Yathin Kethepalli | Searcharxiv

arXiv2025

SoK: Design, Vulnerabilities, and Security Measures of Cryptocurrency Wallets

With the advent of decentralised digital currencies powered by blockchain technology, a new era of peer-to-peer transactions has commenced. The rapid growth of the cryptocurrency economy has led to increased use of transaction-enabling wallets, making them a focal point for security risks. As the frequency of wallet-related incidents rises, there is a critical need for a systematic approach to measure and evaluate these attacks, drawing lessons from past incidents to enhance wallet security. In response, we introduce a multi-dimensional design taxonomy for existing and novel wallets with various design decisions. We classify existing industry wallets based on this taxonomy, identify previously occurring vulnerabilities and discuss the security implications of design decisions. We also systematise threats to the wallet mechanism and analyse the adversary's goals, capabilities and required knowledge. We present a multi-layered attack framework and investigate 84 incidents between 2012 and 2024, accounting for $5.4B. Following this, we classify defence implementations for these attacks on the precautionary and remedial axes. We map the mechanism and design decisions to vulnerabilities, attacks, and possible defence methods to discuss various insights.

cs.CR↗

arXiv2023

Reinforcing Security and Usability of Crypto-Wallet with Post-Quantum Cryptography and Zero-Knowledge Proof

Crypto-wallets or digital asset wallets are a crucial aspect of managing cryptocurrencies and other digital assets such as NFTs. However, these wallets are not immune to security threats, particularly from the growing risk of quantum computing. The use of traditional public-key cryptography systems in digital asset wallets makes them vulnerable to attacks from quantum computers, which may increase in the future. Moreover, current digital wallets require users to keep track of seed-phrases, which can be challenging and lead to additional security risks. To overcome these challenges, a new algorithm is proposed that uses post-quantum cryptography (PQC) and zero-knowledge proof (ZKP) to enhance the security of digital asset wallets. The research focuses on the use of the Lattice-based Threshold Secret Sharing Scheme (LTSSS), Kyber Algorithm for key generation and ZKP for wallet unlocking, providing a more secure and user-friendly alternative to seed-phrase, brain and multi-sig protocol wallets. This algorithm also includes several innovative security features such as recovery of wallets in case of downtime of the server, and the ability to rekey the private key associated with a specific username-password combination, offering improved security and usability. The incorporation of PQC and ZKP provides a robust and comprehensive framework for securing digital assets in the present and future. This research aims to address the security challenges faced by digital asset wallets and proposes practical solutions to ensure their safety in the era of quantum computing.

cs.CR↗