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Bitcoin and other cryptocurrencies have become popular and motivate more hackers to steal digital funds. Users protect their private keys using crypto wallets to keep their funds safe from hackers. While the most secure option is hardware wallet, it suffers from lack of a secure and convenient backup and recovery process. Almost all existing wallets use mnemonics to back up the private keys, and a user must write down these words on a piece of paper. This approach is not only inconvenient but also problematic since the paper could be lost or stolen, resulting in a hacker recovering the keys. In this paper, we propose a new digital scheme to securely back up a hardware wallet relying on the side-channel human visual verification enabled by display screen on a hardware wallet. Using this method, we transfer the root of private keys from one hardware wallet to another wallet securely even via an untrusted terminal, such as a smartphone. At the end of this process, the user has two hardware wallets with the same private keys while she may use one of them as the main wallet and another one as a backup wallet.
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Minimizing Trust in Hardware Wallets with Two Factor Signatures
We introduce the notion of two-factor signatures (2FS), a generalization of a two-out-of-two threshold signature scheme in which one of the parties is a hardware token which can store a high-entropy secret, and the other party is a human who knows a low-entropy password. The security (unforgeability) property of 2FS requires that an external adversary corrupting either party (the token or the computer the human is using) cannot forge a signature. This primitive is useful in contexts like hardware cryptocurrency wallets in which a signature conveys the authorization of a transaction. By the above security property, a hardware wallet implementing a two-factor signature scheme is secure against attacks mounted by a malicious hardware vendor; in contrast, all currently used wallet systems break under such an attack (and as such are not secure under our definition). We construct efficient provably-secure 2FS schemes which produce either Schnorr signature (assuming the DLOG assumption), or EC-DSA signatures (assuming security of EC-DSA and the CDH assumption) in the Random Oracle Model, and evaluate the performance of implementations of them. Our EC-DSA based 2FS scheme can directly replace currently used hardware wallets for Bitcoin and other major cryptocurrencies to enable security against malicious hardware vendors.
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- Award ID(s):
- 1704788
- PAR ID:
- 10094253
- Date Published:
- Journal Name:
- Financial Crypto
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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