The devices that are used to manage accounts on the Bitcoin payment system that manages user accounts presents security risks and could be improved, study suggests.

Researchers have analysed the Bitcoin payment system and identified lack of security in the devices that manage personal accounts. Bitcoin is an innovative currency that allows a different way to make payments. The team also looked at ways to improve the Bitcoin wallet, providing directions for security improvement. The findings of the research could help technology firms to improve the way in which the Bitcoin hardware wallets deals and interact with our PCs.

The researchers at the University of Edinburgh carried out an in-depth security analysis of the communications system used in popular models of Bitcoin wallet. The team created a test harmful software, or malware, which was capable of intercepting messages sent between hardware wallets and computers – where users manage their Bitcoin accounts - clearly identifying a security lack. The results showed that users’ privacy is not protected. They also recognised how easy it is to access Bitcoin funds managed by such devices and divert them into a different account.

Based on their findings, researchers proposed a way to address the problem, by improving the security of such systems. This solution would require the encryption of particular messages sent between Bitcoin wallets and computers, increasing drastically their security.

The security improvement could be incorporated into all models of Bitcoin hardware wallet to offer better protection against hacks, the team says. Their study is published in the journal Information Security. Dr Andriana Gkaniatsou, of the University of Edinburgh’s School of Informatics, lead author 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 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.”

Written by: Pietro Paolo Frigenti

Journal Reference: Gkaniatsou, A., Arapinis, M., & Kiayias, A. (2017, November). Low-Level Attacks in Bitcoin Wallets. In International Conference on Information Security (pp. 233-253). Springer, Cham.