 million. Dollar). In addition, there are more than 40 other cryptocurrencies, of which Celsius stocks worth 1.$ 000 to $ 10 million.

While sales with large coins such as Chainlink or Matic are hardly allowed to play a role-at best they are a drop on the hot stone-the sale of the Celsius token will impossible to be realizable at a capable prices, since not even 250 million CEL tokens are circulating and the 650 million CEL owned by Celsius are a kind of silent reserve. The market will not have the liquidity in the beginning to redeem this.

Celsius was a lending platform on which you could borrow and lend stable coins, bitcoins and other cryptocurrencies. Thanks to the lavish interest of more than 10 percent, Celsius attracted large stocks of cryptocurrencies, with an EARN program it could even integrate other platforms, such as the Berlin Bitcoin Bank Nuri, which probably broke the Celsius bankruptcy. In the course of the bear market, when the courses of cryptocurrencies fell away through the bank, the value of the collateral melted to which the loans had been secured at Celsius. So there were cascades of liquidations, which in the end the platform led back unable to pay.

If old coins are now exchanged for Bitcoin and ether, the market regenerates a piece. The train signals on the one hand in which coins the market the market is familiar when it is unsettled. On the other hand, he is also to be understood as a legal signal, because in it the fear is that old coins are regulated by the SEC as security, which can presumably go hand in hand with great loss of value. At Bitcoin and Ether, the market now seems to assume that such a regulation has become very unlikely.

US court declares sanctions against Tornado Cash for illegal

Excellent news for privacy: A US court judges that a smart contract like Tornado Cash must not be sanctioned-and recognizes that there are legitimate reasons to mix its coins and tokens.

Our realities of cryptocurrencies are much more shaped by courts in the United States than in Germany — and one could add: Fortunately. At least the case of Tornado Cash is now a gratifying, the privacy in crypto space considerably strengthening, decision, one could say, «historical victory».

Because a US court judges that there are legitimate reasons to use a mixer and that an Onchain mixer like Tornado Cash cannot be sanctioned. And since the court system is so transparent in the USA, we can retire the decision nicely.

We have already described the prescribed: In autumn 2022, the US Ministry of finance put the Smart Contract «Tornado Cash» on the list of financial sanctions. Tornado Cash is an onchain mixer. It enables users to use zero-knowledge-proofs coins and tokens on Ethereum, i.e. break through the chain of transactions. Because hackers from North Korea used Tornado Cash, the United States put all the known addresses of the mixer on the list.

This also has considerable consequences for honest users: Anyone who interacted with Tornado Cash, who, for whatever reason, issued the ether or token of addresses of the mixer, ran the risk of being blamed, i.e. to be sanctioned themselves.

Six users from Tornado Cash have now appealed against the sanctions.

Legitimate reasons to use a mixer

The users claim before a court in Texas that the US Ministry of Finance or. The OFAC department responsible for sanctions exceeded its competence when it was not only the addresses of the North Korean hackers, but also sanctioned a smart contract. Because an open sour software that executes itself cannot be sanctioned according to the law.

The applications of a mixer like Tornado Cash are writes the dish, «well, mixed.“The six users who object represent several legitimate reasons to use the smart contract: one used it to use a blockchain service without becoming a victim of malignant cyber attacks. Another to donate money to Ukraine without Russian hackers identifying him. The next one did not want his crypto activities to lead to his physical address.

Mixers are also tools for criminals, such as the hackers from North Korea. However, the court recognizes a significant difference between fiat money and cryptocurrencies: these are so transparent that it can be a significant disadvantage for users — even a physical danger — if they connect their identity with addresses. To forbid blends to prohibit people in danger!

With luck and hope it should fulfill that a court has drawn this knowledge. But the legal is less about the result than the principle: judges have no desirable decisions to make, but those who are in accordance with statutes, laws and precedent.

It is therefore crucial under what circumstances the US laws allow to put a person or organization on the sanction lists. And this is exactly where there are strong reasons to deny the procedure of the Ministry of Finance.

Declines property!

The corresponding laws say that the government «ownership in which a foreign country or a citizen have an interest» can confess if the owners or. their actions were declared danger to national security. This not only applies to the hackers from North Korea, but to every person or organization that offers these services.

At this point, the law begins again in a battle for terminology: How should one understand words like «person», «entity», «property», «interest»? The Tornado Cash users, who question the sanctions, are now accusing the Ministry of Finance to have declined the terms incorrectly in order to make a judgment that was desirable to them, but do not do justice to the statutes and laws.

Tornado Cash is neither a «person» nor a «foreign citizen», the Smart Contract is not «property», and Tornado Cash cannot have any «interest» in this. Ownership, the court concludes according to the exegesis of statutes and judgments, includes everything that can belong to someone, whether a legal or private person. Property includes «the right to own, use and dispose», and thus also «to prevent others from interacting.»

Uncal -free smart contracts such as Tornado Cash cannot be property according to these definitions. It is not possible that someone owns it. In itself, says the court, one could stop at the point.

Why unchangeability is so important

However, the Ministry of Finance, in order to wind around the concept of property, has mixed it with «interest» and «property», a somewhat softer synonym for property, which emphasizes the person in question rather than the possession. The argument here is that Tornado cash makes profits when others use the mixer, and thus similar to patents and copyrights can be understood as property.

The court does not accept this trick for two reasons: First, Tornado Cash does not benefit from the Smart Contracts himself. Relayers and Torn-Holders may benefit from users’ fees, but not from the smart contracts. The Ministry of Finance remains guilty of proof that Tornado Cash benefits from the fees. Second, patents and copyrights are «ownable» — in contrast to Smart Contracts.

At this point, a technically decisive details come into play: Tornado Cash, the DAO, initially had a kind of SOS option through which the developers could change the Smart Contract. However, they have demonstrably burned this right after a while. Since then, the smart contract has been «unchangeable».

If the smart contract could be changed, transactions that run over it could be understood as a «contract between the operator of the smart contracts and a third party» — but not the smart contract itself. On the other hand, if you interact with an unchangeable smart contract, a user can make an offer, but there is no one on the other hand who can answer or reject it — nothing but code that does what is in it. This confirms that an unchangeable smart contract cannot be property.

«A historical victory»

For all of these reasons, the court concludes, «the OFAC has exceeded its constitutional authority». There is right to obtain the users of Tornado Cash.

Paul Grewal, a lawyer of Coinbase, welcomes the decision euphorically: «Privacy wins», he cheers on Twitter, «This is a historical victory for crypto and everyone who wants to defend freedom.“The Smart Contracts from Tornado Cash would now have to disappear from the sanction list, and“ US citizens can again use the privacy protecting protocol.»

As a result, the course of Torn, the token of Tornado Cash, jumped by several hundred percent, from $ 3.50 to a brief $ 35 to be at a good 14. If you now want to use the mixer again, you have to go some detours. The official websites have been shut down, you have to switch to an alternative, and most wallets continue to block the RPC endpoints. But a guide explains how to insert it again in Metamask.

Political delinquency and bitcoins

The US-Twin-tank border has written a report on how non-state actors could use and use virtual currencies-and how the US government can proceed against it. Part of the report reads like instructions to attack virtual currencies.

The recently published report «National Security Implication of Virtual Currencies» is exciting because it first perceives virtual currency from a paranoid government perspective, asks which threat lies in virtual currencies and explicitly discusses how governments can fight virtual currencies.

The approximately 100-page report was written by the marginal institute, a government-related think tank, which primarily supplies the armed forces of the United States with studies. The report asks:

“Why should a non-state actor use virtual currencies? What political or economic goals can he achieve with it? How could this non-state actor proceed? What challenges he would have to master?»

Non-state actors are by no means as personable in this report as NGOs and so on. Non-state actors mean criminal organizations, terrorists, rebels, secessionists here. So all groups that presume to occupy state privileges. In principle, everything that helps these groups is understood as a threat to the one and true state sovereign.

Virtual currencies, says the report, could be attractive to non -state actors to disturb the sovereignty of the state and to strengthen their own political and economic influence.

Neither terrorists nor secessionists have their own virtual currency

But who uses virtual currencies? And there are already the first non-state organizers who publish their own currencies based on virtual currencies? So the danger is hypothetical — or already concrete?

While there are numerous indications that criminal groups use Bitcoin, for example to collect ransom for ransomware or to act drugs in the Darknet, there are no indications that such groups form their own currencies, nor that terrorists use existing virtual currencies to a significant extent. So far no trace of a crime or Iscoin.

However, the report has been found in the past few years, politically motivated developments of virtual currencies with the aim of replacing the sovereign currency of a state. Examples are the auroacoin or the Scottcoin-both currency experiments that have failed (such as about the 30-40 other local/national currencies that arose in 2014, and that political delinquency and unscrupulous rip-off were difficult to distinguish).

Overall, the use of virtual currencies due to delinquent political groups remains far behind what could be expected. “To date, virtual currencies have not been successfully used to compete with the Fiat currencies of the respective countries as competitors. So far, virtual currencies have not been the means of choice for insurgents in civil wars, which is not surprising in view of the high demands on technological infrastructure.»

Nevertheless, the report believes that virtual currencies could be an appropriate solution if the government fails to maintain the stability and accessibility of Fiat currencies. They are more or less a solution in rest mode that is waiting for the right problem to occur in the right environment.

The report identifies another application space for virtual currencies in communities. For example, the Mazacoin should be the national currency of the Lakota Nation. Or the Irish Coin support tourism in Ireland. However, it must also be added here that the difference between political activism and active rip -off is fluid.

The report will therefore also find only very sporadically current applications for the communities — but assumes that they will increase in the future:

“If the technology of virtual currencies improves, virtual currencies for communities could become more widespread.»

So you can crack virtual currencies

The report then hits a slightly absurd turn. It presents weaknesses and attack scenarios on virtual currencies, apparently to show the problems and risks with which the use of virtual currencies is connected by non-state actors-while it explicitly represents these weaknesses as a possibility of how governments can end the currency experiments of terrorists, insurgents and criminals. If this should ever exist.

The report will still be interesting at this point. He divides the possible attacker into virtual currencies into different stages of 1-6, with under the 1 Z. B. Script kiddies fall while the 6. Stage with highly developed cyber armies.

Level I & II (attacker with little or no understanding of the code)

The 51 percent or gold finger attack is already accessible for the lowest levels: “A gold finger attack includes the formation of a mining cartel, which can change the rules of the market due to its dominant computing cub, exclude certain users and prevent the investment.“While this attack is reasonably promising for new and small currencies, the report says that it is unclear how a party can catch 51 percent of the computing power of an established virtual currency such as Bitcoin.

But there is another option: by hacking several mining pools. This could make such an attack with relatively low resources. In practice, the report says, however, this is reserved for attackers of a higher level.

DDOS attacks on central service providers are also possible. While in semi-decentral currencies such as Ripple, such attacks can put the whole system out of action, you can make online wallets, stock exchanges or mining pools for decentralized currencies such as Bitcoin and thus do damage. In addition, further DDOS attacks are possible such as a transaction spam or sending transactions that need more computing power to be verified.

Level III & IV (individual and organized hackers)

Actors of these levels can start more sophisticated attacks. Examples are zero-day exploits (the use of previously unknown weaknesses in software) to damage the infrastructure of virtual currencies. This could make the mechanism that leads to a consensus in the Bitcoin network, which transactions are valid and which are not.

The attackers of this level can also be discovered and exploited, for example to hack mining pools and thus tear 51 percent of the computing power itself. In the case of semi-decentral currencies such as Ripple, attackers could even chop auto-blativity servers and destroy the currency. In the case of decentralized currencies, on the other hand, it would be possible to attack and deprive important people in order to undermine the trust in them.

Zero-day attacks on wallets, stock exchanges or mobile applications could also help to use a virtual currency less usable and the trust in it is undermined. Animal IV attackers could even be possible to secretly change the software implementations of cryptographic applications to enable future attacks.

Level V & VI (State Hacker)

Attacks can be carried out on this level. These actors are able to introduce and spread manipulated hardware and software on a broad basis. You could manipulate smartphones, servers or miners before delivery. This could significantly increase the chance of starting a 51 percent attack or taking advantage of zero-day gaps. In addition, you could break cryptographic standards that ensure the safety of virtual currencies. If such a strategy becomes known, this would erode trust in cryptocurrencies.

Actors of these levels can also gain influence on the important developers of cryptocurrency or bring their own staff into the important positions in the management of cryptocurrencies or from service providers associated with them.

Only part of the whole

The report explicitly declares that it is only part of a more comprehensive discussion of virtual currencies. At the moment, the introduction of virtual currencies is still accompanied by considerable challenges, especially with regard to acceptance among the population, but over time when virtual currencies become more common, these challenges would take over.

In order to find out when this is ready and how governments should then behave, further studies are necessary.