The rising importance of cryptocurrencies as financial assets pushed their applicability from an object of speculation closer to standard financial instruments such as loans. In this work, we initiate the study of secure protocols that enable fiat-denominated loans collateralized by cryptocurrencies such as Bitcoin. We provide limited-custodial protocols for such loans relying only on trusted arbitration and provide their game-theoretical analysis. We also highlight various interesting directions for future research.

Liquid democracy is a transitive vote delegation mechanism over voting graphs. It enables each voter to delegate their vote(s) to another better-informed voter, with the goal of collectively making a better decision. The question of whether liquid democracy outperforms direct voting has been previously studied in the context of local delegation mechanisms (where voters can only delegate to someone in their neighbourhood) and binary decision problems. It has previously been shown that it is impossible for local delegation mechanisms to outperform direct voting in general graphs. This raises the question: for which classes of graphs do local delegation mechanisms yield good results?

We study selfish mining attacks in longest-chain blockchains like Bitcoin, but where the proof of work is replaced with efficient proof systems - like proofs of stake or proofs of space - and consider the problem of computing an optimal selfish mining attack which maximizes expected relative revenue of the adversary, thus minimizing the chain quality. To this end, we propose a novel selfish mining attack that aims to maximize this objective and formally model the attack as a Markov decision process (MDP). We then present a formal analysis procedure which computes an ϵ-tight lower bound on the optimal expected relative revenue in the MDP and a strategy that achieves this ϵ-tight lower bound, where ϵ > 0 may be any specified precision. Our analysis is fully automated and provides formal guarantees on the correctness. We evaluate our selfish mining attack and observe that it achieves superior expected relative revenue compared to two considered baselines.

We consider a natural problem dealing with weighted packet selection across a rechargeable link, which e.g., finds applications in cryptocurrency networks. The capacity of a link (u,v) is determined by how much nodes u and v allocate for this link. Specifically, the input is a finite ordered sequence of packets that arrive in both directions along a link. Given (u,v) and a packet of weight x going from u to v, node u can either accept or reject the packet. If u accepts the packet, the capacity on link (u,v) decreases by x. Correspondingly, v's capacity on (u,v) increases by x. If a node rejects the packet, this will entail a cost affinely linear in the weight of the packet. A link is “rechargeable” in the sense that the total capacity of the link has to remain constant, but the allocation of capacity at the ends of the link can depend arbitrarily on the nodes' decisions. The goal is to minimise the sum of the capacity injected into the link and the cost of rejecting packets. We show that the problem is NP-hard, but can be approximated efficiently with a ratio of (1+ε)⋅(1+3) for some arbitrary ε>0.

Payment channel networks (PCNs) are a promising solution to the scalability problem of cryptocurrencies. Any two users connected by a payment channel in the network can theoretically send an unbounded number of instant, costless transactions between them. Users who are not directly connected can also transact with each other in a multi-hop fashion. In this work, we study the incentive structure behind the creation of payment channel networks, particularly from the point of view of a single user that wants to join the network. We define a utility function for a new user in terms of expected revenue, expected fees, and the cost of creating channels, and then provide constant factor approximation algorithms that optimise the utility function given a certain budget. Additionally, we take a step back from a single user to the whole network and examine the parameter spaces under which simple graph topologies form a Nash equilibrium.

Traditional blockchains grant the miner of a block full control not only over which transactions but also their order. This constitutes a major flaw discovered with the introduction of decentralized finance and allows miners to perform MEV attacks. In this paper, we address the issue of sandwich attacks by providing a construction that takes as input a blockchain protocol and outputs a new blockchain protocol with the same security but in which sandwich attacks are not profitable. Furthermore, our protocol is fully decentralized with no trusted third parties or heavy cryptography primitives and carries a linear increase in latency and minimum computation overhead.

Payment channel networks (PCNs) are one of the most prominent solutions to the limited transaction throughput of blockchains. Nevertheless, PCNs suffer themselves from a throughput limitation due to the capital constraints of their channels. A similar dependence on high capital is also found in inter-bank payment settlements, where the so-called netting technique is used to mitigate liquidity demands.

Payment channel networks are a promising approach to improve the scalability of cryptocurrencies: they allow to perform transactions in a peer-to-peer fashion, along multihop routes in the network, without requiring consensus on the blockchain. However, during the discovery of cost-efficient routes for the transaction, critical information may be revealed about the transacting entities. This paper initiates the study of privacy-preserving route discovery mechanisms for payment channel networks. In particular, we present LightPIR, an approach which allows a client to learn the shortest (or cheapest in terms of fees) path between two nodes without revealing any information about the endpoints of the transaction to the servers. The two main observations which allow for an efficient solution in LightPIR are that: (1) surprisingly, hub labelling algorithms - which were developed to preprocess “street network like” graphs so one can later efficiently compute shortest paths - also perform well for the graphs underlying payment channel networks, and that (2) hub labelling algorithms can be conveniently combined with private information retrieval. LightPIR relies on a simple hub labeling heuristic on top of existing hub labeling algorithms which leverages the specific topological features of cryptocurrency networks to further minimize storage and bandwidth overheads. In a case study considering the Lightning network, we show that our approach is an order of magnitude more efficient compared to a privacy-preserving baseline based on using private information retrieval on a database that stores all pairs shortest paths.

While messaging systems with strong security guarantees are widely used in practice, designing a protocol that scales efficiently to large groups and enjoys similar security guarantees remains largely open. The two existing proposals to date are ART (Cohn-Gordon et al., CCS18) and TreeKEM (IETF, The Messaging Layer Security Protocol, draft). TreeKEM is the currently considered candidate by the IETF MLS working group, but dynamic group operations (i.e. adding and removing users) can cause efficiency issues. In this paper we formalize and analyze a variant of TreeKEM which we term Tainted TreeKEM (TTKEM for short). The basic idea underlying TTKEM was suggested by Millican (MLS mailing list, February 2018). This version is more efficient than TreeKEM for some natural distributions of group operations, we quantify this through simulations.Our second contribution is two security proofs for TTKEM which establish post compromise and forward secrecy even against adaptive attackers. The security loss (to the underlying PKE) in the Random Oracle Model is a polynomial factor, and a quasipolynomial one in the Standard Model. Our proofs can be adapted to TreeKEM as well. Before our work no security proof for any TreeKEM-like protocol establishing tight security against an adversary who can adaptively choose the sequence of operations was known. We also are the first to prove (or even formalize) active security where the server can arbitrarily deviate from the protocol specification. Proving fully active security – where also the users can arbitrarily deviate – remains open.