Proof of Work
Bytecoin is the Next Generation cryptocurrency and the first cryptocurrency created with CryptoNote technology. We truly believe that a stable economic system in the future can only be sustained by introducing a number of competing convertible currencies that are privately held, issued by governments, or open currencies, such as Bytecoin. The founding principles of the Bytecoin are as follows:
THE FREEDOM OF CHOICE - Each individual choses the currency that fits their criteria the best. These criteria may be a matter of comfort, gain or personal preferences. Everyone decides for themselves whether he or she wants their money transactions info anonymous or accessible to the general public. Bytecoin allows you to make absolutely anonymous money transfers.
PRO-ECOLOGICAL AND EGALITARIAN - Our idea is that you should spend as little resources to reach your goals as it physically possible. Bytecoin algorithm harnesses the full potential of CPU mining thereby making it affordable for average PC owners. As it is widely known, CPU mining allows for energy saving and more fair currency allocation. Next Generation currencies are deemed way more economical compared to their predecessors that employed resource-inefficient mining for coins emission and transactions.
SAFETY AND RELIABILITY – Bytecoin provides admittedly the strongest cryptologic protection, which eliminates the possibility of identification or tracking any of the parties involved in a transaction. You may add to that immunity to wallet hacking and impossibility of double-spending schemes.
OPENNESS AND DECENTRALIZATION - The source code and workings of the Bytecoin protocols are open and accessible to whoever wants to use or research them. There is no central governing unit that manages the currency. Bytecoin users are spread all over the world with virtually no influence over the ways the currency is regulated.
AUTOMATION OF ROUTINE - We stand for full automation of routine financial operations without intermediaries. The safety and reliability features that are embedded in Bytecoin make automation of the majority of financial operations a reality.
SOCIAL RESPONSIBILITY – Bytecoin is not just a currency but rather a community of people that supports the development of technology, education and science through donations and R&D efforts. We truly believe that only through joint efforts the future of free access to education, technology and financial resources can be achieved.
CryptoNote v 2.0
Privacy and anonymity are the most important aspects of electronic cash. Peer-to-peer payments seek to be concealed from third party’s view, a distinct difference when compared with traditional banking. In particular, T. Okamoto and K. Ohta described six criteria of ideal electronic cash, which included “privacy: relationship between the user and his purchases must be untraceable by anyone”. From their description, we derived two properties which a fully anonymous electronic cash model must satisfy in order to comply with the requirements outlined by Okamoto and Ohta:Untraceability: for each incoming transaction all possible senders are equiprobable.
Unlinkability: for any two outgoing transactions it is impossible to prove they were sent to the same person.
Unfortunately, Bitcoin does not satisfy the untraceability requirement. Since all the transactions that take place between the network’s participants are public, any transaction can be unambiguously traced to a unique origin and final recipient. Even if two participants exchange funds in an indirect way, a properly engineered path-finding method will reveal the origin and final recipient.
It is also suspected that Bitcoin does not satisfy the second property. Some researchers stated that a careful blockchain analysis may reveal a connection between the users of the Bitcoin network and their transactions. Although a number of methods are disputed, it is suspected that a lot of hidden personal information can be extracted from the public database.
Bitcoin’s failure to satisfy the two properties outlined above leads us to conclude that it is not an anonymous but a pseudo-anonymous electronic cash system. Users were quick to develop solutions to circumvent this shortcoming. Two direct solutions were “laundering services” [2] and the development of distributed methods. Both solutions are based on the idea of mixing several public transactions and sending them through some intermediary address; which in turn suffers the drawback of requiring a trusted third party.
Recently, a more creative scheme was proposed by I. Miers et al. “Zerocoin”. Zerocoin utilizes a cryptographic one-way accumulators and zero-knoweldge proofs which permit users to “convert” bitcoins to zerocoins and spend them using anonymous proof of ownership instead of explicit public-key based digital signatures. However, such knowledge proofs have a constant but inconvenient size – about 30kb (based on today’s Bitcoin limits), which makes the proposal impractical. Authors admit that the protocol is unlikely to ever be accepted by the majority of Bitcoin users.
Untraceable payments
The ordinary digital signature (e.g. (EC)DSA, Schnorr, etc…) verification process involves the public key of the signer. It is a necessary condition, because the signature actually proves that the author possesses the corresponding secret key. But it is not always a sufficient condition.Ring signature is a more sophisticated scheme, which in fact may demand several different public keys for verification. In the case of ring signature, we have a group of individuals, each with their own secret and public key. The statement proved by ring signatures is that the signer of a given message is a member of the group. The main distinction with the ordinary digital signature schemes is that the signer signer needs a single secret key, but a verifier cannot establish the exact identity of the signer. Therefore, if you encounter a ring signature with the public keys of Alice, Bob and Carol, you can only claim that one of these individuals was the signer but you will not be able to pinpoint him or her.
This concept can be used to make digital transactions sent to the network untreaceable by using the public keys of other members in the ring signature one will apply to the transaction. This approach proves that the creator of the transaction is eligible to spend the amount specified in the transaction but his identity will be indistinguishable from the users whose public keys he used in his ring signatures.
It should be noted that foreign transactions do not restrict you from spending your own money. Your public key may appear in dozens of others’ ring signatures but only as a muddling factor (even if you already used the corresponding secret key for signing your own transaction). Moreover, if two users create ring signatures with the same set of public keys, the signatures will be different (unless they use the same private key).
Unlinkable transactions
Normally, when you post your public address, anyone can check all your incoming transactions even if they are hidden behind a ring signature. To avoid linking you can create hundreds of keys and send them to your payers privately, but that deprives you of the convenience of having a single public address.CryptoNote solves this dilemma by an automatic creation of multiple unique one-time keys, derived from the single public key, for each p2p payment. The solution lies in a clever modification of theDiffie-Hellman exchange protocol. Originally it allows two parties to produce a common secret key derived from their public keys. In our version the sender uses the receiver’s public address and his own random data to compute a one-time key for the payment.
The sender can produce only the public part of the key, whereas only the receiver can compute the private part; hence the receiver is the only one who can release the funds after the transaction is committed. He only needs to perform a single-formula check on each transactions to establish if it belongs to him. This process involves his private key, therefore no third party can perform this check and discover the link between the one-time key generated by the sender and the receiver’s unique public address.
An important part of our protocol is usage of random data by the sender. It always results in a different one-time key even if the sender and the receiver both remain the same for all transactions (that is why the key is called “one-time”). Moreover, even if they are both the same person, all the one-time keys will also be absolutely unique.
Double-spending proof
Fully anonymous signatures would allow spending the same funds many times which, of course, is incompatible with any payment system’s principles. The problem can be fixed as follows.A ring signature is actually a class of crypto-algorithms with different features. The one CryptoNote uses is the modified version of the “Traceable ring signature” [1]. In fact we transformed traceability into linkability. This property restricts a signer’s anonymity as follows: if he creates more than one ring signature using the same private key (the set of foreign public keys is irrelevant), these signatures will be linked together which indicates a double-spending attempt.
To support linkability CryptoNote introduced a special marker being created by a user while signing, which we called a key image. It is the value of a cryptographic one-way function of the secret key, so in math terms it is actually an image of this key. One-wayness means that given only the key image it is impossible to recover the private key. On the other hand, it is computationally impossible to find a collision (two different private keys, which have the same image). Using any formula, except for the specified one, will result in an unverifiable signature. All things considered, the key image is unavoidable, unambiguous and yet an anonymous marker of the private key.
All users keep the list of the used key images (compared with the history of all valid transactions it requires an insignificant amount of storage) and immediately reject any new ring signature with a duplicate key image. It will not identify the misbehaving user, but it does prevent any double-spending attempts, caused by malicious intentions or software errors.
Blockchain analysis resistance
There are many academic papers dedicated to the analysis of the Bitcoin’s blockchain. Their authors trace the money flow, identify the owners of coins, determine wallet balances and so on. The ability to make such analysis is due to the fact that all the transfers between addresses are transparent: every input in a transaction refers to a unique output. Moreover, users often re-use their old addresses, receiving and sending coins from them many times, which simplifies the analyst’s work. It happens unintentionally: if you have a public address (for example, for donations), you are sure to use this address in many inputs and transactions.CryptoNote is designed to mitigate the risks associated with key re-usage and one-input-to-one-output tracing. Every address for a payment is a unique one-time key, derived from both the sender’s and the recipient’s data. It can appear twice with a probability of a 256-bit hash collision. As soon as you use a ring signature in your input, it entails the uncertainty: which output has just been spent?
Trying to draw a graph with addresses in the vertices and transactions on the edges, one will get a tree: a graph without any cycles (because no key/address was used twice). Moreover, there are billions of possible graphs, since every ring signature produces ambiguity. Thus, you can’t be certain from which possible sender the transaction-edge comes to the address-vertice. Depending on the size of the ring you will guess from “one out of two” to “one out of a thousand”. Every next transaction increases the entropy and creates additional obstacles for an analyst.
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