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From: Peter Vessenes <peter@coinlab.com>
Date: Thu, 26 Apr 2012 10:11:51 -0700
Message-ID: <CAMGNxUs3eDaYHpg=ZqXQPC5+kQXZwhqUngH2t2OFaTa4x7vPcw@mail.gmail.com>
To: Peter Todd <pete@petertodd.org>
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Cc: bitcoin-development@lists.sourceforge.net
Subject: Re: [Bitcoin-development] Trusted identities
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These are interesting thoughts, karma for bitcoins essentially.

I would like CoinLab to publish a 'cost of subverting 1-n transactions with
90% probability' metric soon, and I think it would help everyone to
understand what that number is.

When we started out, you probably needed to wait 5 blocks for $10 or $20 of
bitcoin value transfer.

Now, I'd happily accept a $1k transaction with 1 confirmation.

More difficulty shortens the safe time we can transact large volumes in,
which is good for the network.

I'm not sure of the current implementation of replacement transactions, can
anyone on the core team speak to this? Can I replace transactions, or is
that part of the spec unimplemented or deprecated right now?

Peter


On Thu, Apr 26, 2012 at 8:49 AM, Peter Todd <pete@petertodd.org> wrote:

> It recently occured to me that we can use the public nature of the block
> chain to create trusted identities, for a specific form of trust.
>
> Lets suppose Alice has some bitcoins held at bitcoin address A. She
> wants to establish trust in the "identity" associated with the ECC
> keypair associated with A, for instance for the purpose of having other
> users trust her not to attempt to double spend. Since the trust she
> seeks is financial in nature, she can do this by valuing the identity
> associated with A, by delibrately throwing away resources. A simple way
> to do this would of course be to transfer coins to a null address,
> provably incurring a cost to her.
>
> A more socially responsible way would be for her to create a series of
> transactions that happen to have large, and equal, transaction fees.
> Bitcoin makes the assumption that no one entity controls more than 50%
> of the network, so if she makes n of these transactions consecutively,
> each spending m BTC to transaction fees, there is a high probability
> that she has given up at least n/2 * m BTC of value. This of course is
> all public knowledge, recorded in the block chain. It also increases the
> transaction fees for miners, which will be very important for the
> network in the future.
>
> Now Bob can easily examine the block chain, and upon verifying Alice's
> trust purchase, can decide to accept a zero-confirmation transaction at
> face value. If Alice breaks that promise, he simply publishes her signed
> transaction proving that Alice is a fraudster, and future Bob's will
> distrust Alice's trusted identity, thus destroying the value needed to
> create it.
>
> In effect, we now have a distributed green address system.
>
> Now Alice could try to mount a double-spend attack on a whole bunch of
> people at once, hoping to have them all accept the transaction. However
> as it is the "just trust them" model works pretty well already.
>
>
> A good usecase for this idea, beyond the obvious fast payments
> application, is a distributed anonymizer. Alice can now publish her
> request to anonymize coins, and other trusted identities can make their
> bids. If Alice accepts a bid from Bob, she will want Bob to send her the
> anonymized coins *prior* to her transaction going through, thus breaking
> the temporal connection between the transactions. Now Alice can give Bob
> the signed payment transaction, and Bob can submit his payment
> transaction to the network first, knowing that Alice isn't going to try
> to rip him off. Bob can also have a trusted identity which signed the
> contract for the anonymizer transaction, and similarly if he rips Alice
> off, she can publish it for the world to see.
>
> A more subtle effect, is this makes sybil attacks more difficult. To
> pretend to be a thousand identities is going to now require 1,000 * n
> coins, and attempting to pull this attack off inherently strengthens the
> bitcoin network. Obviously we can apply this principle to other things
> like tor nodes as well.
>
> --
> http://petertodd.org 'peter'[:-1]@petertodd.org
>
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>


-- 
Peter J. Vessenes
CEO, CoinLab
M: 206.595.9839
Skype: vessenes
Google+ <https://plus.google.com/112885659993091300749>

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<div class=3D"gmail_extra">These are interesting thoughts, karma for bitcoi=
ns essentially.</div><div class=3D"gmail_extra"><br></div><div class=3D"gma=
il_extra">I would like CoinLab to publish a &#39;cost of subverting 1-n tra=
nsactions with 90% probability&#39; metric soon, and I think it would help =
everyone to understand what that number is.</div>

<div class=3D"gmail_extra"><br></div><div class=3D"gmail_extra">When we sta=
rted out, you probably needed to wait 5 blocks for $10 or $20 of bitcoin va=
lue transfer.</div><div class=3D"gmail_extra"><br></div><div class=3D"gmail=
_extra">

Now, I&#39;d happily accept a $1k transaction with 1 confirmation.=A0</div>=
<div class=3D"gmail_extra"><br></div><div class=3D"gmail_extra">More diffic=
ulty shortens the safe time we can transact large volumes in, which is good=
 for the network.</div>

<div class=3D"gmail_extra"><br></div><div class=3D"gmail_extra">I&#39;m not=
 sure of the current implementation of replacement transactions, can anyone=
 on the core team speak to this? Can I replace transactions, or is that par=
t of the spec unimplemented or deprecated right now?</div>

<div class=3D"gmail_extra"><br></div><div class=3D"gmail_extra">Peter</div>=
<div class=3D"gmail_extra">=A0</div><div class=3D"gmail_extra"><br><div cla=
ss=3D"gmail_quote">On Thu, Apr 26, 2012 at 8:49 AM, Peter Todd <span dir=3D=
"ltr">&lt;<a href=3D"mailto:pete@petertodd.org" target=3D"_blank">pete@pete=
rtodd.org</a>&gt;</span> wrote:<br>

<blockquote class=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;border-left:1p=
x #ccc solid;padding-left:1ex">It recently occured to me that we can use th=
e public nature of the block<br>
chain to create trusted identities, for a specific form of trust.<br>
<br>
Lets suppose Alice has some bitcoins held at bitcoin address A. She<br>
wants to establish trust in the &quot;identity&quot; associated with the EC=
C<br>
keypair associated with A, for instance for the purpose of having other<br>
users trust her not to attempt to double spend. Since the trust she<br>
seeks is financial in nature, she can do this by valuing the identity<br>
associated with A, by delibrately throwing away resources. A simple way<br>
to do this would of course be to transfer coins to a null address,<br>
provably incurring a cost to her.<br>
<br>
A more socially responsible way would be for her to create a series of<br>
transactions that happen to have large, and equal, transaction fees.<br>
Bitcoin makes the assumption that no one entity controls more than 50%<br>
of the network, so if she makes n of these transactions consecutively,<br>
each spending m BTC to transaction fees, there is a high probability<br>
that she has given up at least n/2 * m BTC of value. This of course is<br>
all public knowledge, recorded in the block chain. It also increases the<br=
>
transaction fees for miners, which will be very important for the<br>
network in the future.<br>
<br>
Now Bob can easily examine the block chain, and upon verifying Alice&#39;s<=
br>
trust purchase, can decide to accept a zero-confirmation transaction at<br>
face value. If Alice breaks that promise, he simply publishes her signed<br=
>
transaction proving that Alice is a fraudster, and future Bob&#39;s will<br=
>
distrust Alice&#39;s trusted identity, thus destroying the value needed to<=
br>
create it.<br>
<br>
In effect, we now have a distributed green address system.<br>
<br>
Now Alice could try to mount a double-spend attack on a whole bunch of<br>
people at once, hoping to have them all accept the transaction. However<br>
as it is the &quot;just trust them&quot; model works pretty well already.<b=
r>
<br>
<br>
A good usecase for this idea, beyond the obvious fast payments<br>
application, is a distributed anonymizer. Alice can now publish her<br>
request to anonymize coins, and other trusted identities can make their<br>
bids. If Alice accepts a bid from Bob, she will want Bob to send her the<br=
>
anonymized coins *prior* to her transaction going through, thus breaking<br=
>
the temporal connection between the transactions. Now Alice can give Bob<br=
>
the signed payment transaction, and Bob can submit his payment<br>
transaction to the network first, knowing that Alice isn&#39;t going to try=
<br>
to rip him off. Bob can also have a trusted identity which signed the<br>
contract for the anonymizer transaction, and similarly if he rips Alice<br>
off, she can publish it for the world to see.<br>
<br>
A more subtle effect, is this makes sybil attacks more difficult. To<br>
pretend to be a thousand identities is going to now require 1,000 * n<br>
coins, and attempting to pull this attack off inherently strengthens the<br=
>
bitcoin network. Obviously we can apply this principle to other things<br>
like tor nodes as well.<br>
<span class=3D"HOEnZb"><font color=3D"#888888"><br>
--<br>
<a href=3D"http://petertodd.org" target=3D"_blank">http://petertodd.org</a>=
 &#39;peter&#39;[:-1]@<a href=3D"http://petertodd.org" target=3D"_blank">pe=
tertodd.org</a><br>
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r>
will include endpoint security, mobile security and the latest in malware<b=
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<br></blockquote></div><br><br clear=3D"all"><div><br></div>-- <br><table s=
tyle=3D"font-family:Times"><tbody><tr><td><img src=3D"http://coinlab.com/im=
ages/coinlab-logo.png"></td><td valign=3D"bottom"><div style=3D"font-family=
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Peter J. Vessenes<br>CEO, CoinLab<br>M: 206.595.9839<br>Skype: vessenes<br>=
<a href=3D"https://plus.google.com/112885659993091300749" target=3D"_blank"=
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