- cypherpunks - lists.cpunks.org

Re: [zs-p2p] how to use Tor securely (Re: Silk Road founder arrested ...)
by Eugen Leitl 08 Oct '13

08 Oct '13

----- Forwarded message from Tony Arcieri <bascule(a)gmail.com> ----- Date: Sat, 5 Oct 2013 14:52:33 -0700 From: Tony Arcieri <bascule(a)gmail.com> To: zs-p2p(a)zerostate.is Cc: info(a)postbiota.org Subject: Re: [zs-p2p] how to use Tor securely (Re: Silk Road founder arrested ...) Message-ID: <CAHOTMVJRS8CqVgBTU=gk+16_BdxFxkMTOfzXmVjvJ7D+=KtyvA(a)mail.gmail.com> Reply-To: zs-p2p(a)zerostate.is On Fri, Oct 4, 2013 at 2:35 PM, Eugen Leitl <eugen(a)leitl.org> wrote: > I think that it is inevitable that in the future "decentralized web apps" > will be written in > either Javascript + LAFS, or else Javascript + some-other-decentralized- > storage-system. The Cryptosphere is a heavily Tahoe-LAFS inspired decentralized storage system which is specifically focusing on decentralized HTML+JS apps, FYI: http://cryptosphere.org/ -- Tony Arcieri _______________________________________________ zs-p2p mailing list zs-p2p(a)zerostate.is https://lists.zerostate.is/mailman/listinfo/zs-p2p ----- End forwarded message ----- -- Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://ativel.com http://postbiota.org AC894EC5: 38A5 5F46 A4FF 59B8 336B 47EE F46E 3489 AC89 4EC5

1 0

[tor-talk] What the NSA cares about getting and defenses
by Eugen Leitl 08 Oct '13

08 Oct '13

----- Forwarded message from Watson Ladd <watsonbladd(a)gmail.com> ----- Date: Mon, 7 Oct 2013 19:13:26 -0700 From: Watson Ladd <watsonbladd(a)gmail.com> To: tor-talk(a)lists.torproject.org Subject: [tor-talk] What the NSA cares about getting and defenses Message-ID: <CACsn0cn1mGUWf7WYyNHn1Mnw8sWWqm3r+xX9wMhnd+iPmyA4_g(a)mail.gmail.com> Reply-To: tor-talk(a)lists.torproject.org Prompted by the Ars Technica reporting on QUANTUM, I took a look at the slide and read the text, as well as compared to the MULLINIZE document describing NAT breaking. My conclusion is that the NSA obtains significant amounts of information from user activity in between closing browsers, and that current Tor Browser Bundle remains vulnerable to this attack. QUANTUM appears to rely on inserting fake references to third party assets and manipulating cookies in the requests made by the browser in response. I propose that we block third party cookies unless over HTTPS to mitigate this problem, and try to encourage users to use more frequent new identities. MULLINIZE achieves the reliable tracking of individual users behind a NAT through similar tricks. It is clear that the NSA views this information as valuable, even without real-world addresses to tie to it. Linkability across pages is difficult: breaking sessions is a major cost of the obvious no cookies approach to preventing this sort of attack. Sincerely, Watson -- tor-talk mailing list - tor-talk(a)lists.torproject.org To unsusbscribe or change other settings go to https://lists.torproject.org/cgi-bin/mailman/listinfo/tor-talk ----- End forwarded message ----- -- Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://ativel.com http://postbiota.org AC894EC5: 38A5 5F46 A4FF 59B8 336B 47EE F46E 3489 AC89 4EC5

1 0

[tor-talk] Convergence and Exit Nodes
by Eugen Leitl 08 Oct '13

08 Oct '13

----- Forwarded message from Sean Alexandre <sean(a)alexan.org> ----- Date: Mon, 7 Oct 2013 21:21:49 -0400 From: Sean Alexandre <sean(a)alexan.org> To: tor-talk(a)lists.torproject.org Subject: [tor-talk] Convergence and Exit Nodes Message-ID: <20131008012149.GA17533@tuzo> User-Agent: Mutt/1.5.21 (2010-09-15) Reply-To: tor-talk(a)lists.torproject.org In light of FoxAcid and the NSA hijacking traffic coming out of exit nodes [1], I'm wondering about the possibilities for building counter measures into exit nodes. To start it might be something as simple as bundling some type alternate CA system such Convergence into exit nodes [2]. Have exit nodes compare what they're seeing, and raise a flag if they see anything suspicious. Over time this could be built out into a fuller set of tools: honey pot HTTP requests to get more info on odd certs and DNS responses, etc. Run responses through automated Tor Browser Bundles on VMs that do system monitoring to watch for exploits, etc, etc. It seems this is an area with a lot of potential for increasing the safety of Tor users. The main goal would be to more quickly expose 0days being used to compromise users, and get them fixed. Also, to flag suspicious IP addresses. Thoughts? [1] http://www.theguardian.com/world/2013/oct/04/tor-attacks-nsa-users-online-a… [2] https://en.wikipedia.org/wiki/Convergence_%28SSL%29 -- tor-talk mailing list - tor-talk(a)lists.torproject.org To unsusbscribe or change other settings go to https://lists.torproject.org/cgi-bin/mailman/listinfo/tor-talk ----- End forwarded message ----- -- Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://ativel.com http://postbiota.org AC894EC5: 38A5 5F46 A4FF 59B8 336B 47EE F46E 3489 AC89 4EC5

1 0

Bruce Schneier on the good, old air gap
by Eugen Leitl 07 Oct '13

07 Oct '13

http://www.wired.com/opinion/2013/10/149481/ Want to Evade NSA Spying? Don’t Connect to the Internet BY BRUCE SCHNEIER 10.07.13 6:30 AM Photo: Ariel Zambelich / WIRED; Illustration: Ross Patton / WIRED Since I started working with Snowden’s documents, I have been using a number of tools to try to stay secure from the NSA. The advice I shared included using Tor, preferring certain cryptography over others, and using public-domain encryption wherever possible. I also recommended using an air gap, which physically isolates a computer or local network of computers from the internet. (The name comes from the literal gap of air between the computer and the internet; the word predates wireless networks.) But this is more complicated than it sounds, and requires explanation. Since we know that computers connected to the internet are vulnerable to outside hacking, an air gap should protect against those attacks. There are a lot of systems that use — or should use — air gaps: classified military networks, nuclear power plant controls, medical equipment, avionics, and so on. Osama Bin Laden used one. I hope human rights organizations in repressive countries are doing the same. Air gaps might be conceptually simple, but they’re hard to maintain in practice. The truth is that nobody wants a computer that never receives files from the internet and never sends files out into the internet. What they want is a computer that’s not directly connected to the internet, albeit with some secure way of moving files on and off. But every time a file moves back or forth, there’s the potential for attack. And air gaps have been breached. Stuxnet was a U.S. and Israeli military-grade piece of malware that attacked the Natanz nuclear plant in Iran. It successfully jumped the air gap and penetrated the Natanz network. Another piece of malware named agent.btz, probably Chinese in origin, successfully jumped the air gap protecting U.S. military networks. These attacks work by exploiting security vulnerabilities in the removable media used to transfer files on and off the air gapped computers. Bruce Schneier is a security technologist and author. His latest book is Liars and Outliers: Enabling the Trust Society Needs to Survive. Since working with Snowden’s NSA files, I have tried to maintain a single air-gapped computer. It turned out to be harder than I expected, and I have ten rules for anyone trying to do the same: 1. When you set up your computer, connect it to the internet as little as possible. It’s impossible to completely avoid connecting the computer to the internet, but try to configure it all at once and as anonymously as possible. I purchased my computer off-the-shelf in a big box store, then went to a friend’s network and downloaded everything I needed in a single session. (The ultra-paranoid way to do this is to buy two identical computers, configure one using the above method, upload the results to a cloud-based anti-virus checker, and transfer the results of that to the air gap machine using a one-way process.) 2. Install the minimum software set you need to do your job, and disable all operating system services that you won’t need. The less software you install, the less an attacker has available to exploit. I downloaded and installed OpenOffice, a PDF reader, a text editor, TrueCrypt, and BleachBit. That’s all. (No, I don’t have any inside knowledge about TrueCrypt, and there’s a lot about it that makes me suspicious. But for Windows full-disk encryption it’s that, Microsoft’s BitLocker, or Symantec’s PGPDisk — and I am more worried about large U.S. corporations being pressured by the NSA than I am about TrueCrypt.) 3. Once you have your computer configured, never directly connect it to the internet again. Consider physically disabling the wireless capability, so it doesn’t get turned on by accident. 4. If you need to install new software, download it anonymously from a random network, put it on some removable media, and then manually transfer it to the air gapped computer. This is by no means perfect, but it’s an attempt to make it harder for the attacker to target your computer. 5. Turn off all auto-run features. This should be standard practice for all the computers you own, but it’s especially important for an air-gapped computer. Agent.btz used autorun to infect U.S. military computers. 6. Minimize the amount of executable code you move onto the air-gapped computer. Text files are best. Microsoft Office files and PDFs are more dangerous, since they might have embedded macros. Turn off all macro capabilities you can on the air-gapped computer. Don’t worry too much about patching your system; in general, the risk of the executable code is worse than the risk of not having your patches up to date. You’re not on the internet, after all. 7. Only use trusted media to move files on and off air-gapped computers. A USB stick you purchase from a store is safer than one given to you by someone you don’t know — or one you find in a parking lot. 8. For file transfer, a writable optical disk (CD or DVD) is safer than a USB stick. Malware can silently write data to a USB stick, but it can’t spin the CD-R up to 1000 rpm without your noticing. This means that the malware can only write to the disk when you write to the disk. You can also verify how much data has been written to the CD by physically checking the back of it. If you’ve only written one file, but it looks like three-quarters of the CD was burned, you have a problem. Note: the first company to market a USB stick with a light that indicates a write operation — not read or write; I’ve got one of those — wins a prize. 9. When moving files on and off your air-gapped computer, use the absolute smallest storage device you can. And fill up the entire device with random files. If an air-gapped computer is compromised, the malware is going to try to sneak data off it using that media. While malware can easily hide stolen files from you, it can’t break the laws of physics. So if you use a tiny transfer device, it can only steal a very small amount of data at a time. If you use a large device, it can take that much more. Business-card-sized mini-CDs can have capacity as low as 30 MB. I still see 1-GB USB sticks for sale. 10. Consider encrypting everything you move on and off the air-gapped computer. Sometimes you’ll be moving public files and it won’t matter, but sometimes you won’t be, and it will. And if you’re using optical media, those disks will be impossible to erase. Strong encryption solves these problems. And don’t forget to encrypt the computer as well; whole-disk encryption is the best. One thing I didn’t do, although it’s worth considering, is use a stateless operating system like Tails. You can configure Tails with a persistent volume to save your data, but no operating system changes are ever saved. Booting Tails from a read-only DVD — you can keep your data on an encrypted USB stick — is even more secure. Of course, this is not foolproof, but it greatly reduces the potential avenues for attack. Yes, all this is advice for the paranoid. And it’s probably impossible to enforce for any network more complicated than a single computer with a single user. But if you’re thinking about setting up an air-gapped computer, you already believe that some very powerful attackers are after you personally. If you’re going to use an air gap, use it properly. Of course you can take things further. I have met people who have physically removed the camera, microphone, and wireless capability altogether. But that’s too much paranoia for me right now.

3 3

[zfs] [Review] 4185 New hash algorithm support
by Eugen Leitl 07 Oct '13

07 Oct '13

----- Forwarded message from Zooko Wilcox-OHearn <zooko(a)leastauthority.com> ----- Date: Mon, 7 Oct 2013 21:17:14 +0000 From: Zooko Wilcox-OHearn <zooko(a)leastauthority.com> To: zfs(a)lists.illumos.org Subject: [zfs] [Review] 4185 New hash algorithm support Message-ID: <CAM_a8JxVeY4LNhmmXFzAFWOfgN0Z0KxLkENTCVrhq_moG481Cg(a)mail.gmail.com> Reply-To: zfs(a)lists.illumos.org Hi folks: I just joined this list because I saw this thread. I'm one of the architects of a distributed storage system named Tahoe-LAFS (https://Tahoe-LAFS.org) It has quite a few things in common with ZFS, architecturally, but it is also very different from ZFS, because it's not so much a real *filesystem* as it is like a BitTorrent that has an upload button as well as a download button. But it is like ZFS inasmuch as they both involve a heck of a lot of hashing for error-detection. I'm also an author of a secure hash function which has been designed for this kind of usage and which you should consider as an alternative to SHA-256, Edon-R, or Skein for use in ZFS. It is named BLAKE2. Here are the slides I presented about BLAKE2 at a recent academic crypto conference: ¹. ¹ https://blake2.net/acns/slides.html The slides mention ZFS. ZFS is mentioned on a slide with a list of tools that use secure hash functions for data-intensive purposes. Out of the list there, Tahoe-LAFS and ZFS are the only ones that use a hash function which is actually secure — SHA-256. The others all use hash functions that are known to be more or less unsafe — MD5 and SHA-1. So, before I go on with my pitch for why you should consider BLAKE2, first please clarify for me whether ZFS really needs a collision-resistant hash function, or whether it needs only a MAC. I had thought until now that ZFS doesn't need a collision-resistant hash unless dedup is turned on, and that if dedup is turned on it needs a collision-resistant hash. But this thread seems to indicate that even when dedup is turned on, it might be possible to use a MAC, by having a pool-wide secret to use for the MAC key… If I understand correctly (which I probably don't), that would make it impossible for anyone who doesn't know the secret to cause collisions during dedup, but still possible for someone who knows the secret (presumably root on that system, or someone who stole the secret) to generate blocks that would collide during dedup. If you used a collision-resistant hash for that purpose, then nobody would be able to cause collisions. If you need a MAC, I suggest Poly1305-AES. It is very efficient, has a nice proof that it is as secure as AES is, and it is part of a new proposed cipher suite for TLS ². ² http://tools.ietf.org/html/draft-agl-tls-chacha20poly1305-01 If you need a collision-resistant hash function, I suggest BLAKE2. It is more efficient than SHA-256, Skein, or Keccak (see ³), and it has a better reputation among cryptographers than Edon-R has. In fact, BLAKE2's parent, BLAKE, was rated by NIST as being even more well-studied than Keccak was — see my slides, linked above, for quotes from NIST's final report on the SHA-3 contest. ³ http://bench.cr.yp.to/results-hash.html#amd64-hydra8 I get the impression that BLAKE2 has gotten a certain "mind-share" among cryptographers, because after this article ⁴ from the Center for Democracy and Technology came out, questioning NIST's plans to modify SHA-3 to improve its performance, there has been a heated discussion on the SHA-3 mailing list, and several of the cryptographers in that discussion (including the inventors of Keccak) have mentioned BLAKE2 as an example of a high-performance hash function. There has been one academic research paper analyzing BLAKE2 so far: ⁵ (in addition to a ton of them analyzing its predecessor, BLAKE, during the SHA-3 contest). ⁴ https://www.cdt.org/blogs/joseph-lorenzo-hall/2409-nist-sha-3 ⁵ http://eprint.iacr.org/2013/467 In addition to being high-performance in normal single-stream mode, BLAKE2 comes with parallelized modes, so that you can use 4 or 8 CPU cores to compute a hash up to 4- or 8- times as fast. You can get the academic papers, source code (both simple reference implementations and optimized implementations in various languages), test vectors, and so on: https://blake2.net Regards, Zooko Wilcox-O'Hearn Founder, CEO, and Customer Support Rep https://LeastAuthority.com Freedom matters. ------------------------------------------- illumos-zfs Archives: https://www.listbox.com/member/archive/182191/=now RSS Feed: https://www.listbox.com/member/archive/rss/182191/22842876-6fe17e6f Modify Your Subscription: https://www.listbox.com/member/?member_id=22842876&id_secret=22842876-a25d3… Powered by Listbox: http://www.listbox.com ----- End forwarded message ----- -- Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://ativel.com http://postbiota.org AC894EC5: 38A5 5F46 A4FF 59B8 336B 47EE F46E 3489 AC89 4EC5

1 0

Re: [Cryptography] Universal security measures for crypto primitives
by grarpamp 07 Oct '13

07 Oct '13

On Oct 7, 2013, at 1:43 AM, Peter Gutmann <pgut001(a)cs.auckland.ac.nz> wrote: > Given the recent debate about security levels for different key sizes, the > following paper by Lenstra, Kleinjung, and Thome may be of interest: > > "Universal security from bits and mips to pools, lakes and beyond" > http://eprint.iacr.org/2013/635.pdf On Mon, Oct 7, 2013 at 10:46 AM, Jerry Leichter <leichter(a)lrw.com> wrote: > Then: "...fundamental limits will let you make about 3*10^94 ~ 2^315 [bit] flips > and store about 2^315 bits Then perhaps by the time that engine gets near 256 bits done crunching you, any given secret holder will be either dead, too old / pardonable, or society will have moved on, thereby placing the secret into one of historical value only. It would probably also cost about 2^315 bits to build and operate. Not many 100yr secrets out there besides grand conspiracies and whodunit's, and those don't really need crypto. Might as well bump everything to 512 just to be safe from physics ;)

1 0

[Cryptography] Iran and murder
by Eugen Leitl 07 Oct '13

07 Oct '13

----- Forwarded message from John Kelsey <crypto.jmk(a)gmail.com> ----- Date: Mon, 7 Oct 2013 12:03:20 -0400 From: John Kelsey <crypto.jmk(a)gmail.com> To: Phillip Hallam-Baker <hallam(a)gmail.com> Cc: "cryptography(a)metzdowd.com" <cryptography(a)metzdowd.com>, "James A. Donald" <jamesd(a)echeque.com> Subject: [Cryptography] Iran and murder Message-Id: <81634C0C-DC57-4AED-80B3-74FEDBC859B9(a)gmail.com> X-Mailer: iPad Mail (10B329) Alongside Phillip's comments, I'll just point out that assassination of key people is a tactic that the US and Israel probably don't have any particular advantages in. It isn't in our interests to encourage a worldwide tacit acceptance of that stuff. I suspect a lot of the broad principles we have been pushing (assassinations and drone bombings can be done anywhere, cyber attacks against foreign countries are okay when you're not at war, spying on everyone everywhere is perfectly acceptable policy) are in the short-term interests of various powerful people and factions in the US, but are absolutely horrible ideas when you consider the long-term interests of the US. We are a big, rich, relatively free country with lots of government scientists and engineers (especially when you consider funding) and tons of our economy and our society moving online. We are more vulnerable to widespread acceptance of these bad principles than almost anyone, ultimately, But doing all these things has won larger budgets and temporary successes for specific people and agencies today, whereas the costs of all this will land on us all in the future. --John _______________________________________________ The cryptography mailing list cryptography(a)metzdowd.com http://www.metzdowd.com/mailman/listinfo/cryptography ----- End forwarded message ----- -- Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://ativel.com http://postbiota.org AC894EC5: 38A5 5F46 A4FF 59B8 336B 47EE F46E 3489 AC89 4EC5

1 0

interesting commercial cjdns project: Enigmabox
by Eugen Leitl 07 Oct '13

07 Oct '13

Just came across http://enigmabox.net/ which is a commercial project using cjdns/Hyperboria for transport and offers end to end encrypted VoIP and operates http (and more?) exits. The hardware seems to be PCEngines ALIX. It doesn't ship with Tor, but Tor can be used with it. Don't see any open source, but users are getting root access on the system.

1 0

Re: [tor-talk] Freenet and hidden services
by Eugen Leitl 07 Oct '13

07 Oct '13

----- Forwarded message from str4d <str4d(a)i2pmail.org> ----- Date: Mon, 7 Oct 2013 10:58:41 +0000 (UTC) From: str4d <str4d(a)i2pmail.org> To: tor-talk(a)lists.torproject.org Subject: Re: [tor-talk] Freenet and hidden services X-Mailer: smtp.postman.i2p - Official I2P Mailer Message-Id: <20131007105841.28054AE2B3(a)smtp.postman.i2p> Reply-To: tor-talk(a)lists.torproject.org -----BEGIN PGP SIGNED MESSAGE----- Hash: SHA512 I consider Tahoe-LAFS to be the (current) best solution for this. It provides a distributed data store, which can be used for hosting (with a Javascript "web server"). I know Tahoe works with Tor via SOCKS but I don't personally know of any active networks. Tahoe has been used in I2P as a distributed data store for a long time, and there are several "deepsites" hosted in it. We are actively working to make Tahoe integrate better with Tor/I2P. Zooko recently posted a *much* better summary of this: https://cpunks.org//pipermail/cypherpunks/2013-October/001242.html str4d On 10/07/2013 08:11 PM, Jerzy Łogiewa wrote: > Do you mean if Tor wold have distributed data store like freenet? > > Nice idea, please implement this. :~ > > -- Jerzy Łogiewa -- jerzyma(a)interia.eu > > On Oct 6, 2013, at 3:26 AM, It's Good to be Alive wrote: > >> Hi, I'm fairly new at Tor, and this is my first time on a mailing >> list, so if there's a better place to ask, let me know. Are >> there any plans, long-term or short, for augmenting Tor with >> Freenet-style resilient, distributed, encrypted hosting in place >> of the current hidden-service model? I understand that they are >> different projects with different goals, but in the wake of the >> Freedom Hosting fiasco it seems that the idea has merit. >> Certainly both sides would benefit? Freenet is not always >> anonymous, and hidden services are not always resilient, but >> together... What are the pros and cons of this idea, and what >> stands in the way of implementing it? Just curious. Cheers! >> Thanks for your time. > -----BEGIN PGP SIGNATURE----- Version: GnuPG v1.4.12 (GNU/Linux) iQEcBAEBCgAGBQJSUpPHAAoJENXeOJaUpGWyy/4H/36aYQmjKCPYxT8SdYEL2vOV IJ/vhIhWFeSkS/VKXtMHyP272HR+J+oTQ+IqeFYVD+MZFXWB3+lpoqkvsG8YhCDY yq2k7M8y37vnxwt+KhrEL4Ql6tcwHuA4LcePw9mT1EiPhDFrUKCa2HBIz6SZ7IDz NNN9ISBkt4eslF9k3vUnqWUA4S/Wd4geTtKMJBxgIfXzt0p/ppSm5LR8tSwo/Yxc QMB4SL0toj1srv/fjFKR/Gy4TU3rww9sCr0rDlTtlOx8JVjc9imEynq00WIlQwi1 x1jDLvKvqg2hricJjVMHXRwhERadQjgg2FHxyaE2fpfhOZ6uHjZ7U9XLZTpEFnM= =gliq -----END PGP SIGNATURE----- -- tor-talk mailing list - tor-talk(a)lists.torproject.org To unsusbscribe or change other settings go to https://lists.torproject.org/cgi-bin/mailman/listinfo/tor-talk ----- End forwarded message ----- -- Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://ativel.com http://postbiota.org AC894EC5: 38A5 5F46 A4FF 59B8 336B 47EE F46E 3489 AC89 4EC5

1 0

Analysis of Silk Road’s Historical Impact on Bitcoin
by Eugen Leitl 07 Oct '13

07 Oct '13

http://thegenesisblock.com/analysis-silk-roads-historical-impact-bitcoin/ Analysis of Silk Road’s Historical Impact on Bitcoin Oct 3, 2013 Posted By Jonathan Stacke In Featured, News Tagged Bitcoin, Price, Silk Road, Volume Comments 11 Silk Road, the online drug bazaar that has eluded authorities and been ingrained in the bitcoin narrative for years, was shut down yesterday. Ross Ulbricht was named in the court documents outlining Silk Road’s activities, as were a number of key data points that offer insights into the impact the world’s most infamous retail website has had on bitcoin. Ulbricht was caught as a result of human error and excessive risks related to physical delivery of false identification being delivered to his home address in San Francisco from Canada. After tracking the package, authorities found their way to Ulbricht and were able to compile a significant case against him (more details in the official complaint embedded below). Notably, it does not appear he was tracked as the result of any underlying flaws with tor, used for anonymous web browsing, or bitcoin, the only currency accepted on Silk Road. For years the cloaked narcotics website has found its way into bitcoin-oriented conversations, but only now are the qualitative and quantitative data points available to asses Silk Road’s true impact on the fledgling digital currency. A History of Influence Facts offered by federal prosecutors overlayed onto bitcoin trading data tells a convincing story about the intertwined histories of bitcoin and Silk Road. It appears that a significant portion of bitcoin’s early traction and price gains can be traced directly to Silk Road, with that impact waning over time, most dramatically in the past six months. On December 30, 2010, bitcoin was traded at $0.30/BTC. The court documents filed yesterday point to Silk Road’s first known publicity occurring via posts from Ulbricht on internet forums and an explanatory WordPress page beginning on January 27, 2011. Bitcoin tripled in value, reaching parity with USD, just two weeks later on February 8. early 2011 Bitcoin then traded between between $0.65 and $0.80 for the next two months until interest was reignited by coverage in major publications, including TIME Magazine and The New York Times. In the weeks following the NYC piece, bitcoin prices and volume exploded, drawing significant attention from the media. Notably, Gawker broke a story about the Silk Road itself, pushing up the last gain of one of bitcoin’s early bubbles. As bitcoin reached a remarkable 100x year-to-date growth at $30/BTC on June 7, the relationship between Silk Road and bitcoin would see its first true test. On June 8, 2011, Senators Charles Shumer and Joe Manchin wrote a letter to Attorney General Eric Holder, urging him to investigate bitcoin for its relationship to online narcotics purchases, as well as “urge [Holder] to take immediate action and shut down the Silk Road network.” Bitcoin plunged 66% to $10 over the next three days, trending downward to $2 by November 2011. It would seem that in 2011, direct use of bitcoin on Silk Road or speculators on its adoption comprised between 66% and 93% of the currency’s value. 2011 bubble Over the next few months as the calendar rolled over into 2012, once again coverage from a number of important press outlets like TIME and Wired rallied enthusiasm for bitcoin, pushing prices up to a stabilized $5 by February. According to the complaint released yesterday, that is also around the time Ulbricht began to add features to Silk Road, including the establishment of a forum and “stealth mode” for top vendors. In June of 2012, bitcoin began another rally. By this time, infrastructure in the bitcoin world had begun to increase dramatically, including the first bitcoin ASIC companies to begin advertising products and new exchanges being formed. Gawker ran another story about Silk Road in July 2012, which appears to have had positive impact on bitcoin prices, though not nearly to the extent it did previously. The months following proved to be highly transitional, with Bitcoin Foundation putting a public face on the new industry and early 2013 seeing the European financial troubles that led to the climb to $260 in April of this year and unprecedented global attention. Just a few weeks later the markets would see another test of the relationship between Bitcoin and Silk Road. Between April 24 and May 1, Silk Road suffered a series of DDoS attacks that sent bitcoin prices sliding downwards. The negative price action was timed perfectly with the attacks, indicating a strong relationship. While the drop was significant at 35% initially before leveling off around a 25% loss – it was notably lighter than the impact of negative Silk Road news previously. april 2013 ddos Looking at the impact from the most recent news, we see a similar pattern emerging. Despite being the definitive end of Silk Road, with its founder detained and the logos of federal agencies plastered across the site, the impact on bitcoin prices was relatively muted. On the initial news break USD/BTC rates fell 20-35%, depending on the exchange, before settling around 10-15% lower than before the news shortly thereafter. October 2013 Quantifiable Impact Also contained within the filings were a number of aggregate statistics about Silk Road’s transactional volume that shed significant light on how much of the bitcoin market was built around the company’s narcotics trade. Specifically, the complaint states that site’s total revenue between February 2011 and July 2013 was 9.5 million bitcoin. Over that same period approximately 225 million bitcoin were transacted over the block chain, of which the 9.5 million in Silk Road sales accounted for just 4%. Similarly, total exchange volume over the same period was roughly 75 million bitcoin, making Silk Road approximately 12% of total volume. This, of course, assumes all bitcoins used for purchases on the site were purchased on exchanges rather than obtained from in person transactions, mining, earnings, gifts or reused by sellers to purchase from others on the site. Important to remember is that these figures are aggregate stats over two years of revenue. Unless fiat-equivalent sales on Silk Road were growing exponentially alongside bitcoin exchange rates over the past two years, this also means the bitcoin volume listed in the filing is front loaded into the periods when more bitcoins were required for the same fiat equivalent purchasing power. This coincides with the market reactions that also indicates a significantly reduced importance of Silk Road on the bitcoin economy. Looking Forward The bitcoin markets as a whole seem well poised to move forward. An unknown has been removed from the ecosystem, but a number of concerns remain. While bitoin will likely recover, there are probably more than a few concerned bitcoin users right now. The contents of the filing pertained almost exclusively to the charges against Ulbricht, but give little insight into what other information was obtained. Whether or not home addresses or bitcoin addresses of Silk Road users were retained in some way is still unclear and the extent to which such matters are prosecutable has yet to be determined. There is also a strong likelihood of copycat sites arising. While the recent action may deter US citizens, Silk Road was known for its global reach, meaning an aspiring entrepreneur could run a similar company from anywhere in the world. The business model is proven and the technology still apparently sound and repeatable. The downfall was related to human error, which was clearly outlined in the filing, creating an advanced watchlist for the next person to avoid. The barriers to entry are remarkably low and now paired with a known surplus of both demand and supply in the marketplace. While Silk Road’s early impact on digital currency appears to have been quite significant, any new participant at this stage will likely encounter the same decreasing importance to the broader bitcoin ecosystem.

2 1