What a long, strange trip it’s been! Only four years ago, and two years after it started as a novelty in 2009, Reuben Grinberg published the first academic article on bitcoin, “BitCoin: An Innovative Alternative Digital Currency,” in the 2011 issue of the Hastings Science & Technology Law Journal.
Since then, the pace of bitcoin research has accelerated to the point where it justifies its own peer-reviewed journal: Ledger.
In this article, I present a “Top 10” list of research papers published in 2015. The editors at Ledger think of each of them as “the one that got away”, because they represent the kind of research that the journal supports.
While this list is by no means authoritative (and most certainly subjective), it reviews some of the year’s most influential papers, and presents several others that were praised in academic circles but received little exposure within the bitcoin community.
We watch with excitement as increasing numbers of people begin to comprehend bitcoin’s potential ramifications on our future world, and we look forward in anticipation to the results from cryptocurrency work and discovery that will undoubtedly come in 2016.
The list is a broad mix of papers from engineering, the sciences and economics that contributed to the nascent field of cryptocurrency research.
10. SoK: Research Perspectives and Challenges for Bitcoin and Cryptocurrencies
Authors: Joseph Bonneau, Andrew Miller, Jeremy Clark, Arvind Narayanan, Joshua A. Kroll and Edward W Felten.
Given bitcoin’s cypherpunk roots, its scattered documentation, and its lack of a formal specifications, Bonneau, Miller, Clark, Narayanan, Kroll and Felten complete the monumental tasks of producing the “first systematic exposition of bitcoin”.
Written in the form of a review article, the paper collects, organizes and synthesizes a huge body of prior work — from academic sources spanning three decades, to IRC logs, online discussion forums and developer mailing lists.
They identify three components of bitcoin’s design that can be decoupled and analyzed individually: (1) transactions and scripts, (2) consensus and mining, and (3) the peer-to-peer communication network.
They also speak to the mystery of how a quarter century of academics was unable to discover what (apparently) came intuitively to Satoshi Nakamoto.
This is a must-read article for those interested in quickly getting up to speed on the current state of computer science research in cryptocurrency.
9. Eclipse Attacks on Bitcoin’s Peer-to-Peer Network
Authors: Ethan Heilman, Alison Kendler, Aviv Zohar and Sharon Goldberg.
Security researchers have been eager to identify new attack vectors against the bitcoin network since the authors of the “selfish mining” paper garnered praise and publicity in 2013.
Presented in August during the 24th USENIX Security Symposium in Washington, DC, authors Heilman, Kendler, Zohar and Goldberg reveal the “eclipse attack”, in which the attacker “monopolizes all of the victim’s incoming and outgoing connections, thus isolating the victim from the rest of its peers in the network”.
The attacker can then trick the victim by feeding him misinformation about the state of the ledger, or coopt the victim’s computing power for its own nefarious purposes.
8. Confidential Transactions
Author: Gregory Maxwell
That there is a strong desire for financial privacy in bitcoin comes as no surprise, given the community’s historically libertarian leanings. Possibly no one has made more of an impact fostering privacy-enhancing techniques than Gregory Maxwell.
Following up on his 2013 invention of “coinjoin”, in this report Maxwell presents his latest cutting-edge research. “Confidential Transactions” is a technique that permits users to hide the values of their payments from the public, yet — with novel cryptographic methods— present sufficient information to allow miners to verify that the sum of the coins transacted is preserved.
Implementing confidential transactions in bitcoin requires significant protocol changes; however, experimentation is currently being carried out on Blockstream sidechains.
7. Does Governance Have a Role in Pricing? Cross-Country Evidence from Bitcoin Markets
Author: Robert Viglione
In this paper, PhD candidate Robert Viglione statistically proves an inverse relationship between economic freedom and bitcoin price premiums.
His methodology represents a potential market-based — rather than expert-defined —measure of economic freedom that is updated in real time, rather than annually. This might provide us with data needed to run event studies that document the market’s perception of elections, for example.
It also shows that even at this early, volatile stage, bitcoin is generating useful macroeconomic data.
6. Bitcoin in Islamic Banking and Finance
Author: Charles W Evans
Considering that Muslims make up about 25% of the world’s population, and that bitcoin is free of interest, Professor Charles Evans argues that the overlap between hard-money advocacy and Shari’a-compliant finance is large enough for these two communities to build intellectual bridges.
This paper has put bitcoin on the radar of many people previously far-removed from cryptocurrency, resulting in a surprising amount of attention from Muslims worldwide.
5. Bitcoin-NG: A Scalable Blockchain Protocol
Authors: Ittay Eyal, Adem Efe Gencer, Emin Gun Sirer and Robbert van Renesse
As a follow-up to the influential 2013 manuscript on selfish mining, Cornell investigators Eyal, Gencer, Sirer and van Renesse do not disappoint.
Bitcoin-NG is a radical scalability proposal that employs “micro blocks” and “key blocks” to bypass the tradeoff between transactional throughput and latency in bitcoin’s present peer-to-peer communication network.
In addition to benchmarking the performance of their proposal using a large-scale bitcoin-network simulator, the authors also introduce several novel metrics such as consensus delay and mining power utilization for quantifying the security and efficiency of blockchain protocols.
4. Digital Currencies
Author: Bank of International Settlements, Committee on Payments and Market Infrastructures
In its November report, this Bank of International Settlements committee recognized bitcoin’s distributed ledger technology (the Blockchain) as a “genuinely innovative element within digital currency schemes”.
The report states that such ledgers may offer lower costs to end users compared with existing centralized arrangements and that digital currencies such as bitcoin might address gaps in traditional payment services.
3. Should Cryptocurrencies be Included in the Portfolio of the International Reserves Held by the Central Bank of Barbados?
Authors: Winston Moore and Jeremy Stephen
In this working paper from the Central Bank of Barbados, economists Winston Moore and Jeremy Stephen conclude that holding a small portion of reserve assets in bitcoin could be beneficial to the small island nation.
The appropriate portfolio allocation could both improve returns and increase diversity against speculative attacks, without significantly affecting the volatility of the reserve balance.
The authors recognize that “digital currency could become a key currency for settling transactions” and that it is necessary for central banks to evaluate their potential impact.
This paper is significant because it reveals the emerging worldwide recognition of bitcoin as a useful store of value among central bank authorities.
2. The Bitcoin Backbone Protocol
Authors: Juan A Garay, Aggelos Kiayias and Nikos Leonardos
Already with 24 citations attesting to its impact, “The Bitcoin Backbone Protocol” provides one of the first “provable security” models for a cryptocurrency’s consensus algorithm.
Authors Garay, Kiayias and Leonardos “extract and analyze the core of the Bitcoin protocol,” framing their analysis in terms of two novel properties they refer to as common prefix and chain quality.
The common prefix property relates to the network’s ability to converge upon a single history, while the chain quality property describes the degree to which a malicious entity can gain an advantage in excess of its mining power.
Their results align with those from Eyal and Sirer (selfish mining) and in fact broadly generalize the underlying concepts.
1. The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments
Authors: Joseph Poon and Thaddeus Dryja
In perhaps the most influential paper of 2015, Poon and Dryja present their invention: the Bitcoin Lightning Network, which is an extension of two-party payment channels applied in such a way as to permit instant transactions between any number of participants.
Lightning transactions are normal bitcoin transactions, but— except for rare cases — are not actually posted to the Blockchain. Because the bulk of the transactional data is stored privately, lightning transactions are expected to be significantly less expensive than on-chain bitcoin transactions, thereby enabling affordable micropayments.
Poon and Dryja’s vision may soon be realized, as Blockstream continues to work towards making the Lightning Network a reality.