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Financial and ID Technologies

Bitcoin Wallets are Vulnerable to Hackers and Security Defects

23 January 2018

Devices used to manage Bitcoin accounts could be improved for better protection against hackers, according to recent research.

Source: Tech in AsiaSource: Tech in Asia

Computer scientists have discovered weak spots in security of gadgets that manage personal accounts with Bitcoin, a form of digital currency that provides an alternative to conventional money that has recently gained popularity.

The researchers identified how these wallets may be improved. Their findings could help technology firms improve how the devices — called Bitcoin hardware wallets — interact with our PCs.

A team from the University of Edinburgh carried out an in-depth security analysis of the communications system used in popular models of Bitcoin wallet. The researchers created a simple piece of harmful software, or malware, that was able to intercept messages sent between hardware wallets and computers — where users manage Bitcoin accounts.

The tests revealed that users’ privacy is not protected. They showed how easy it is to access Bitcoin funds managed by these devices and divert them into a different account. Based on these findings, researchers proposed a fix for improving the security of these systems. This would encrypt particular messages sent between Bitcoin wallets and computers that make them much more secure. Their fix could be incorporated into all models of Bitcoin hardware wallets to offer better protection against hacks.

Dr. Andriana Gkaniatsou, from the University of Edinburgh’s School of Informatics and lead of the study, said “A wallet should protect not only our money but also our privacy. It was surprising to discover how easy it is to access a user's funds, even when the sophisticated hardware is incorporated. Unfortunately, there is no silver bullet when it comes to protecting financial digital assets - we need to ensure that all components of the system are equally protected and interact in a secure way."

The paper on this research and discovery was published in Information Security.

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