章節(jié)5協(xié)議frm二級(jí)任務(wù)-1講義2017current issues financial markets劃線版norestriction

JournalofEconomics—Volume29,Number2—Spring2015—PagesBitcoin:Economics,Technology,andRainerB?hme,NicolasBenjaminEdelman,andTylerBitcoinisanonlinecommunicationprotocolthatfacilitatestheuseofavirtualcurrency,includingelectronicpayments.Sinceitsinceptionin2009byananonymousgroupofdevelopers(Nakamoto2008),BitcoinhasservedBapproximay62.5milliontransactionsbetween109millionaccounts.AsofMarch2015,thedailytransactionvolumewasapproximay200,000bitcoins—roughly$50millionatmarketexchangerates—andthetotalmarketvalueofallbitcoinsincirculationwas$3.5billion(B2015).Table1summarizesBitcoinactivitytodate.(Wewillfollowtheconventioninthecomputersciencelitureofusingcapital-BBitcointorefertothesystem,andlower-bbitcointorefertotheunitofaccount.)Bitcoin’srulesweredesignedbyengineerswithnoapparentinfluencefromlawyersorregulators.Ratherthanstoretransactionsonanysingleserverorsetofservers,Bitcoinisbuiltonatransactionlogthatisdistributedacrossanetworkofparticipatingcomputers.Itincludesmechanismstorewardhonestparticipation,tobootstrapacceptancebyearlyadopters,andtoguardagainstconcentrationsofpower.Bitcoin’sdesignallowsforirreversibletransactions,aprescribedpathofmoneycreationovertime,andapublictransactionhistory.AnyonecancreateaRainerB?hmeisProfessorofSecurityandPrivacy,UniversityofInnsbruck,Innsbruck,Austria.NicolasChristinisAssistantResearchProfessor,DepartmentofElectricalandComputerEngineeringandCyLab,CarnegieMellonUniversity,Pittsburgh,Pennsylvania.BenjaminEdelmanisAssociateProfessorofBusinessAdministration,HarvardBusinessSchool,Boston,Massachusetts.TylerMooreisAssistantProfessorofComputerScienceandEngineering,SouthernMethodistUniversity,Dallas,Texas.Theiraddressesarerainer.boehme@uibk.ac.at,nicolasc@,bedelman@,andtylerm@.?Toaccessthedisclosurestatements, =10.1257/jep.29.2.213 JournalofEconomicBitcoinActivitytoTotalbitcoinsminted USdollarequivalentatmarketprice TotalnumberofreachableBitcoinnodes ≈6,500aTotal(cumulative)numberoftransactions Totalnumberofaccountsever ≈109Blockchain ≈30.3Numberofblocksto ≈Estimateddailytransaction ≈200,000BTC(≈$50Averagetransactionvalue Computationinvestedinpuzzle ≈4,254Power >173MWSource:Authors’compilationandowncomputationsderivedfrom(Yeow2015;B,2015; ,2015;BitcoinWiki2015b).aReportsonlypubliclyreachablenotesandexcludes“private”nodes,forexample,nodeshostedonprivatenetworksbehindafirewall,whicharelikelytorepresentthemajorityofthenetworkbutcannotbereliablymeasured.bExcludeschange.Thedistributionisskewedtowardsmalltransactions.Weestimatethemediantransactionamounttobearound0.02bitcoins($5).cThiscorrespondstoroughly11,500timesthecombinedpowerofthetop500putersintheworld.Thatsaid, puterscanperformallsortsofmathematicaloperations,whileBitcoinminersaregenerallyhighlyspecializedinsingletypeofcryptographicdReflectsacomputationsimilartoBonneau’s(2014)lowerbound.AccordingtoBitcoinWiki(2015b),themostenergy-efficientmininghardwarecanperform1,957millionsofoftheBitcoinnetworkis340,000hashes(1012)persecond(2015).Thiscapacitywouldrequirecontinuousconsumptionof173MW,ifeveryminerusedthemostenergy-efficienthardware.Bitcoinaccount,withoutchargeandwithoutanycentralizedvettingprocedure—orevenarequirementtoprovidearealname.Collectively,theserulesyieldasystemthatisunderstoodtobemoreflexible,moreprivate,andlessamenabletoregulatoryoversightthanotherformsofpayment—thoughaswediscussinsubse-quentsections,allthesebenefitsfaceimportantlimits.Bitcoinisofinteresttoeconomistsasavirtualcurrencywithpotentialtodisruptexistingpaymentsystemsandperhapsevenmonetarysystems.Evenattheircurrentearlystage,suchvirtualcurrenciesprovideavarietyofinsightsaboutmarketdesignandthebehaviorofbuyersandsellers.Thisarticlepresentsthetform’sdesignprinciplesandpropertiesforanontechnicalaudience;reviewsitspast,present,andfutureuses;andpointsoutrisksandregulatoryissuesasBitcoininctswiththeconventionalfinancialsystemandtherealeconomy.RainerB?hme,NicolasChristin,BenjaminEdelman,andTyler BitcoinDesignScarcityisaprerequisiteforascribingvaluetoanyformofmoney.Atamicrolevel,scarcityprotectsagainstcounterfeiting.Morebroadly,scarcityboundsthegrowthpathofthemonetarybaseandfacilitatespricestability.Inmodernecono-mies,wheremoneyisheldinelectronicforms,scarcityispbylegalrulesensuringthecorrectnessofbookkeerecords:thatis,electronicmoneyinvolvesafinancialsysteminwhichtransactionstriggeracreditforoneaccountandacorre-spondingdebittoanother.Centralbanksholdthepowertoadjusttheabsolutetyofmoneyincirculation.Againstthisbackdrop,Bitcoincanbeunderstoodasthefirstwidelyadoptedmechanismtoprovideabsolutescarcityofamoneysupply.Bydesign,Bitcoinlacksacentralizedauthoritytodistributecoinsortotrackwhoholdswhichcoins.Conse-quently,theprocessofissuingcurrencyandverifyingtransactionsisconsiderablymoredifficultthaninclassicbookkeesystems.Meanwhile,Bitcoinissuesnewcurrencytoprivatepartiesatacontrolledpaceinordertoprovideanincentiveforthosepartiestomaintainitsbookkeesystem,includingverifyingthevalidityoftransactions.EnablingandThe“Bitcoincore”softwarecanbelydownloadedaten/choose-your-wallet.ThestandardBitcoinimplementationincludesanumberoffeatures.Typically,itcreatesa“wallet”filefortheuserthatcanstorebitcoins(withoutgivinganameorproofofidentity);itcreatesanindividualnodefortheuserinthepeer-to-peerBitcoinnetworkthatcanbeusedwithastandardInternetconnection;anditprovidesaccesstothe“blockchain”datastructurethatverifiesallpastBitcoinactivity.TransactionsandtheBlockBitcoinsarerecordedastransactions.Forinstance,someuser notsimply“hold”threebitcoins.Rather, participatesinapubliclyverifiabletransactionshowingthathereceivedthreebitcoinsfromBob. wasabletoverifythatBobcouldmakethatpaymentbecausetherewasapriortransactioninwhichBobreceivedthreebitcoinsfromAliceandtherewasnopriortransactioninwhichBobspentthesethreebitcoins.Figure1illustratestheseinctions.Indeed,eachindividualbitcoincanreadilybetracedbackthroughalltrans-actionsinwhichitwasused,andthustothestartofitscirculation.AllBitcointransactionsarereadablebyeveryoneinrecordsstoredinawidelyreplicateddatastructure.Ingeneral,transactionsareorderedrecursivelybyhavingtheinputofatransaction(roughly,thesourceoffunds)refertotheoutputofaprevioustransac-tion.(Forexample,thetransactionmightrevealthatBobpays usingbitcoinhereceivedfromAlice.) JournalofEconomicFigureBitcoin’sApproachtoTransactionFlowand3bitcoins 3AB:AB:signedBC:signedPeer-to-peerNew3Transactionlog(blockchain,copiedtoallNew3Minersappendblocksoftransactionsbysolvingmathematicalpuzzlesofincreasingdif 專業(yè)提供CFAFRM全程+講Source:Bitcoinreliesontwofundamentalfromcryptography:public-privatekeycryptographytostoreandspendmoney;andcryptographicvalidationoftransactions.Standardpublic-privatekeycryptographyletsanyonecreateapublickeyandanassociatedprivatekey(Diffieandman1976).Publickeysaredesignedtobewidelyshared—hencethename.Messagesencryptedwithapublickeycanonlybedescrambledbysomeonewhopossessesthecorrespondingprivatekey,allowinganyonetoencryptamessagethatonlythespecifiedrecipientcanread.Similarly,messagesencryptedwithaprivatekeycanonlybedescrambledwiththecorrespondingpublickey,allowingaspecifiedsendertocreateamessagethatcanbeconfirmedtobeauthentic.Public-privatekeycryptographyiswidelyused:inthebest-knownexample,webbrowsersonaHTTPS“securewebsite”encryptcommunica-tionswiththatsite’sadvertisedpublickeyinordertobeginasecureconnection.InBitcoin,similarencryptionfundamentalsauthenticateinstructionstotransfermoneytootherparticipants.Suchaninstructionisencryptedusingthesender’sprivatekey,confirmingforeveryonethattheinstructioninfactcamefromthesender. SupposethatAlicehasthreebitcoinsthatshewantstogivetoBob.ShepublishesamessageintheBitcoinnetworkindicatingthatsheistransferringthreeofherexistingbitcoins,alongwithareferencetothetransactionwhereshehadreceivedthosebitcoins.PartofthismessageisencryptedbyAlice’sprivatekeytoprovethattheinstructioncamefromher,inamethodakintoasignatureonapapercheck.Later,ifBobwantstosendbitcoinsto,hepublishesamessage,againencryptedwithhisprivatekey,indicatingthathegothisbitcoinsfromAliceandwhathewantstosendtowhom.TheBitcoinnetworkidentifiesAlice,Bob,andonlybytheirpublickeys,whichserveasaccountnumbers.EverynewtransactionthatispublishedtotheBitcoinnetworkisperiodicallygroupedtogetherina“block”ofrecenttransactions.Tomakesurenounauthorizedtransactionshavebeeninserted,theblockitselfiscomparedtothemostrecentlypublishedblock—yieldingalinkedsequenceofblocks,or“blockchain.”Anewblockisaddedtothechainroughlyeverytenminutes.Withthisdatastructureince,anyBitcoinusercanverifythatapriortransactiondidinfactoccur.Keethetransactionrecordoperationalandupdatedisapublicgood,asitisthefoundationoftheentireBitcoinsystem.Toencourageuserstoassist,theBitcoinsystemperiodically newlymintedbitcoinstotheuserwhosolvesamathematicalpuzzlethatisbasedonthepre-existingcontentsoftheblock(whichpreventstamperingwiththeblockandhencemodifyingpriortransactions)andwhichcanonlybesolvedbycomputationallyintensivemethodsthatincludearandomcomponent.Thus,fastercomputingismorelikelytosolveagivenproblemandwillsolveagreaternumberoftheseproblems,butspeedalonewillnotguar-anteesuccess.Uponsolvingthepuzzle,theuserpublishesa“block”whichcontainsaproof-of-workthatasolutionwascarriedoutalongwithallobservedtransactionsthathavetakencesincethelastpuzzlesolutionwasannouncedandareferencetothepreviouscompleteblock.Afterotherusersverifythesolution,theystartworkingonanewblockcontainingnewoutstandingtransactions.Thisprocessiscalled“mining”andrecursivelyensuresthatthetotalhistoricalorderingonallblocks(“chain”)isagreedbytheentirenetwork.ABitcointransactiondoesnotclear(andhenceisnotfinal)untilithasbeenaddedtotheconsensusblockchain.Transactionbatchesareaddedeverytenminutesonaverage.However,minersarecontinuouslyworkingonaddingblocksoftransactions,andbuildingonprevioustransactions.Bycontinuallypresentingtheirsolutionstothepuzzles,withtheassociatednewtailoftheblockchain,minersareineffect“voting”onthecorrectrecordofBitcointransactions,andinthatwayverifyingthetransactions.Insomecases,atransactionbatchwillbeaddedtotheblockchain,butthenafewminuteslateritwillbealteredbecauseamajorityofminersreachedadifferentsolution.SourcestypicallymendconsideringaBitcointransactionfinalonlyaftersixconfirmations,toassurethatthetransactionistrulyrecordedinapermanentpartoftheblockchain.Whilethisprovidesgreaterassurance,itcreatesadelayofapproximayonehourbeforeaBitcointransactionisfinallyvalidated. 專業(yè)提供CFAFRM全程+講 JournalofEconomicAsminersupdatetheblockchain,theircomputationaleffortscarrysignifi-cantcosts.Inparticular,thecomputerizedproof-of-workcalculationsarequitepower-intensive,consumingmorethan173megawattsofelectricitycontinuously.,thatamountisapproximay20percentofanaveragenuclearpowernt(WorldNuclearAssociation2015),orapproximay$178millionperataverageUSresidentialelectricityprices.ThesecomputationalcostshavegrownsharplyandmayrisefurtherbecauseBitcoinautomaticallyadjustspuzzledifficultysothatthetimeintervalbetweentwoblocksremainsroughlytenminutes.AsmorecomputingpowerjoinstheBitcoinsystem,thepuzzlesautomati-callyemoredifficult,increasingcomputingandelectricityrequirements.Infact,anarmsraceensuedasthepriceofbitcoinrose.Taylor(2013)comparesthedifficultyofsolvingthepuzzletothebitcoin-dollarexchangerate,findingthatesintheexchangerate—bitcoinsingmorevaluableintermsofUSdollars—havebeenfollowedbyincreasesincomputationaldifficulty.Built-inBitcoinincludesseveralbuilt-inincentivestoencourageusefulbehavior.Theminerswhoverifytheblockchainarerewardedwith—whatelse?—bitcoins.Atfirst,minerssolvingthepuzzlereceivedarewardof50bitcoins.Thisrewardisperi-odicallycutinhalf,anditstandsat25asofMarch2015.After21millionbitcoinshavebeenminted,therewardfallstozeroandnofurtherbitcoinswillbecreated.Hence,theprotocoldesignforBitcoinsetsacontrolledpacefortheexpansionofthecurrencyandanultimatelimittothenumberofbitcoinsissued.Minershaveasecondpotentialsourceofrevenue(whichwill etheonlysourceofrevenueonceallbitcoinshavebeencreated).Whenlistingatransac-tion,thebuyerandsellercanalsooffertopaya“transactionfee,”whichisabonuspaymenttowhateverminersolvesthepuzzlethatverifiesthetransaction.Thesefeesareoptional,but97percentofthetransactionsin2014includeafee,mostoftensetatthedefaultrateofthestandardsoftware,0.0001bitcoin.Inrelativeterms,thetransactionfeesarebelow0.1percentoftotaltransactionvalue(M?serandB?hme2014).However,asthemathematicalpuzzles eharder,therewillpresumablybeapointwheretheautomaticrewardforsolvingthepuzzledropsbelowthecostof ngso.Atthatpoint,onepossibilityisthatthosewhowantedaBitcointransactioncouldbiduptheoptionalfees.Houy(2014a)modelsequilibriafortheleveloftransactionwhenthemintingrewarddropsbelowthecostofmining.EarlyinBitcoin’soperation,updatingtheblockchainyieldedbitcoinsmoreoftenandhencemorereadilyperunitofcomputingpowerprovided.ThisdesignbenefitedthosewhorantheBitcointformattheoutset—heltocreatethecriticalmassneededtobootstrapthetform(B?hme2013).Today,someusersstillfindminingprofitable,buteffectiveminingnowrequiresspecializedhardware(particularlywell-suitedtosolvingthemathematicalpuzzlesatissue)aswellaccesstolow-costRequiringminerstosolveapuzzlehelpsavoidcertaintypesoffraud.Inprin-ciple,asystemlikeBitcoincouldvalidatetransactionsusingasimpleconsensusbyRainerB?hme,NicolasChristin,BenjaminEdelman,andTyler majorityvote,withamajorityofconnectedusersabletoaffirmthatagiventrans-actioninfactoccurred.Butthenanattackercouldgamethesystembycreatingnumerousfakeidentities.Inresponse,theBitcoinprotocolmakesitcostlytosubmitfakevotes.ConsistentwiththeInternet’sopenarchitecture,anyonecanconnectmultiplecomputerstotheBitcoinsystem.Butvotingontheauthenticityofatrans-actionrequiresfirstworkingtosolveamathematicalpuzzlethatiscomputationallyhardtosolve(althougheasytoverify).Solvingthepuzzleprovides“proofofwork”;inlieuof“one ,onevote,”Bitcointhusimplementstheprincipleof“onecomputationalcycle,onevote.”Throughthisdesign,theproof-of-workmechanismsimultaneouslydiscouragescreatingnumerousfakeidentitiesandalsoprovidesincentivestoparticipateinverifyingtheblockchain.Comparedwithconventionalpaymentsystems,Bitcoinlacksaernancestructureotherthanitsunderlyingsoftware.Thishasseveralimplicationsforthefunctioningofthesystem.First,Bitcoinimposesnoobligationforafinancialinstitution,paymentprocessor,orotherintermediarytoverifyauser’sidentityorcross-checkwithwatch-listsorembargoedcountries.Second,Bitcoinimposesnoprohibitiononsalesofparticularitems;incontrast,forexample,creditcardnetworkstypicallydisallowallmanneroftransactionsunlawfulintheceofsale(MacCarthy2010).Finally,Bitcoinpaymentsareirreversibleinthattheprotocolprovidesnowayforapayertoreverseanaccidentalorunwantedpurchase,whereasotherpaymenttforms,suchascreditcards,doincludesuchprocedures.Asdiscussedinsubsequentsections,thesedesigndecisionsareintentional—simpli-fyingtheBitcointformandreducingtheneedforcentralarbiters,albeitraisingconcernsforsomeusers. 專業(yè)提供CFAFRM全程+講CentralizationandDecentralizationintheBitcoinThekeyinnovationinBitcoin,comparedtootherformsofcryptographiccash(Chaum1983)orvirtualcurrencies(EuropeanCentralBank2012),isitsdecentral-izedcore.EarlyadopterspraiseddecentralizationandbyallindicationschoseBitcoinbecausetheywantedtouseadecentralizedsystem(Raskin2013).Decentralizationofferscertainadvantages.Itavoidsconcentrationsofpowerthatcouldletasingle ororganizationtakecontrol.Itoftenpromotesavailabilityandresiliencyofacomputersystem,avoidingacentralpointoffailure.Itoffersatleasttheappearanceofgreaterprivacyforusers(andperhapsgreatergenuineprivacy)becauseintheoryaneavesdropadversarycannotobservetransactionsacrossthesystembytargetinganysinglepointoranysingleserver.(However,aswediscussbelow,significantprivacyconcernsremain.)Nonetheless,thedecentralizationtoutedbyBitcoinhasnotfullycometofrui-tion.WhiletheBitcoinprotocolsupportscompletedecentralization(includingthepossibilityofallparticipantsactingasminers),significanteconomicspush JournalofEconomictowardsdefactocentralizationandconcentrationamongasmallnumberofinter-mediariesatvariouslevelsoftheBitcoinecosystem.WereviewfourkeycategoriesofintermediariesthathaveshapedBitcoin’sevolution:currencyexchanges,digitalwalletservices,mixers,andminingpools.Afifthtypeofintermediary,paymentprocessors,isdiscussedfurtherbelow.CurrencyCurrencyexchangesallowuserstotradebitcoinsfortraditionalcurrenciesorothervirtualcurrencies.Mostoperatedoubleauctionswithbidsandasksmuchliketraditionalfinancialmarkets,andchargeacommissionrangingfrom0.2to2percent.Someexchangesoffermoreadvancedtradingtools,suchaslimitorstoporders.Todate,derivativesmarketsandshort-sellingremainrare.Atpresent,manytradesinbitcoinarepaniedbyoneoreventwoconver-sionsfromand/ortoconventionalcurrencies.Furthermore,pricequotesinbitcoinarealmostalwayscomputedinrealtimebyreferencetoafixedamountofconven-tionalcurrency.Thus,Bitcointodayresemblesmoreapaymenttformthanwhateconomistsconsideracurrency.WhilefewtechnicalbarriersimpedesettingupintermediariesintheBitcoinecosystem,therearesignificantregulatoryrequirements.IntheUnitedStates,currencyexchangesgenerallyoperateas“moneytransmitters”andthusmustregisterwiththeFinancialCrimesEnmentNetwork(FinCEN)asmoneyservicesbusi-nesses.Registrationincludesastate-by-statelicensingrequiringbothlegalfeesandpostingbonds.Certificationinasinglestateoftencostsatleast$10,000,sonation-wideparticipationcaneasilyreachsixfiguresonfeesalone.Othercountrieshavebroadlysimilarrules.InGermany,currencyexchangesthatmanagedepositsonbehalfofsareviewedas“depositbanks”withaminimumcapitalrequirement€5Inaddition,currencyexchangesneedonlineinfrastructurecapableofwith-standingattacksincludinghackinganddenial-of-serviceattacks.Forthesereasons,thenumberofBitcoinexchangeshasremainedmodest,andthenumberofBitcoinexchangeswithsignificantvolumehasbeenevensmaller.Inspring2012,theJapan-basedMt.Goxexchangeservedover80percentofallBitcointransactions.However,Mt.Goxcollapsedinearly2014andreportedinitsbankruptcyfiling“l(fā)osing”754,000ofitscustomers’bitcoinsworthapproximay$450millionatthetimeofclosure(Abrams,Matthew,andTabuchi2014).InMarch2015,thesevenlargestexchangeswereBTC,OKCoin,Huobi,Bitfinex,LakeBTC,Bitstamp,andBTC-e,whichjointlyservedmorethan95percentofallbitcointradefromOctober2014toMarch2015(B2015).DigitalWalletBitcoinwalletsaredatafilesthatincludeBitcoinaccounts,recordedtransac-tions,andprivatekeysnecessarytospendortransferthestoredvalue.Someusersinstallspecializedwalletsoftware(suchasArmory,Electrum,orHive)ontheiraldevicestomaintaincontrolovertheirbitcoins.However,manyusers 專業(yè)提供CFAFRM全程+講 thistaskunappealing.Bitcoinwalletsoftwarecanbedifficulttoinstall,andcanimposeoneroustechnicalrequirements—suchasstoringacopyoftheentireblockchain,whichwas30gigabytesasofMarch2015.(Notallparticipantsneedtodown-loadtheentirechain,butthesystemdoesrelyonsomeuserselectingtodoso.)Otherusersworryaboutsecurity:acrashorattackonthecomputerholdingthedigitalwalletcouldcausethelossofauser’sbitcoins.Asaresult,manyusersrelyonadigitalwalletservicethatkeepstherequiredfilesonasharedserverwithaccessviatheweborviaphone-basedapps.Akeydistinctionamongdigitalwalletservicesiswhethertheserviceknowstheaccount’sprivatekey.Someservices(includingB,StrongCoin,andCoinPunk)lettheusermaintaincontroloverprivatekeys,meaningthattheserviceisincapableofspendingtheuser’sbitcoin(norcouldhackersdosoeveniftheyfullyinfiltratedthewalletservice).Forsuchfirms,theusermustkeepandpresenttheprivatekeywhenneeded,andauserwholosesthekeyorallowsittobecompromisedisathighrisk.Incontrast,otherservices(suchasCoinbaseandXapo)requireuserstolettheservicestoretheirprivatekeys,whichincreasesriskifthedigitalwalletserviceiscompromised.Inpractice,digitalwalletservicestendtoincreasecentralization—eitherexpandingtheroleandimportanceofexchanges,oraddinganadditionalservicethatislikelytobecentralizedduetohighfixedcosts,lowmarginalcosts,andlimiteddiversityinusers’needs. 專業(yè)提供CFAFRM全程+講Asinitiallyenvisioned,theBitcointransactionlogshowseachtransactionmadefromeachpayertoeachpayee,alongwiththepublickeysservingaspseudonymsofeach.Asaresult,anyonewhoknowstheidentityofanyuserfromanytransac-tion—perhapsthemailingaddressusedfordeliveryofpurchasedgoods,orthebankaccountusedtopurchasebitcoins—cantrackthatuser’sothertransactionsmadewiththesamepseudonym,bothbeforeandsince.Topreserveprivacyagainstthistactic,mixersletuserspoolsetsoftransactionsinunpredictablecombinations,thuspreventingtrackingacrosstransactions.SupposeAlicewantstopayBobonebitcoin,andCharleswantstopayDaisyonebitcoin.Tomisleadanobserverwhotracksthesepayments,AliceandCharlescouldbothpayamixer“Minnie”andprovideadditional instructionsforMinnietopayBobandDaisyonebitcoineach.AnobserverwouldseeflowsfromAliceandCharlestoMinnie,andfromMinnietoBobandDaisy,butwouldnotbeabletolwhetheritwasAliceor whosentmoneytoBob.Inpractice,mixersmustensurethattimingdoesnotyieldcluesaboutmoneyflows,whichisparticularlydifficultsinceitisrarefordifferentuserstoseektotransmittheexactsameamount.Mixershavebeenusedtopromoteanonymityinonlinecommunications,mostfamouslybytheTornetwork,sotheirlimitationsarenowwidelyknown(DanezisandDiaz2008).Inadditiontostandaloneservices,somemixersareincorporatedasafeatureprovidedbydigitalwallets.Whilemixersseemtoimproveprivacy,theycreateadditionalchallenges.Forone,thefinalityofBitcoinpaymentsleavespayerswithlittlerecourseifamixer JournalofEconomicabscondswiththeirfunds.Furthermore,mixingprotocolsareusuallynotpublic,sotheireffectivenesscannotbeproven.Indeed,correlationsintimingmightstillrevealtransactioncounterparts,particularlyatlittle-usedmixers(M?ser,B?hme,andBreuker2013).Finally,mixerscharge1to3percentoftheamountsent,increasingcostsforthosewhochoosetousethem.MiningAsdiscussedabove,bitcoinsarecreatedwhenaminersuccessfullysolvesamathematicalpuzzle.Thepuzzleshaveesignificantlymoredifficultovertime,andlumpyrewardsmeanaloneminerisnowatriskofcontributingresourcesinanattempttosolveapuzzlebutthenreceivingnoreward.Inresponse,miningpoolsnowcombineresourcesfromnumerousminers.Minersworkindepen-dently,butuponwinningaminersharesearningswithothersinthepool(muchlikeconsumerssharingresourcestobuylotterytickets).AsofMarch2015,thetwolargestpoolsareAntPoolandF2Pool,whichtogetheraccountforaroundone-thirdofBitcoinminingactivities.OversizedminingpoolsthreatenthedecentralizationthatunderpinsBitcoin’strustworthiness.Inseveralinstancesincludingatwelve-hourintervalinJune2014,GHashbrieflyheldmorethan50percentoftotalminingpower,whichcouldhaveallowedGHashpooloperatorstoattemptmanipulations.AnattackerwhoholdsamajorityofBitcoin’scomputationalresourcescanaltersomeofthesystem’srecords,includinginsertingfalsetransactionsandrejectingactualtransactions(albeitwithastrongchancethatotherswillnotice),ordeviatefromtheprotocolrules.UsesofEarly:SilkRoadandOtherIllicitAfterearlyproof-of-concepttransactions,thefirstnotableadoptersofBitcoinwerebusinessesthatsoughtfeaturesnoteasilyavailablethroughalternatives:greateranonymityandtheabsenceofrulesconcerningwhatcouldbeboughtorsold.Oneprominentexampleinvolvedtheonlinesaleofnarcoticsincludingmari-juana,prescriptiondrugs,andbenzodiazepines(aclassofpsychoactivedrugs).Drugshadbeensoldonlineforyears,typicallyoninformalbulletinboardsandonwebsitessuchas“TheFarmer’sMarket,”awebsitethatlistedvariousnarcoticsavailableforpurchasewithpaymentusingotherservicesincluding