Decrypting Blockchain Safety

To understand the importance of Dongning’s Guo’s recent award for bitcoin research, you first have to understand the history of the cryptocurrency itself.  

Guo, a professor in Northwestern Engineering's Master of Science in Information Technology (MSIT) program, was awarded the 2023 Bitcoin Research Prize in October at the Chaincode Labs Bitcoin Research Day in New York. His paper, co-authored with Ling Ren — assistant professor of computer science at the University of Illinois Urbana-Champaign — is entitled “Bitcoin’s Latency–Security Analysis Made Simple.”  

That “Security” is in the title of the winning paper is no coincidence. Bitcoin’s origin story is split. The cryptocurrency was created with the aim to help average consumers avoid banking meltdowns like the one that occurred in 2008 and threatened to topple the global economy. Yet it also is frequently at the center of fraud investigations and has been linked to unsavory elements.  

“I’m fascinated by the existence of a purely decentralized, voluntary digital currency, constructed using economics to incentivize cooperation and mathematics to guarantee safety,” said Guo, who teaches Introduction to Statistics and Data Analysis in MSIT. “My research keeps me sharp and provides me with examples I can use in class.” 

Guo’s peer-reviewed paper was published in September 2022 in the Proceedings of the Fourth ACM Conference on Advances in Financial Technologies. It provides a sharp characterization of the safety of transactions in blockchain systems such as Bitcoin. The paper looks at the foundation of bitcoin mining – the process by which financial transactions are verified as legitimate transactions by volunteer verifiers, called miners – and seeks to find a way to determine at what point any one transaction can be considered safe.  

The problem Guo’s paper addresses is the difference in time it takes one miner to receive information about a transaction compared to another miner – also known as latency. Think of it as akin to buffering on a slow internet connection while a neighbor’s is ultra-fast.  

The issue is that latency leads to forks in the road of a bitcoin transaction’s verification process. If a neighbor verifies information while one is still waiting for their screen to refresh, it essentially creates another path rather than a longer string of “yeses” that the transaction is legitimate.  

It is through the long chains of verification – called blockchains – that the guarantee of security rests. 

Put another way, if someone was moving a large sum of money – say, the equivalent of one million dollars – through a banking system, would they feel better with six verifications that the transaction is secure that guarantees it is safe with 99.65 percent confidence or with 20 verifications that guarantees its safety with 99.999999 percent confidence? 

“The deeper a transaction is in a long blockchain, the more likely that all honest miners reach consensus about it,” Guo said. “It has been rigorously proved that a transaction in the longest blockchain eventually becomes permanent, but when that happens has remained elusive for a long time.”  

Guo’s paper addresses latency and how long of a wait there needs to be to arrive at enough “yeses” for a transaction to be considered safe. It also addresses individuals on the internet who would misuse the entire cryptocurrency system for criminal activities.  

“Without rigorous mathematical proof, a system is only secure until someone finds a way to break it,” Guo said. “With rigorous proof, we know under what conditions no attacks exist that can break the system. Our rigorous proof provides a security guarantee to all stakeholders and others who still have doubts.”