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Study Suggests Link Between Ross Ulbricht & Satoshi Nakamoto (Bitcoin Inventor)

  1. Phungushead
    Two Israeli computer scientists say they may have uncovered a puzzling financial link between Ross William Ulbricht, the recently arrested operator of the Internet black market known as the Silk Road, and the secretive inventor of bitcoin, the anonymous online currency, used to make Silk Road purchases.

    Dorit Ron, a computer scientist at the Weizmann Institute, and Adi Shamir, a pioneering cryptographer who is a member of the applied mathematics faculty at the Institute, will publish a paper Sunday exploring how the 29-year-old Mr. Ulbricht, who was arrested by the Federal Bureau of Investigation in October and has been charged with a murder-for-hire scheme and narcotics-trafficking, acquired and protected the estimated millions he made in commissions operating Silk Road. The researchers say Silk Road, at the time of Mr. Ulbricht’s arrest, had sales of $1.2 billion, generating $80 million in commissions. A huge run-up in the value of bitcoin in the last month has exponentially increased those amounts.

    However, the researchers added, they believe the F.B.I. has seized only about 22 percent of the commissions they have identified, and that they themselves have only been able to trace about a third of the total.

    The Silk Road site, which has been called an “eBay for drugs” was intended to permit any kind of anonymous transaction between buyers and sellers of illegal goods or activities. It was shut down when the F.B.I. arrested Mr. Ulbricht, who used the Internet identity “Dread Pirate Roberts,” while he was sitting in a public library in San Francisco near his home.

    The two scientists have been exploring the web of financial transactions produced by bitcoin, the anonymous currency that has drawn the attention of both law enforcement and federal regulators in recent months. Their research is made possible by the fact that while bitcoin is designed to protect the anonymity of buyers and sellers, the actual transactions are public. Earlier this year, the researchers obtained a complete listing of all bitcoin transactions and have since been exploring the “graph” of those interactions in an attempt to gain statistical insights into user behavior in the anonymous financial market.

    After Mr. Ulbricht was arrested last month, the scientists used public information to begin tracing Silk Road-related transactions. Among their discoveries was a particular transfer to an account controlled by Mr. Ulbricht from another that had been created in January 2009, during the very earliest days of the bitcoin network, which was set up the previous year.

    Although the authors state that they cannot prove that that account belongs to the person who created the bitcoin currency, it is widely believed that the first accounts belong to a person who identifies himself as “Satoshi Nakamoto,” but who has remained anonymous and has not been publicly heard from since 2010.

    Individual bitcoin is generated using a cryptographic algorithm that requires computer-processing power and that insures that each coin remains unique and cannot be copied.

    After seizing Mr. Ulbricht’s computer, the F.B.I. spent several weeks analyzing data, determining that the laptop contained a digital wallet with 144,336 bitcoin, currently valued at more than $122 million, which the agency has attempted to freeze.

    In tracing various transactions made to and from Mr. Ulbricht’s account, the authors found an intriguing one involving the transfer of 1,000 bitcoin, which would have been worth $60,000 when it was made on March 20 of this year, but is now worth roughly $847,000.

    They write: “Such a single large transfer does not represent the typical behavior of a buyer who opens an account on Silk Road in order to purchase some narcotics (such buyers are expected to make an initial deposit of tens or hundreds of dollars, and to top the account off whenever they buy additional merchandise). It could represent either large-scale activity on Silk Road, or some form of investment or partnership, but this is pure speculation.”

    The mysterious account that made the investment had at one point accumulated 77,600 bitcoin, mostly through “mining” operations, an amount which would now be worth approximately $64 million.

    “The short path we found suggests (but does not prove) the existence of a surprising link between the two mysterious figures of the bitcoin community, Satoshi Nakamoto and DPR,” the authors write, referring to Mr. Ulbricht as the Dread Pirate Roberts.

    In addition to the curious transaction, which they say they cannot explain, the authors said they discovered that much of the bitcoin accumulated by Mr. Ulbricht has remained beyond the F.B.I.’s grasp.

    The scientists note that, for technical reasons, seizing and controlling bitcoin from a computer is a much greater challenge for law enforcement than illicitly obtained cash stored in a safe. With bitcoin, its very design may make it possible for its support community to move to thwart law enforcement or any resale of the digital tokens.

    In addition, the scientists speculated that the reason the F.B.I. had not recovered all Mr. Ulbricht’s bitcoin might be that he was using a second computer that has not been located.

    Dr. Ron and Dr. Shamir noted that despite the fact that the F.B.I. closed the original Silk Road black market, a second “Silk Road anonymous market” has been created since.

    Satoshi Nakamoto’s actual identity remains a hotly debated topic among Internet researchers. A number of individuals claim to have discovered his true identity, but those assertions have either been denied or ignored by those named.

    The F.B.I. did not immediately respond to a request for comment.

    November 23, 2013

    New York Times


  1. Phungushead
    Israeli Researchers' Theory Debunked: No Clear Ties Between Bitcoin's Creator And Sil

    [IMGL="white"]http://www.drugs-forum.com/forum/attachment.php?attachmentid=35953&stc=1&d=1385750132[/IMGL] Given the mysteries swirling around figures like Bitcoin inventor Satoshi Nakamoto and the Silk Road black market operator known as the Dread Pirate Roberts, a study that draws connections between the two pseudonymous figures offers the prospect of a Hollywood story that’s too good to be true. Unfortunately for screenwriters, it took Bitcoin users less than 24 hours to debunk it.

    On Saturday, the New York Times reported on a new study by Adi Shamir, the cryptographer who helped to invent the ubiquitous encryption protocol RSA, and Dorit Ron, a professor of computer science at Israel’s Weizmann Institute, that claims a connection between Nakamoto and Silk Road’s creator. By analyzing the public record of Bitcoin transactions known as the blockchain, the researchers wrote that they’d found evidence that a thousand bitcoins belonging to one of Bitcoin’s earliest users, which they speculated was likely Satoshi Nakamoto, had found their way into addresses associated with the Silk Road earlier this year, before the site was seized by the FBI in October. Those bitcoins were worth around $60,000 at the time of the transaction in March, but are now valued at to $1 million at Bitcoin’s current exchange rate with the dollar.

    “The short path we found…suggests (but does not prove) the existence of a surprising link between the two mysterious figures of the Bitcoin community, Satoshi Nakamoto and [the Dread Pirate Roberts],” the researchers write. “We are sure that analyzing this figure will start a very vigorous debate in the Bitcoin community.”

    The researchers were right: the Bitcoin community was vigorously debating their speculative conclusion within hours of the paper’s release online. And they quickly disproved it. A user on the Reddit forum devoted to Bitcoin pointed out that the Bitcoin address Shamir and Ron had associated with Nakamoto in fact seemed to belong to an Austin, Texas security researcher named Dustin Trammell, who had registered a PGP key linked to that supposed Nakamoto address on the Bitcoin marketplace Bitcoin OTC.

    Trammell, a 36-year-old security researcher who lists himself on Linkedin as the CEO of Exploithub, a marketplace for software security vulnerabilities, wrote on the forum Bitcointalk in 2011 that he’d been interested in the cryptocurrency since it first came online. “I’m a fan of both cryptography and alternative currencies, so Bitcoin hit my radar pretty fast back in January 2009 when Satoshi released the Bitcoin whitepaper and initial version of the client software,” he wrote at the time. I’ve reached out to Trammell to learn more about his association with Silk Road, but haven’t yet heard back from him.

    I’ve asked Ron to comment on the evidence that her and Shamir’s Nakamoto hypothesis has been debunked, and I’ll update the story if I hear back from her.

    Separate from Shamir and Ron’s conclusions about a connection between Nakamoto and the Dread Pirate Roberts–and in fact more central to their paper–was its analysis of where the Silk Road’s profits ended up. The researchers’ efforts to trace clues in the blockchain led them to believe that the vast majority of the site’s earnings haven’t been found by the FBI, despite its seizure in October of 144,000 bitcoins allegedly held by Ross Ulbricht, the 29-year-old man accused of being the Dread Pirate Roberts. Only 22% of Ulbricht’s alleged fortune from Silk Road were taken, according to the study, while the researchers say they can identify Bitcoin addresses holding a third of the business’s estimated profits.

    Many of the remaining bitcoins may have in fact been spent on maintaining the Silk Road’s infrastructure or other costs. When I interviewed the Dread Pirate Roberts in July of this year, he told me that the “vast majority” of its earnings were reinvested in the business. But Shamir and Ron say that nonetheless, at least three months of profits from the Silk Road have gone unaccounted for by the FBI.

    Prosecutors in Ulbricht’s case have admitted that much of the Silk Road’s wealth has gone unaccounted for, and even used the claim that Ulbricht may have a secret stash of bitcoins to argue in court last Thursday that he shouldn’t be granted bail. “There could very well be additional large stashes of Bitcoins that Ulbricht stored elsewhere and that the FBI has yet to locate,” prosecutors wrote in a letter to the judge in the case. “Being digital currency, Bitcoins can be stored in any fashion that a computer file can be stored – on a thumb drive in a safe deposit box, for example, or even on the Internet, in ‘cloud’ storage. Ulbricht could thus easily retrieve any Bitcoins he has secreted away were he to be released.”

    25 November 2013

    Andy Greenberg
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