The Unreasonable Fundamental IncertitudesBehind Bitcoin Mining
Nicolas T. Courtois
, Marek Grajek
and Rahul Naik
University College London, UK,
Independent researcher and writer, Poland
Bitcoin is a “crypto currency”, a decentralized electronicpayment scheme based on cryptography. It implements a particular typeof peer-to-peer ﬁnancial anarchy. It has very recently gained excessivepopularity and attracted a lot of attention in the mainstream press andmedia. Scientiﬁc research on this topic is less abundant. A paper at Fi-nancial Cryptography 2012 conference explains that Bitcoin is a systemwhich
uses no fancy cryptography, and is by no means perfect
.Bitcoin depends on well-known cryptographic standards such as SHA-256. In this paper we revisit the cryptographic process which allows oneto make money by producing new bitcoins. We reformulate this problemas a speciﬁc sort of Constrained Input Small Output (CISO) hashingproblem and reduce the problem to a pure block cipher problem, cf. Fig.2. We estimate the speed of this process and we show that the amortizedcost of this process is less than it seems and it depends on a certaincryptographic constant which is estimated to be at most 1.86. Theseoptimizations enable bitcoin miners to save tens of millions of dollarsper year in electricity bills.Miners who set up mining operations face many economic incertitudessuch as high volatility. In this paper we point out that there are funda-mental incertitudes which depend very strongly on the bitcoin speciﬁca-tion and that this is speciﬁcation is NOT written in stone, it is likely tochange. One question is to see if bitcoin mining with ASICs is the lastand ﬁnal stage in the development of bitcoin. The energy eﬃciency of bitcoin miners have already been improved by a factor of about 10,000since bitcoin have been invented, and we claim that further improve-ments are inevitable. Better technology is bound to be invented, wouldit be quantum bitcoin miners. More importantly, the speciﬁcation of theproblem to solve is likely to change. A major change in the Proof of Workfunction have been proposed in May 2013 at Bitcoin conference in SanDiego by Dan Kaminsky . However, any sort of change could be ﬂatlyrejected by the community which have heavily invested in ASIC miningwith the current technology.Another question is the reward halving scheme in bitcoin. The currentbitcoin speciﬁcation mandates a strong 4-year cyclic property. This cycleis totally
and is simply an artifact of the current speciﬁcation.We ﬁnd this property totally unreasonable and harmful and explain whyand how it needs to be changed.
electronic payment, crypto currencies, bitcoin, hash func-tions, SHA-256, cryptanalysis, CICO problem (Constrained Input Con-strained Output), bitcoin mining, business cycles.
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