[Cryptography] Bitcoin theft and the future of cryptocurrencies

[Ersin Taskin]

Reversibility is a requirement which cannot be denied in systems addressing
real-world scenarios as Henry Baker beautifully explains in a recent post
in this mail list. In Turkey life-threatening ransomware occasions
involving Bitcoin is increasing day-by-day. The adversaries have taken
million Dolar scale Bitcoins from innocent people and Turkey is new to
Bitcoin. The police can capture the guys that physically attacked and
captured victims and took their Bitcoin. That is the easy part. However,
Bitcoins are gone and the State cannot get them back. All they can do is
send the attackers to jail for 1-3 years. There are so many guys in Turkey
that have nothing to lose and that would indeed wish to stay in jail for
some time and getting out rich is a gigantic bonus. You cannot scare them
with legal stuff. So Bitcoin ransomware crimes are only increasing here.
This has proven to be universal. Just Google "Bitcoin ransomware". And it
is a real, big problem. I find the cryptocurrency community ignoring this
issue amazing.

We cannot ask people to apply Winklevoss Twins' solution which dramatically
proves the necessity of reversibility. The only universally applicable way
to resolve this issue is reversibility. We must acknowledge that state has
legitimate use cases. In order to use state in this use case, we need a
reversibility mechanism in Bitcoin (and cryptocurrencies in general). A
legitimate currency (crypto or not) must allow reversibility at least as an
option to its users. Reversibility can be anchored to relevant State tools
(such as courts). I as a Bitcoin supporter and user should have the right
to use such an option. Anybody who wants to transact with me also has the
same right to choose that option.

I am working on a paper proposing a new protocol to Bitcoin called Proof of
Trust (POT) (and Proof of Prophecy (POP) as a special case) where I address
the issue of reversibility as well as efficiency, privacy, security, and
performance.

I must say that Iang is on the right track because an application level
Trusted Third Party or a protocol level Anchor is needed for a solution to
reversibility.

2018-01-04 23:30 GMT+03:00 iang <iang at iang.org>:

>
>
> On 13/12/2017 11:21, Georgi Guninski wrote:
>
>> If your bitcoin wallet is compromised, all your bitcoins are gone
>> forever. With a credit card, you have some chance of only minor
>> damage. If your computer is owned, your wallet is at risk.
>>
>
> Yes.
>
> This appears major problem for the widespread adoption of bitcoin
>> IMHO.
>>
>
> One would think, modulo hype.
>
> Fixing it appears to contradict decentralization, which opens another
>> can of "worms".
>>
>> Potential approach is to use "trusted wallet proxy", but this may not
>> work in practice.
>>
>> Are these concerns taken seriously?
>>
>
> The Bitcoin community has bought into what might be called the "security
> of the chain" fallacy - that the security of the chain is more important
> than the security of the users.  To an extent this aligns with price
> increases, use cases and the like.
>
> Part of the flaw inherent in the approach is what we grey hairs used to
> call WYTM - who are you threatened by, how, why?  If you are threatened by
> the state, then that's one thing.  If you are going to be robbed by your
> spouse in a legally sponsored attack called divorce, that's another thing.
> Cryptocurrency are mostly worried about one set of risks that could be said
> to be lower risk than average John Doe cares about.
>
> Any technical attempts at mitigating cryptocurrency theft?
>>
>
> Since early days, hardware wallets, cold storage and multisig have been
> proposed.  But these are hard to use.
>
> I am working on a hybrid model where cold storage is issued to a
> (governable, reversable) derivative issue that is managed by a TTP that is
> "us".
>
> It's complex of course to get the mix right.  Part of the problem is
> whatever design you come up with, there needs to be some reversibility
> built in at some point.  Which kinda flies in the face of raw blockchain.
> So blockchain needs to compromise, as do the people.
>
> iang
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