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Clustering bitcoin accounts using heuristics

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Editors note: well explore present and future applications of cryptocurrency and blockchain technologies at our upcoming Radar Summit: Bitcoin & the Blockchain on Jan. 27, 2015, in San Francisco.

A few data scientists are starting to play around with cryptocurrency data, and as bitcoin and related technologies start gaining traction, I expect more to wade in. As the space matures, there will be many interesting applications based on analytics over the transaction data produced by these technologies. The blockchain the distributed ledger that contains all bitcoin transactions is publicly available, and the underlying data set is of modest size. Data scientists can work with this data once its loaded into familiar data structures, but producing insights requires some domain knowledge and expertise.

I recently spoke with Sarah Meiklejohn, a lecturer at UCL, and an expert on computer security and cryptocurrencies. She was part of an academic research team that studied pseudo-anonymity (pseudonymity) in bitcoin. In particular, they used transaction data to compare potential anonymity to the actual anonymity achieved by users. A bitcoin user can use many different public keys, but careful research led to a few heuristics that allowed them to cluster addresses belonging to the same user:

In theory, a user can go by many different pseudonyms. If that user is careful and keeps the activity of those different pseudonyms separate, completely distinct from one another, then they can really maintain a level of, maybe not anonymity, but again, cryptographically its called pseudo-anonymity. So, if they are a legitimate businessman on the one hand, they can use a certain set of pseudonyms for that activity, and then if they are dealing drugs on Silk Road, they might use a completely different set of pseudonyms for that, and you wouldnt be able to tell that thats the same user.

It turns out in reality, though, the way most users and services are using bitcoin, was really not following any of the guidelines that you would need to follow in order to achieve this notion of pseudo-anonymity. So, basically, what we were able to do is develop certain heuristics for clustering together different public keys, or different pseudonyms. Im happy to get into the technical details, but Im not sure how relevant they are. The point is that, if you think these are good heuristics, then basically they provided evidence that a certain set of pseudonyms were called into the same owner. In that owner could be a single individual or it could be an entire service, like bit scams or another exchange.

In the course of their research, Sarah and her collaborators realized that addresses used to collect excess bitcoins (change addresses) provided a good clustering mechanism:

If you think about making change with physical cash, if I walk into a physical store and I hand the clerk a $20 bill, and my thing only costs $5, then Im going to get $15 back in change, right? And in bitcoin, that process of making change is actually completely transparent, so you can observe the change public key in the blockchain.

What we tried to do is distinguish change addresses, as we called them, from the legitimate recipient in the transaction. So, in my example in the store, youd see two public keys as the out in that transaction, one of them would receive $5, and the other would receive $15. What we tried to do is develop a heuristic for distinguishing that $15 part of the transaction from the legitimate $5 recipient. That turned out to be much trickier, but that really was the bulk of the work in the project, just trying to make that heuristic as safe as possible.

Once they settled on heuristics with which to cluster addresses, the research project still required a data set for testing their theories. This entailed conducting and following transactions through the bitcoin ledger:

Image courtesy of Sarah Meiklejohn.

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Clustering bitcoin accounts using heuristics

Wikileaks: Classified report detailed assassination shortcomings

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By Jamie Crawford, CNN National Security Producer

updated 5:31 PM EST, Thu December 18, 2014

A classified CIA document was posted by the anti-secrecy group Wikileaks on Thursday.

STORY HIGHLIGHTS

Washington (CNN) -- Targeted assassinations or the capture of senior insurgent leaders in larger counterinsurgency operations can provide both positive and negative outcomes according to a classified CIA document posted by the anti-secrecy group Wikileaks on Thursday.

The use of so-called high-value targeting, or HVT, programs are the subject of a document titled "Best Practices in Counterinsurgency" and labeled as secret -- and not for the eyes of foreign nations -- dates back to July 2009 in the early days of the Obama administration.

According to the document, the CIA assessed the results of such operations by either U.S. government personnel or other countries during operations in Afghanistan, Iraq, Libya, Israel and eight other countries.

READ: Swedish court refuses to revoke Julian Assange's arrest warrant

Use of high-value targeting programs can have beneficial effects such as eroding insurgent effectiveness, weakening insurgent will, and fragmenting or splitting the insurgent group among others.

However, the report cites the possibility of increasing the level of support for insurgent groups, radicalizing an insurgent group's remaining leaders and creating a vacuum for additional radical groups to enter as potential adverse effects for such operations.

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Wikileaks: Classified report detailed assassination shortcomings

Wikileaks pins accused spy Rolando ‘Roly’ Sarraff Trujillo as Cuban political prisoner

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MIAMI -

Rolando "Roly" Sarraff Trujillo was arrested on espionage charges in Cuba in 1995.

Sarraff, now 51, worked as a cryptographer in Cuba's Directorate of Intelligence. About a decade after he was accused of helping the CIA crack the Cuban intelligence codes, his name came up on a document Wikileaks released in 2008 where the U.S. identified him as a political prisoner.

Sarraff was sentenced to 25 years in prison. He had a journalism degree from La Universidad de La Habana and enjoyed painting and writing poetry. His family said he was the subject of random interrogations, and shared a letter he wrote in 2012.

"My spirit is still strong, full of hope, and my honor intact," the letter said in Spanish. "I confront this brutality and severe punishment with the utmost dignity, but without losing my tenderness, the sense of justice and my limited capacity to offer love."

President Barack Obama's administration claimed Wednesday that Cuba released 53 political prisoners, but The White House did not identify any of them, and while releasing three Cuban spies said the release of Alan Gross was a humanitarian gesture.

His family in Cuba hopes Sarraff could be one of the 53 releases.

Sarraff's sisters live in Spain. Katia Sarraff Trujillo, who lives in Palma de Mallorca since 1998, and Vilma Sarraff Trujillo, have been providing updates on their brother on a blog in Spanish.

Their Thursday post was titled "48 hours missing." They told reporters Friday that their parents, Odessa Trujillo and Rolando Sarraff, were afraid that something had happened to their son and blamed the Cuban government for the lack of information.

"We are alarmed at the unjustifiable secrecy and lack of humanity," the family blog post said.

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Wikileaks pins accused spy Rolando 'Roly' Sarraff Trujillo as Cuban political prisoner

Edward Snowden and the Downside to the Industrial Internet …

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The Industrial Internet of Things (IIoT) is the use of Internet of Things technologies by industrial organizations to deliver better performance and enhance competitive advantage not only in an individual facility, but across an industrial organizations supply chain and throughout its value network.

There have been many articles forecasting the explosive growth of the Industrial Internet of Things (IIoT). Without a doubt, IIoT things industrial smart devices that connect to the Internet and are able to collect useful data will greatly outnumber people by many times within a decade. When one considers that IIoT things can include a companys transportation assets, industrial equipment, the products made, and the containers that carry products across a supply chain, it is easy to see why this explosive growth is inevitable.

Cyber security tops the list when it comes to challenges for the Industrial Internet of Things. When one thinks of a hacker getting into a system and shutting down a utility, for example, it is obvious that the consequences of an IIoT security breach could be dire. And the IIoT makes this problem so much greater. Hackers need only a tiny tear in the security fabric and they can get in and cause harm. And as those connected devices grow exponentially, so do the entry points.

Key technologies that can be employed to help secure the IIoT including Network Access Control, Device Security, Encryption, and Industrial Protocol Firewall solutions. But as a colleague, Max Parnell (on the IT Team at ARC), pointed out at a Christmas Party, part of the solution will be based on regulation. And those regulations need to reflect how society balances security and privacy.

Max pointed me to a blog by Robert Hansen, written by one of the top dogs of internet security. Hansen points out that we can structure the Internet to insure anonymity or accountability, but not both. If everything on the Internet could be attributed and tracked back to people, you would have complete accountability. If you knew the packet you sent would be tagged with the information necessary for someone to track you down, youd be extremely unlikely to commit any crimes using the Internet.

On the flip side, 100% attribution is terrible for privacy when youre not doing anything illegal, or if you are a political dissident. The very last thing our forefathers wanted when they were talking amongst themselves in pubs on the East coast, considering creating a new nation, was attribution. They saw fit to write amendments to the constitution to limit unlawful search and seizures, and to allow freedom of speech.

Hansen made the point that as a younger man he would have chosen attribution and security. But that I would now tell my younger self to look beyond security, and really contemplate what a completely secure society would look like.

Ive got to say, when I think about tracking down pedophiles or gun runners, it is easy to side with attribution and security. But in light of the Edward Snowden revelations, and the scope of government surveillance of everyday citizens, my older self is not nearly so sure that is the right path.

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Edward Snowden and the Downside to the Industrial Internet ...

Sneak peek at Data Loss Prevention in SharePoint – plus new mobile encryption viewers – Video

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Sneak peek at Data Loss Prevention in SharePoint - plus new mobile encryption viewers
On this week #39;s show we invite back Asaf Kashi, a lead engineer on the information protection team. We introduce the information protection updates coming to Office 365 and demonstrate the upcoming.

By: OfficeGarageSeries

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Sneak peek at Data Loss Prevention in SharePoint - plus new mobile encryption viewers - Video

German researchers discover a flaw that could let anyone listen to your cell calls.

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German researchers have discovered security flaws that could let hackers, spies and criminals listen to private phone calls and intercept text messages on a potentially massive scale even when cellular networks are using the most advanced encryption now available.

The flaws, to be reported at a hacker conference in Hamburg this month, are the latest evidence of widespread insecurity on SS7, the global network that allows the worlds cellular carriers to route calls, texts and other services to each other. Experts say its increasingly clear that SS7, first designed in the 1980s, is riddled with serious vulnerabilities that undermine the privacy of the worlds billions of cellular customers.

The flaws discovered by the German researchers are actually functions built into SS7 for other purposes such as keeping calls connected as users speed down highways, switching from cell tower to cell tower that hackers can repurpose for surveillance because of the lax security on the network.

Those skilled at the myriad functions built into SS7 can locate callers anywhere in the world, listen to calls as they happen or record hundreds of encrypted calls and texts at a time for later decryption. There also is potential to defraud users and cellular carriers by using SS7 functions, the researchers say.

These vulnerabilities continue to exist even as cellular carriers invest billions of dollars to upgrade to advanced 3G technology aimed, in part, at securing communications against unauthorized eavesdropping. But even as individual carriers harden their systems, they still must communicate with each other over SS7, leaving them open to any of thousands of companies worldwide with access to the network. That means that a single carrier in Congo or Kazakhstan, for example, could be used to hack into cellular networks in the United States, Europe or anywhere else.

Its like you secure the front door of the house, but the back door is wide open, said Tobias Engel, one of the German researchers.

Engel, founder of Sternraute, and Karsten Nohl, chief scientist for Security Research Labs, separately discovered these security weaknesses as they studied SS7 networks in recent months, after The Washington Post reported the widespread marketing of surveillance systems that use SS7 networks to locate callers anywhere in the world. The Post reported that dozens of nations had bought such systems to track surveillance targets and that skilled hackers or criminals could do the same using functions built into SS7. (The term is short for Signaling System 7 and replaced previous networks called SS6, SS5, etc.)

The researchers did not find evidence that their latest discoveries, which allow for the interception of calls and texts, have been marketed to governments on a widespread basis. But vulnerabilities publicly reported by security researchers often turn out to be tools long used by secretive intelligence services, such as the National Security Agency or Britains GCHQ, but not revealed to the public.

Many of the big intelligence agencies probably have teams that do nothing but SS7 research and exploitation, said Christopher Soghoian, principal technologist for the ACLU and an expert on surveillance technology. Theyve likely sat on these things and quietly exploited them.

The GSMA, a global cellular industry group based in London, did not respond to queries seeking comment about the vulnerabilities that Nohl and Engel have found. For the Posts article in August on location tracking systems that use SS7, GSMA officials acknowledged problems with the network and said it was due to be replaced over the next decade because of a growing list of security and technical issues.

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German researchers discover a flaw that could let anyone listen to your cell calls.

Keep encrypted files encrypted when you back them up to the cloud

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After reading my article on encrypting sensitive data, Ian Cooper asked if it was safe "to use one of these encryption tools in conjunction with an online backup service?"

In that previous article, I discussed two separate ways to encrypt a folder filled with sensitive files: Windows own Encrypted File System (EFS) and VeraCrypt, a free, open-source fork of the well-remembered TrueCrypt. This time around, I'll look at how files encrypted with either of these work with two popular online backup services, Mozy and Carbonite.

[Have a tech question? Ask PCWorld Contributing Editor Lincoln Spector. Send your query to answer@pcworld.com.]

Both Mozy and Carbonite encrypt your files and keep them encrypted on their servers. However, the default settings provide a backdoor to that encryption. It's therefore theoretically possible for a hacker, a disgruntled employee, or the NSA to access your files.

Both companies offer a more secure option where you and only you have the key, and therefore, there's no backdoor. Mozy calls this a Personal Encryption Key; Carbonite calls it aPrivate Encryption Key. The problem, of course, is that if you lose the key, you lose your backup.

But even if the backup service has the key to your files, they don't have the key to your EFS encryption. And the files are useless without that. When I tested this, Carbonite wouldn't let me download EFS-encrypted files onto another computer. Mozy let me download the files, but those files just contained gobbledygook.

VeraCrypt's container approach makes this a non-issue. Remember that VeraCrypt keeps your sensitive files in one or more encrypted container files. Open a container with the password, and your files become available in a virtual drive. Close the container, and your files exist only in the encrypted container.

The simple solution: Don't back up the virtual drive. Just back up the container. That will effectively back up the files, but they'll be encrypted before Mozy, Carbonite, or any other online service will ever see them.

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Keep encrypted files encrypted when you back them up to the cloud


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