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Bitcoin has a ‘dark forest’ of its own, and it has to do with brainwallets



The concept of a blockchain “dark forest” has been popularized recently by Ethereum and the existence of front-running bots that will copy any profitable transaction pending for submission.

The bots are able to assess if any given transaction that just entered the mempool can be replicated, and they will immediately publish their own copy with a much higher gas fee, which virtually guarantees that they will be the first to claim it. The term “dark forest” is inspired from a sci-fi novel and indicates a place where detection means instant death — or in this case loss of funds.

In Ethereum, this usually happens with public smart contracts that for some reason came in control of funds. Dan Robinson from Paradigm Capital demonstrated one such case with money mistakenly sent to a contract address. These types of bots also threw a wrench into Bancor’s vulnerability mitigation plan in June.

Bitcoin (BTC) does not have smart contracts to front-run, but a post by BitMEX Research highlights how a similar event occurs when one uses brainwallets.

A brainwallet is the term for a private key that is only stored as a memory in a person’s brain, meaning that no physical backups exist. This approach is generally discouraged because relying on a person’s memory to store a complex alphanumeric string is not ideal.

A potential solution to this is creating a wallet from an easy to remember phrase. This is what the analysts did by generating a seed phrase from extracts of famous literary works, including the Bitcoin whitepaper.

Unfortunately, in some cases the BTC put into these wallets was swept away even before the transaction to fund them was confirmed. This was the case with simple seed words like “Call me Ishmael” from Herman Melville’s Moby Dick. Other longer and more complex excerpts were still swept within a day, with the Bitcoin whitepaper’s “The network is robust in its unstructured simplicity” lasting the longest.

The analysts concluded that addresses generated from these types of complex, but public-domain seed words are fully compromised and are constantly being monitored.

As Cointelegraph reported earlier, blockchain makes it hard to use any type of password-based generation mechanism. Passwords on traditional platforms are mostly protected by the fact that they’re stored on a secret database. The attackers must interact with it to make guesses, but the server will usually issue rate limit denials. Furthermore, having to make a web request to make a guess is already many times slower than hashing through locally-stored combinations.

Blockchain private keys can instead be pre-generated from massive dictionary databases, making attackers the effective owners of those addresses. There are ways to mitigate these vulnerabilities by using salt — random bits of data added to throw off brute force attempts. But the fundamental issue of brainwallets is that any address that is sufficiently resistant to brute forcing will likely be difficult to remember reliably.

There are many stories of people losing their BTC by forgetting a private key they stored in their brain, with one notable loss of $13 million reported in 2019 — though some believe it was fake. Ethereum is likely subjected to the same type of private key brute forcing, with millions of dollars in Ether (ETH) being reportedly stolen in the past.

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PayPal Forays into Crypto Market as Bitcoin Price Explodes Past $12,400



  • Bitcoin is now trading at the highest price seen in well over a year, with bulls aiming for $13,000 as its strong uptrend gains momentum
  • Today, news regarding PayPal’s foray into the crypto market provided the benchmark cryptocurrency with a serious boost
  • Its price surged all the way up to highs of nearly $12,500 before meeting some resistance, but it does appear to be poised for further gains
  • This recent uptrend has come about in the absence of any immense bullishness in the stock market, with BTC incurring independent momentum
  • Where it trends next will likely depend on how long it can stay above $12,000

After struggling to gain momentum throughout the past few weeks, Bitcoin has now entered a firm bull trend as its price rockets up towards fresh yearly highs.

The cryptocurrency is currently trading at the highest price seen since earlier this year, with bulls appearing to be in firm control of its short-term trend.

This trend is now leading BTC up towards $13,000 – a level that has not been breached since the June of 2019 rally that sent the crypto towards $14,000.

This time is different than before, as the benchmark cryptocurrency is being driven by immense underlying strength.

PayPal’s decision to provide its users with access to buying, selling, and storing cryptocurrency is one catalyst behind today’s move.

Bitcoin Rockets Towards $13,000 as Buying Pressure Mounts

At the time of writing, Bitcoin is trading up just under 4% at its current price of $12,380. This marks a massive surge from its recent lows of $10,200 set just a few weeks ago.

The cryptocurrency is facing some resistance at $12,500, it seems, as sellers are aggressively offloading their holdings each time its price reaches this level.

This rally will likely persist in the near-term if bulls continue holding BTC above $12,000.

PayPal Sparks a New Sense of FOMO Amongst Investors

The latest leg higher came about following reports of PayPal entering the crypto market, allowing users to buy, sell, and store Bitcoin and other digital assets like Ethereum.

As Reuters reported earlier today:

“PayPal joins the cryptocurrency market, allowing customers to buy, sell and hold virtual coins including bitcoin using the company’s online wallets.”

This is the latest major name in FinTech to involve itself with the nascent market, as Square recently made headlines with its decision to purchase $50 million worth of Bitcoin to be held on its balance sheets as a reserve asset.

Featured image from Unsplash.
Pricing data for BTCUSD from TradingView.

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Study finds CME drives Bitcoin price, but it excludes stablecoin volumes



On Oct. 14, Wilshire Phoenix investment firm released its Efficient Price Discovery report, which detailed how CME Bitcoin (BTC) futures impact Bitcoin price discovery.

The firm concluded that “CME Bitcoin futures contribute more to price discovery than its related spot markets.” And the researchers also suggested that:

“CME Bitcoin futures have grown to become significant, this is not only demonstrated through trading volume and open interest, but also by influence on spot price formation.”

Wilshire’s analysis correctly states that price discovery in traditional markets is a contested topic. The report also adds that studies on price formation often find that the futures markets lead most of the time, but this doesn’t mean their conclusions about CME Bitcoin futures are absolute.

According to the report, CME Group, the leading derivatives venue, trades $5.15 trillion per day across its multiple markets. According to Nasdaq data, this number compares to the $430 billion in daily volume seen in the U.S. stock market.

This data shows that the trend of derivatives volumes surpassing spot exchanges by tenfold is the norm rather than an exception.