Between the advent of cryptocurrencies in 2009 and the price of Bitcoin reaching $1 in 2011, a small community of less than 100 people maintained the blockchain. A lack of miners that could have been fatal to the project.
324 GB of data to analyze
From the start, fans of the nascent crypto world have been raving about this new, anonymous, decentralized payment method. However, an upcoming study from the University of Houston (Texas) refutes these claims with supporting data. First observation: in its early days, Bitcoin was far from being a real decentralized crypto-currency.
Only 64 Bitcoin holders were responsible for the vast majority of transactions (by transaction volume) and mining – the researchers therefore say that “wealth, income and resources were highly concentrated in the Bitcoin community during this period ”.
The researchers added that data analysis techniques have the potential to de-anonymize crypto wallet owners from the start.
Satoshi Nakamoto, named after the so-called inventor of Bitcoin, had ambitions to break away from traditional centralized financial institutions with his cryptocurrency. He wants to replace the trust that underpins the operation of existing systems with cryptographic proofs using blockchains of mathematics and computer networks.
Alyssa Blackburn explained that he did not necessarily succeed. She and her team discovered that in Bitcoin’s first two years, the cryptocurrency could only operate with 64 agents, miners. She found this “not in the spirit of a decentralized cryptocurrency without a trusted third party”.
To find this number, scientists analyzed code, Bitcoin software features, trades on forums, professional blogs, and used more sophisticated investigative tactics. The team targets miners, the heart of the system, as they solve the algorithm that validates bitcoin transactions in exchange for a few tokens.
For example, the researchers followed the “extranonce” thanks to the 324 GB of data archived in the blockchain. These are the 0s and 1s in each string of code that follows computer mining activity. Satoshi Nakamoto tolerated this break in anonymity to monitor his cryptocurrency activity. She disappeared shortly before her disappearance in December 2010.
Anonymity and security issue
The study noted that this small group initially seems willing to help blockchain grow, even though they could have easily made money off the project. As for anonymity, the researchers used data mining techniques to show how bad Bitcoin is at this point.
The research details so-called “address binding” techniques, which include monitoring exchanges within the address range of a wallet. After several transactions, linking Bitcoin wallets becomes relatively trivial depending on the volume of transactions, currency exchange and purchases in the real economy.
Thanks to these techniques, the researchers claim to have succeeded in identifying the key players in the early days of Bitcoin. The newspaper, however, refused to reveal all of these identities, except for long-established cases such as Ross Ulbricht or Michael Mansir-Brown.
The authors wrote that this small number of people involved in the Bitcoin project could have tampered with blockchain data and triggered a “51% attack”. With few active miners, one miner can control most of the network hash rate (or computing power). Meanwhile, that miner could spend the same bitcoin twice or steal another user’s bitcoin.
The study also highlights another fact: Bitcoin has always had problems with decentralization, and the situation today is not much different. A study published in December 2021 showed that 10% of miners control 90% of mining capacity, with only the top 50 miners holding 50% of global mining capacity. This problem manifests itself in the ownership of Bitcoins: 0.01% of owners own a quarter of all Bitcoins. Decentralization is not yet fully achieved.
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Originally, 64 miners kept Bitcoin alive
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