Module 2: Money Systems + Cryptocurrency

Question 1

Euro note features

Answer 1

• 13 digit serial number —> sequential note are 9 digits apart. Bunches of sequential notes > multiple car sale
• Letter code for Central Bank which issued it. Can tell when notes were produced.
• Signature of ECB president

Question 2

What are Stored value cards

Answer 2

pre-paid debit card

Question 3

How to acquire Stored value cards?

Answer 3

Minimal ID —> €2500, up to €50000 deposit limit—> full set of ID, but KYC is far looser. Pay and take out cash
Acquire a drop address (bijv. mail box, number that looks similar to apartment address. “Apartment #”. Here you can receive mail). Photo ID and utility bills. Use false name. Strong fake credentials (Photoshop, acquire an international driving permit online, or other photo ID’s: bus or rail ID card)
Add funds through smurfing (small amounts adding up to big amount over stretch of time, avoid reporting limit)
10 cards could possibly hold €500,000

Question 4

What is blockchain?

Answer 4

Technology underpinning crypto. Database that stores information electronically. Distributed ledger.
Everyone who wants to see it can download the entire (bitcoin) blockchain

Question 5

What are the characteristics?

Answer 5

• Time stamped
• Secure (encrypted)
• Distributed (all network participants have a copy of the ledger for complete transparency)
• Unanimous: All network participants agree to the validity of the records
• Anonymous: identity is (pseudo)anonymous
• Immutable: validated records are irreversible and cannot be changed
• Programmable

Question 6

What is bitcoin?

Answer 6

BTC = Digital asset, blockchain, decentralized, convertible, programmable

Question 7

What are validators and miners?

Answer 7

validators (take and process transactions, prepares for miner. no reward) and miners (collects transactions, solve computational puzzle, add blocks to blockchain. rewarded)

Question 8

Explain Pow

Answer 8

Proof of work. Miners need to solve the SHA256 and find the nonce added to the ~2700 transactions. The end goal is to securely wrap the transactions and add this bundle to the blockchain
The hashes are created based on current transaction details and previous block’s PoW —> chain. You can’t change things (or solve all the hashes of the blocks involved)

Question 9

Elaborate on conflicting blockchain?

Answer 9

Conflicting blockchain (added same time). Wait a few blocks. Fork: hard fork: chain splits. soft fork: update to blockchain

Question 10

Unspent Transaction Output

Answer 10

(UTxO) = change. Output can be sent to other address
Transactions are programmable!

Question 11

Multi-signature transactions

Answer 11

bitcoin users come together in single transaction and send and receive accross different parties (e.g. CoinJoin, https://mixero.io/mix_coinjoin). Break heuristics

Question 12

Mixing and tumblers (not used by most sophisticated criminals)

Answer 12

[schemes] Mixing takes many users BTC, ‘mixes’ them through layering multiple transaction, sends back to original users

Question 13

Bridges

Answer 13

Convert crypto between currencies. Very difficult technique to trace on blockchain networks

Question 14

Bitcoin-Monero bridge

Answer 14

Criminals often use Monero to obfuscate the origin and destination of their Bitcoin. Monero creates fakes input and outputs —> no idea what is real. Bitcoin-Monero bridge uses a public smart contract to allow users to convert crypto easily without using an exchange.

Question 15

Process of Bitcoin-Monero bridge

Answer 15

1. User will connect to bridge interface.
2. Interface generates unique address to send bitcoins to
3. User sends BTC to address. Smart contract is generated
4. Bridge sends equivalent Monero to address given to the user
5. Monero mix user’s transactions through its design to obfuscate and hide identity