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University says Bitcoin is incapable of protecting users' IP addresses

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November 27, 2014

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According to some current research from the University of Luxembourg, the cyber currency Bitcoin, meant to usher in a new age of anonymous transactions, is now considered useless at protecting users' IP addresses.

In an Association of Computing Machinery (ACM) conference whitepaper by Alex Biryukov, Dmitry Khovratovich and Ivan Pustogarov of the Laboratory of Algorithmics, Cryptology and Security, “few computers” and a budget of €1,500 for servers and traffic charges should be enough to start unmasking users' addresses with as much as a 60 percent accuracy.

If an attacker needed to be stealthy, their success rate would drop to 11 percent, according to Biryukov.

In what they call “a generic method to deanonymize a significant fraction of Bitcoin users and correlate their pseudonyms with public IP addresses”, the authors say clients can be uniquely identified by their “entry nodes” and that these identify the origin of the transaction.

“In a concrete example, an attacker with a few GB of storage and no more than 50 connections to each Bitcoin server can disclose the sender's IP address in 11 percent of all transactions generated in the Bitcoin network”, the paper claims.

Even more scary, the researchers say they can identify users behind NAT firewalls and think their attack could be extended to other P2P networks.

The key phase of the researchers' attack includes four steps:

1) Getting a list of Bitcoin servers using the GETADDR message and working out if the responder is a server using the ADDR response and sending it a VERSION message.

2) Building a list of nodes as targets for deanonymisation.

3) Mapping clients to entry nodes.

4) Mapping transactions to entry nodes.

The whitepaper notes that TOR would protect against this, but that can be defeated if the attacker is willing to take a risk.

Overall, Bitcoin servers can be prohibited from accepting TOR connections, but refusing those connections would be noticed by the system admin.

Also likely to be noticed-- to get their 60 percent deanonymisation rate it required “a slight DoS of the network”.

“This Bitcoin network analysis segment, combined with previous research on transaction flows reveals that the level of anonymity in the Bitcoin network is quite low,” explains Dr. Alex Biryukov in this announcement, which adds that the research team is currently discussing possible patches with Bitcoin's systems developers.

Source: The University of Luxembourg.

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