Improving Security of Crypto Wallets in Blockchain Technologies

A big challenge in blockchain and cryptocurrency is securing the private key from potential hackers. Nobody can rollback a transaction made with a stolen key once the network confirms it. The technical solution to protect private keys is the cryptocurrency wallet, software, hardware, or a combination to manage the keys. In this dissertation, we try to investigate the significant challenges in existing cryptocurrency wallets and propose innovative solutions. Firstly, almost all cryptocurrency wallets suffer from the lack of a secure and convenient backup and recovery process. We offer a new cryptographic scheme to securely back up a hardware wallet relying on the side-channel human visual verification on the hardware wallet. Another practical mechanism to protect the funds is splitting the money between two wallets with small and large amounts. We propose a new scheme to create hierarchical wallets that we call deterministic sub-wallet to achieve this goal. The user can send funds from the wallet with a large amount to a smaller one in a secure way. We propose a multilayered architecture for cryptocurrency wallets based on a Defense-in-Depth strategy to protect private keys with a balance between convenience and security. The user protects the private keys in three restricted layers with different protection mechanisms. Finally, we try to solve another challenge in cryptocurrencies, which is losing access to private keys by its user, resulting in inaccessible coins. We propose a new mechanism called lean recovery transaction to tackle this problem. We make a change in wallet key management to generate a recovery transaction when needed. We implement a proof-of-concept for all of our proposals on a resource-constraint hardware wallet with a secure element, an embedded display, and one physical button. Furthermore, we evaluate the performance of our implementation and analyze the security of our proposed mechanisms.