Bitcoin has emerged as the most successful cryptographic currency in history. Within two years of its quiet launch in 2009, Bitcoin grew to comprise billions of dollars of economic value despite only cursory analysis of the system’s design. Since then, the challenges for Bitcoin have grown.

A growing literature has identified hidden-but-important properties of the system, discovered attacks, proposed promising alternatives, and singled out difficult future challenges for Bitcoin. Meanwhile a large and vibrant open-source community has proposed and deployed numerous modifications and extensions.

Drawing from a scattered body of knowledge, the authors of this research identify three key components of Bitcoin’s design that can be decoupled. This enables a more insightful analysis of Bitcoin’s properties and future stability. By addressing the challenges for Bitcoin, the authors map the design space for numerous proposed modifications, providing comparative analyses for alternative consensus
mechanisms, currency allocation mechanisms, computational puzzles, and key management tools.

They survey anonymity issues in Bitcoin and provide an evaluation framework for analysing a variety of privacy-enhancing proposals. They also offer new insights on what they term as disintermediation protocols, which absolve the need for trusted intermediaries in an interesting set of applications.

Discover how the challenges for Bitcoin can be overcome. Access this free research report.