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Energy Efficient Simple and Anonymous Cryptocurrency Management with Crypto Identities

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Since the introduction of bitcoin, thousands of cryptocurrencies have been developed and adopted all over the world. Nevertheless, we believe they still have a long way to go in order to replace regular currencies in day-to-day activities. A separate cryptocurrency wallet is required to hold coins and tokens of its type, which is also one of the complicated problems concerning managing multiple cryptocurrencies. Every wallet has at least one unique alphanumeric identifier address, usually twenty-six or more characters in length. Since the blockchain ledger is public, the user's anonymity is protected using this address when transferring e-money. Communicating this address is also a difficult process. The current method to resolve the communicating complexity without compromising anonymity is to use a QR code, requiring a QR scanner app. Transacting with different coins with the same user requires communicating all of the different wallet addresses. With this research, we propose a solution to the multifaceted problems of executing peer-to-peer cryptocurrency transactions and managing varied cryptocurrencies, without compromising anonymity. We introduce secure and anonymous crypto identities with an open protocol to securely communicate identities over a communication medium, tied to any number of different cryptocurrencies.
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Journal of Green Engineering (JGE)
Volume-11, Issue-1, January 2021
Energy Efficient Simple and Anonymous
Cryptocurrency Management with Crypto
Identities
1H.T.M.Gamage,2H. D. Weerasinghe,3N. G. J. Dias
1,2,3Department of Computer Systems Engineering, University of Kelaniya, SriLanka.
E-mail:2017_tharindu@kln.ac.lk,:hesiri@kln.ac.lk, ngjdias@kln.ac.lk
Abstract
Since the introduction of bitcoin, thousands of cryptocurrencies have been
developed and adopted all over the world. Nevertheless, we believe they still
have a long way to go in order to replace regular currencies in day-to-day
activities. A separate cryptocurrency wallet is required to hold coins and
tokens of its type, which is also one of the complicated problems concerning
managing multiple cryptocurrencies. Every wallet has at least one unique
alphanumeric identifier address, usually twenty-six or more characters in
length. Since the blockchain ledger is public, the user’s anonymity is
protected using this address when transferring e-money. Communicating this
address is also a difficult process. The current method to resolve the
communicating complexity without compromising anonymity is to use a QR
code, requiring a QR scanner app. Transacting with different coins with the
same user requires communicating all of the different wallet addresses. With
this research, we propose a solution to the multifaceted problems of
executing peer-to-peer cryptocurrency transactions and managing varied
cryptocurrencies, without compromising anonymity. We introduce secure
and anonymous crypto identities with an open protocol to securely
communicate identities over a communication medium, tied to any number
of different cryptocurrencies.
Journal of Green Engineering, Vol. 11 1,795-806.
© 2021 Alpha Publishers. All rights reserved.
796 H.T.M.Gamage et al.
Keywords: Cryptocurrency, Blockchain, Cryptocurrency Transactions,
Cryptocurrency Management, Public Crypto Identities,Energy.
1 Introduction
Electronic cash has been an engaging research topic among cryptography
practitioners and financial entrepreneurs for decades since the early eighties.
The success of the early electronic currencies was barely visible, and many
went ultimately unsuccessful even after a good user adoption due to their
dependence on centralized entities and the reliance on trusted computing as a
backend. The main obstacle for implementing a decentralized electronic
currency in the early days was on how to overcome the double-spending
problem without relying on a trusted third party. Double-spending is a
potential vulnerability of electronic cash where the same currency could be
spent twice by reproducing digital information for previously spent money. A
pseudonymous person or a group of people called Satoshi Nakamoto
introduced a proof-of-work based distributed timestamp server with the
Bitcoin whitepaper to solve this double-spending problem using a peer-to-
peer network without going through a financial institution. The network
timestamps transactions by hashing them into an ongoing chain of hash-
based proof-of-work, forming a record that cannot be changed without
redoing the proof-of-work [1]. The term blockchain was subsequently used to
explain the technology behind Bitcoin's proof-of-work based timestamp
server. Bitcoin not only solved the double-spending problem of electronic
cash but also added the ability to execute completely non-reversible
transactions and small casual transactions with lower transaction costs.
Cryptocurrencies are an area of heightened pecuniary, numismatic,
technological, and investment interest. Yet a comprehensive understanding
of their theories and foundations are still left wanting among many
practitioners, and stakeholders [2]. The two forms of cryptocurrencies are
coins and tokens. Coins run on its own standalone, separate blockchain.
Some of these blockchains are alterations of the bitcoin blockchain to
improve scalability and performance. Meantime, many coins run on unique
blockchain implementations. Bitcoin, Ethereum, Ripple, Bitcoin Cash,
Litecoin are prime examples for coins. Coins are mainly used for payments,
and its value depends on its users’ trust in the currency. Unlike coins, tokens
do not run its own blockchain, instead, run on an existing blockchain. Tokens
mainly derive value from their use case, usually used as a medium to access
services, and specific resources limited to it. Swiss Financial Market
Supervisory Authority categorizes tokens into three typesPayment tokens,
Utility tokens, and Asset tokens [3].
This research’s main objective is to provide a decentralized protocol with
Crypto Identities to streamline peer-to-peer cryptocurrency transactions and
simplify management of multiple cryptocurrencies. The solution’s
decentralized nature should also assure users’ anonymity while providing
public crypto identities to manage and receive different forms of
cryptocurrencies. The identity is flexible, whereas it is not tied to a single
Energy Efficient Simple and Anonymous Cryptocurrency Management with Crypto
Identities 797
cryptocurrency like in a wallet address. In other words, it could be identified
as a single receiving alias for management of many cryptocurrencies. The
open nature of the protocol should accredit independent developers to use the
crypto identities within their existing and new cryptocurrency applications,
promoting wide adoption of crypto identities to simplify cryptocurrency
management.The remainder of the paper is organized as follows. In Section
2, we discuss the various problems of managing multiple cryptocurrencies
and inconvenience in executing their transactions even for the users with a
good technical background. In Section 3, we present the Crypto Identities
solution with possible technical implementations and compare and contrast
them to come up with a technical implementation decision. Next, we discuss
the architecture and protocol details of the Crypto Identities solution and
explain how it assures the simplicity for managing multiple cryptocurrencies
while preserving the anonymity of its users in Section 4. Finally, we
conclude the paper with an open discussion in Section 5.
2. The Inconvenience
Management of cryptocurrencies requires its users to possess a
considerable degree of technical knowledge in cyberspace. The problems that
we specifically list here are unique to cryptocurrencies, whereas
cryptocurrencies as e-money also inhabit some of the same problems visible
in the classic electronic payment and transaction systems. The complexity
involved in all aspects of the cryptocurrency management process limits its
wider adoption reaching beyond its current limits while making it much less
expendable in all aspects of day-to-day financial activities. A Delphi study
conducted by Gareth R.T. White showcases that the concept of blockchain is
not well known, and the underlying technology may be challenging for
business management scholars and practitioners to comprehend [4]. To start
with, in order to hold different kinds of coins in a decentralized environment,
users must be able to manage separate digital wallets for each and every
different coin. On top of that, in order to receive different coins, the
particular user needs to communicate these separate addresses over a
communication medium. For example, suppose a particular user prefers to
hold both Bitcoin and Ethereum cryptocurrencies in a secure manner. In that
case, the user has to manage at least two separate wallets, while keeping its
private keys securely. Ethereum cannot be sent to a bitcoin address and vice
versa. The addresses are often case-sensitive large alphanumeric strings with
over twenty-six characters, which are hardly readable and can be mistyped
easily. Even though a transaction with an invalid address most of the time
results in a rejected transaction, there are certain scenarios that sending a
cryptocurrency to an invalid address could become successful, as well as it
could completely lose your cryptocurrencies without a possibility to recover.
The alternative to direct use of cryptocurrency addresses is to communicate
798 H.T.M.Gamage et al.
the QR code of the address instead. Even though QR code simplifies the
address communication process if you manage multiple cryptocurrencies or
generate new addresses for different transactions on the same coin, you have
to communicate a different QR code each time.
Spoofing a user address is also a possible risk associated with
cryptocurrency transactions and investments. Over 7 million United States
dollars were lost in the CoinDesk ICO hack [5][9-14]. In an ICO, collection
of funds usually starts at a pre-specified time and closes when the required
amount has been collected. Assume if a hacker got access to either project
website or social media feeds spoofing the collection address at the last
minute of an ICO. As funding opens, within a few hours, the hacker could
receive millions worth cryptocurrency coins until investors get notified. A
phishing attack is a regular issue associated with any e-money options,
including cryptocurrencies that are dealing with online wallets. But in
blockchain, if you unveil your private keys to a fraudulent web site or a third
party, this could not only result in losing control of your cryptocurrency
forever but also will not be able to complain to a mediating body like in a
regular e-money option controlled by a known organization or a third party.
Therefore, it is very important that cryptocurrency users are aware of
possible cyberspace attacks when dealing with e-money like cryptocurrencies
more than any other user. Social engineering attacks against cryptocurrency
users are hardly possible against many cryptocurrency wallets, as users prefer
offline wallets against online wallets when storing large amounts of
cryptocurrency, but it is also a possible attack. These forms of issues are
common to not only cryptocurrencies but also, they are heavily vulnerable on
any electronic currency transactions and e-money systems that operate
online.
3 Cryptoidentities
Proposed Crypto Identity is a unique identifier similar to a user name for
cryptocurrency users to be used anywhere on the cryptocurrency space. We
propose a solution to the complexity of managing multiple forms of
cryptocurrencies while defining an open protocol that can be implemented
and adopted freely and openly anywhere, backed by decentralized control. A
straightforward solution for the management of complexity would be to use a
centralized backend to provide simplicity, whereas this solution goes against
all of the core principles of inventing and implementing cryptocurrencies.
Cryptocurrencies provide the mechanism to keep personally identifiable
information away from the open transaction log, while its users are identified
with large alphanumeric identifiers called wallet addresses. And wallets even
provide the ability for its users to generate new addresses on demand for the
new transactions. All these mechanisms are carefully crafted into
cryptocurrencies with a high level of privacy in mind. Therefore, even if
anyone comes up with the best of centralized solutions to the management of
cryptocurrencies, its users will hardly be attracted as it goes against the
Energy Efficient Simple and Anonymous Cryptocurrency Management with Crypto
Identities 799
invention of this technology. A centralized solution not only makes it easy to
backtrack its users’ transaction history by the involved parties, but also
provides a central point for governance, hacking, and failure. Therefore, we
discarded the idea of even thinking about a centralized solution for the
management of cryptocurrencies, and also, we highly oppose anyone coming
up with such a solution for a decentralized technology like cryptocurrency.
We come up with two standard decentralized options for Crypto Identities
with this research, and evaluate the pros and cons of two approaches. The
first option proposes a system that implements crypto identities on a separate
blockchain backed by crypto identity coins. The second option presents a
system that implements a decentralized application to store crypto identities
on top of Ethereum blockchain, backed by a crypto identity token. And we
also discuss the architecture and technical perspectives of two approaches
and encryption and hashing mechanisms that both these approaches can use
in common within our protocol.
A technically sound solution to implement Crypto Identities is to run a
separate standalone open, permissionless blockchain, where we can store
associated data encrypted and securely on individual nodes. Users
contributing to the authenticity of the network can be monetized using crypto
identity coins for dedicating their storage space and computational power for
storing and validating user data. We propose Proofs of Space-Time as the
consensus mechanism for this blockchain. PoST allows a prover to convince
a verifier that she spent a ―space-time‖ resource, storing data—spaceover a
period of time. Compared to a proof-of-work, a PoST requires less energy
use, as the ―difficulty‖ can be increased by extending the time period over
which data is stored without increasing computation costs. In Proof of Space,
a service requester must dedicate a significant amount of disk space as
opposed to computation [6]. PoST is very much similar to Proof of Space,
but, unlike the previous definitions, takes into account amortization attacks
and storage duration [7]. Since we are not using Proof-of-Work, we eliminate
the possibility of high energy consumption that happens on massively used
PoW based blockchains like Bitcoin.
The second option is to implement a decentralized application.
Decentralized applications also called dApps are run by many users in a
decentralized environment using trustless protocols. In simple terms, dApps
run on a decentralized blockchain platform like Ethereum, Bitcoin, and EOS.
They typically facilitate tokens to reward users who contribute to the success
of the decentralized application as well as users may expedite tokens to use
certain features of the decentralized application they benefit with. A
decentralized application behaves very much similar to a standard web
application, but instead of communicating with a centralized hosting
provider, dApps communicate with distributed host nodes. Therefore, when
implemented on an established blockchain platform with many distributed
host nodes, it is practically impossible to take down the service, unlike in a
traditional server-side backend. Moreover, taking down an application
through a centralized server only requires the hacker to interrupt with the
hosting service, where data is more susceptible to attacks. After evaluating
800 H.T.M.Gamage et al.
different blockchain platforms, we propose Ethereum blockchain to run our
crypto identities backed by crypto identity erc-20 tokens. Ethereum
blockchain provides programmability support with a turing-complete Solidity
programming language. As programmability is a high concerning factor, we
can exclude bitcoin blockchain for our decentralization application. Even
though EOS provided a scalable platform for decentralized applications [8],
we have preferred Ethereum over EOS due to factors such as adoption,
maturity, and programming language.
4 Architecture and the Protocol
Figure 1. Crypto Identities Architecture
Crypto identity architecture consists of components for a secure and private
identity management mechanism, separate decentralized blockchain or a
decentralized application, an encryption mechanism, hashing mechanism and
an algorithm for swapping shareable keys over time. Crypto identities are
similar to regular user names users would select to identify themselves on
Energy Efficient Simple and Anonymous Cryptocurrency Management with Crypto
Identities 801
an online platform. The key distinction is preserving anonymity and
personally identifiable information out of the public identity. Since we are
storing data on a public blockchain, we use encryption and hashing
mechanisms to secure our data. Encryption is a two-way function, whereas
hashing is a one-way function. The public-facing user identifiers in our own
terms are called crypto identities. They are alphanumeric identifiers which
can be used as aliases when communicating their identity on cryptocurrency
space but should be encrypted when stored on the blockchain. Encryption is
used instead of hashing at this point as cryptocurrency senders should
unencrypt the public-facing crypto identity-related information for this
crypto identity. The public-facing identities consist of an associated private
key only known to its owners. The owner of the crypto identity selects his
own sharable key while creating their crypto identity on the blockchain. This
shareable key is used to encrypt and decrypt public crypto identity when
stored on the blockchain. The sharable key is kept private with the owner and
shared only with the other party when required to receive cryptocurrency.
The protocol expires the sharable key either when the public crypto identity
is accessed by a predefined number of attempts or when 30 days passes by,
whichever comes earlier. The expiration of shareable keys employed in the
protocol is essential to make sure cryptocurrency addresses are not tracked
over time for a user. Otherwise, the parties who receive shareable keys to
send cryptocurrencies may even attempt to track down address changes for a
public crypto identity over time. With the expiration, crypto identities are
hardly trackable for usage information and spending and receiving patterns
even for the known parties, who already know the decrypted crypto identity-
related information. Figure 1 presents architecture with primary components
of Crypto Identities protocol implementation.
Public crypto identities associate data of multiple cryptocurrency wallet
addresses into a single block of data. Encrypted crypto identity and its
associated data are stored on the blockchain, whereas private key associated
with public identity is used to manage the crypto identity-related information.
A shareable key is considered technically expired for a crypto identity even
though its associated data is not yet changed, either at the end of the 30 days
expiration period or after the predefined number of attempts accessed,
whichever comes earlier. We define a default access limit of 100 attempts,
and the owner may set it to 0 for setting an unlimited number of accesses for
the crypto identity data. At the end of the expiration, whenever the owner
authenticates himself to his crypto identity data, the application should
prompt the user for a new shareable key. Only at this point, previous
encrypted identity directs itself to a hashed dataset of previously encrypted
two-way recoverable data. The hashed data is infeasible to reverse, and the
old data is securely stored forever on the blockchain. The protocol has not
yet defined a mechanism to abandon this data, but it should be able to
abandon data after a certain period or number of blocks passed by.
802 H.T.M.Gamage et al.
We keep both these options open at this point of writing as an open
protocol for anyone to implement it as they require. A hash function maps
any arbitrary size data to a fixed size value while making it computationally
infeasible to reverse. Looking for these hashed digests on the blockchain can
be used to abandon the unnecessary data in future. The new shareable key
creates a completely new encrypted dataset on the blockchain, and the owner
needs to keep his shareable key remembered or saved somewhere for future
reference. The cumulative process makes the crypto identities protocol
completely anonymous while allowing cryptocurrency users to manage all of
their cryptocurrency wallet addresses using a single blockchain or a
decentralized application. The elimination of a centralized control while
providing a secure and private mechanism to manage a single identity for all
popular blockchains and cryptocurrencies can be admitted as the exclusive
invention of crypto identities protocol.
Figure 2. Steps of Using a Public Crypto Identity
As shown in Figure 2, the main steps for using a public crypto identity
include creating the identity, adding data, sharing identity, and finally
accessing the identity by cryptocurrency senders for making payments.
During the first step, the owner selects his unique crypto identity and a
sharable key. The selected public crypto identity also consists of an
associated private key. The sharable key is used to encrypt the data stored on
the blockchain, and this key is privately shared among the owner's senders
who he wishes to receive cryptocurrency payments from, during the third
step. After selecting a crypto identity and a sharable key, the owner may
authenticate himself to manage the identity using the associated private key
and continue to add data into a key-value data structure. At this stage, the
owner would add all of his cryptocurrency addresses with the associated key.
Keys would usually be three English letter short cryptocurrency codes such
as BTC for bitcoin, ETH for ethereum, XRP for ripple, and BCH for bitcoin
cash uniquely identify a single cryptocurrency. For referencing a full list of
three-letter codes we suggest CoinMarketCap, CoinCap and Coin360 web
sites [911].
Energy Efficient Simple and Anonymous Cryptocurrency Management with
Crypto Identities 803
We propose that the implemented application to add validations for
addresses for each and every popular cryptocurrency address so that people
would not make any mistakes whenaddingdata and include a confirmation
stage where users are prompted to verify the addresses once again before
completing the step 2. After creating the identity and adding data into the
crypto identity, the data is encrypted with the owner's shareable key and
stored on the blockchain together with the encrypted identity. The public
crypto identity is known only for the owner, and whoever the owner shares
this identity. Therefore, we introduce a primary level of privacy at the start
ensuring that the identity is not stored on the blockchain in plain text. Next,
our expiration of crypto identity data storage makes sure it would be
impractical to track down user spending patterns over a certain period of time
even for the known users of the identity and shareable key. Without
acquiring the shareable key, it would be impossible to track any
cryptocurrency addresses. Even if the shareable key is exposed together with
identity after the public crypto identity's encrypted data has expired, it is
impossible to acquire the related cryptocurrency address data for the
adversaries. Since the data on the blockchain is abandoned after the
expiration period, there is no way to acquire related data for the public crypto
identity. Thereby crypto identities protocol guarantees its user's
anonymousness on top of already provided privacy secured by
cryptocurrency addresses. While providing the anonymity crypto identities
protocol ensures users will have a single public identity that does not vary
over time; nevertheless, associated data points would expire over time.
During step 4, senders would access the public crypto identity using the
shareable key. First, they would encrypt the plain text public crypto identity
using the provided shareable key from the owner to find the blockchain's
entry. Afterwards, the sender would receive the encrypted crypto identity
dataset and decrypt with the same provided shareable key this time to find
out the cryptocurrency wallet addresses that the make the payment into. All
of this functionality would be accessed via a simplified user interface beneath
that the crypto identity protocol implementation relies on. In addition to that
crypto identities protocol enables the implementation to extend a single
decentralized application that can communicate with all of the
cryptocurrency addresses with a single public identity. The open protocol
implementation can be added as an intermediate standalone component to
any of the third-party application implementations.
5 Conclusion
The proposed open protocol is ongoing research which we are currently
implementing and evaluating. The simplicity provided by the protocol
ensures cryptocurrencies can be used for day to day activities regularly
without much hassle. We believe it would be easier for different applications
to integrate common crypto identities into many of the existing applications
804 H.T.M.Gamage et al.
in cryptocurrency space by making this open. On top of the much-needed
simplicity, it requires for cryptocurrencies to be used in day to day activities,
we should also not centralize any of the core concepts of cryptocurrency
usage. With this open protocol, we also ensure the simplicity of user
identities is provided with a fully decentralized nature. We guarantee the
privacy is provided and assure that backtracking for payment patterns are
computationally infeasible. We also considered a Non-interactive Zero-
Knowledge Proof system for the privacy of sharing crypto identities. Even
though anonymity techniques provide legitimate usages such as privacy and
freedom of usage, it is also used illicitly by cybercriminals to hide from legal
authorities [12]. On top of the open crypto identities protocol, we also
propose its applications to anonymize the traffic for managing public crypto
identities using Tor network. Tor is a free and open-source software used for
enabling anonymous communication [13]. Tor is an extension for earlier
Onion Routing system which addresses design limitations by adding perfect
forward secrecy, congestion control, directory servers, integrity checking,
configurable exit policies, anti-censorship features, guard nodes, application
and user-selectable stream isolation, and a practical design for location-
hidden services via rendezvous points [14]. We believe that the illegal use of
the protocol vastly degrades the value of cryptocurrencies and opportunities
they offer to the whole world and should be heavily discouraged for
everyone’s benefit to live a privacy-centred life. As long as the majority of
users in cryptocurrency space use the currency for legitimate and usual
activities, illegitimate users would not be able to degrade the value of
decentralized digital currencies similar to regular fiat currencies. Crypto
identities protocol provided the much needed decentralized solution to the
difficultly of managing cryptocurrencies with a single receiving public crypto
identity without compromising anonymity.
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Biographies
H. Tharindu Madushanka Gamage is a Senior Software Engineer
currently reading for Master of Philosophy in the Faculty of Computing and
Technology, University of Kelaniya. He is specialized in Mobile Application
Development. Mr. Gamage has been developing native and hybrid mobile
apps for over a decade now. His primary research interests are Blockchain,
Cryptocurrency, and Mobile Technologies.
H D Weerasinghe is working as a Senior Lecturer in the Faculty of
Computing and Technology, University of Kelaniya. He is an expert in the
field of Information/Data Security, Network and Systems Administration,
Data Communication and Networks, Network Management, Operating
Systems, Web and Internet Technologies, Web Development and
Programming, Object Oriented Programming, Ethics and Professional issues
in Computing.
N G J Dias is working as a Professor in the Faculty of Computing &
Technology in the Department of Computer Systems Engineering at the
University of Kelaniya. His Teaching Subjects are in the Field of Data
Structures and Algorithms Computer Graphics, Data Communication and
Networks, Computer Architecture and Organization, Multimedia Systems
Development, Cyber Security, Formal Methods and Software Verification,
Deductive Reasoning and Logic Programming, Theory of Automata, Theory
of Computability and Complexity, Wireless Communication, and Visual
Programming.
ResearchGate has not been able to resolve any citations for this publication.
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Main Message: Blockchain has the potential to become a significant source of disruptive innovations in business and management. Key Points: There is a scarcity of knowledge and understanding of blockchain techniques that hinders its academic research and practical application. Business managers need to understand the potential impact and threat of blockchain applications in order to gain and maintain competitive advantage. Business and management blockchain applications appear to offer considerable performance improvement and commercialisation opportunities.
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Roger Dingledine, Nick Mathewson, Steven Murdoch, and Paul Syverson, -Tor: The secondgeneration onion router‖, Proceedings of the 13th USENIX Security Symposium, Vol. 13, pp. 20-21, 2004.
  • Stefan Dziembowski
  • Sebastian Faust
  • Vladimir Kolmogorov
  • Pietrzak Krzysztof
Stefan Dziembowski, Sebastian Faust, Vladimir Kolmogorov, and Pietrzak Krzysztof, -Proofs of Space‖, Lecture Notes in Computer Science, Vol. 9216, pp. 585-605, 2015.
  • Tal Moran
  • Ilan Orlov
Tal Moran and Ilan Orlov, -Simple Proofs of Space-Time and Rational Proofs of Storage‖, Lecture Notes in Computer Science, Vol. 11692, pp. 381-409, 2019.
Why is it called tor?
  • Torproject
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Torproject.org. Why is it called tor?, Available Online: https://support.torproject.org/about/ why-is-it-called-tor/, 2020.
Litecoin -Open source P2P digital currency
  • Peter Vessenes
Peter Vessenes. Litecoin -Open source P2P digital currency, Available Online: https://litecoin.org/, 2020.