Abstract
The blockchain technology introduced by bitcoin, with its decentralised peer-to-peer network and cryptographic protocols, provides a public and accessible database of bitcoin transactions that have attracted interest from both economics and network science as an example of a complex evolving monetary network. Despite the known cryptographic guarantees present in the blockchain, there exists significant evidence of inconsistencies and suspicious behavior in the chain. In this paper, we examine the prevalence and evolution of two types of anomalies occurring in coinbase transactions in blockchain mining, which we reported on in earlier research. We further develop our techniques for investigating the impact of these anomalies on the blockchain transaction network, by building networks induced by anomalous coinbase transactions at regular intervals and calculating a range of network measures, including degree correlation and assortativity, as well as inequality in terms of wealth and anomaly ratio using the Gini coefficient. We obtain time series of network measures calculated over the full transaction network and three sub-networks. Inspecting trends in these time series allows us to identify a period in time with particularly strange transaction behavior. We then perform a frequency analysis of this time period to reveal several blocks of highly anomalous transactions. Our technique represents a novel way of using network science to detect and investigate cryptographic anomalies.
Highlights
Blockchain technology contains both structural and operational properties that are designed to safeguard it, including an underlying open decentralized peer-to-peer network between miners, cryptographic protocols, and validation of transactions between users
The blockchain itself is an 80 byte block header sequence which is used to both cryptographically certify the transactions belonging to any given mined block, and to provide a proof of work target in the form of a nonce which is used by miners to find a block header that can be used to commit a set of bitcoin transactions
This latter is achieved with a 4 byte nonce, effectively a 32 bit unsigned integer which in the public code is repeatedly incremented by the mining software in order to find a value which results in a double SHA256 operation on the block header that gives a value that is less than the difficulty level governing their mining Difficulty levels are continuously adjusted to maintain a constant rate of mining around 10 minutes/block on average
Summary
Blockchain technology contains both structural and operational properties that are designed to safeguard it, including an underlying open decentralized peer-to-peer network between miners, cryptographic protocols, and validation of transactions between users. The blockchain itself is an 80 byte block header sequence which is used to both cryptographically certify the transactions belonging to any given mined block, and to provide a proof of work target in the form of a nonce which is used by miners to find a block header that can be used to commit a set of bitcoin transactions This latter is achieved with a 4 byte nonce, effectively a 32 bit unsigned integer which in the public code is repeatedly incremented by the mining software in order to find a value which results in a double SHA256 operation on the block header that gives a value that is less than the difficulty level governing their mining Difficulty levels are continuously adjusted to maintain a constant rate of mining around 10 minutes/block on average. Whilst parts of the block header are predictable, notably the version, difficulty and most of the timestamp field, the Merkle-Damgård hash, the previous block hash and the nonce should all be randomly distributed, as they are dependent on properties of the SHA256 algorithm
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