On the Anonymity of Peer-To-Peer Network Anonymity Schemes Used by Cryptocurrencies
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Cryptocurrency systems can be subject to deanonymization attacks by exploiting the network-level communication on their peer-to-peer network. Adversaries who control a set of colluding node(s) within the peer-to-peer network can observe transactions being exchanged and infer the parties involved. Thus, various network anonymity schemes have been proposed to mitigate this problem, with some solutions providing theoretical anonymity guarantees. In this work, we model such peer-to-peer network anonymity solutions and evaluate their anonymity guarantees. To do so, we propose a novel framework that uses Bayesian inference to obtain the probability distributions linking transactions to their possible originators. We characterize transaction anonymity with those distributions, using entropy as metric of adversarial uncertainty on the originator's identity. In particular, we model Dandelion, Dandelion++ and Lightning Network. We study different configurations and demonstrate that none of them offers acceptable anonymity to their users. For instance, our analysis reveals that in the widely deployed Lightning Network, with just 5 strategically chosen colluding nodes the adversary can uniquely determine the originator for 67 adversary that controls 15 4 possible originators. Moreover, we observe that due to the way Dandelion and Dandelion++ are designed, increasing the network size does not correspond to an increase in the anonymity set of potential originators, highlighting the limitations of existing proposals.
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