Bitcoin Forum

We all know that hacks and thefts are following Bitcoin (as well as other cryptocurrencies, for that matter) and its users like a plague, so I was thinking about solving this issue once and for all. Long story short, we need to implement two things described in detail below

First, we should create "frozen" or lockable addresses, i.e. addresses which will be locked for a specified amount of time on the protocol level by setting a special variable that will be our countdown timer. After it runs out the address gets unlocked and you can move your coins freely. That would essentially mean that no one including the owner of the keys will be able to move these coins anywhere until the specified amount of time runs out, thereby efficiently and effectively preventing hacks and thefts during that time. As an extension to this basic feature, it could be beneficial to create a white list of addresses where the coins can be sent to during this lock time

Second, we should make some transactions reversible, but please don't attack me before you actually listen me out. It is most certainly not what you think it is. This feature should allow a transaction to expire (i.e. be reversed) unless the payee (i.e. the person you pay to and who is to receive the money) confirms it from their side. This is how many online payment systems work (e.g. Yandex.Money). Basically, you send money to someone but they won't be able to receive it without a protection code which you send them separately (or tell in person). Thus, if no code is provided on time, the transaction gets canceled. Essentially the same thing can and should be implemented in Bitcoin

So if you find these proposals interesting or even if you find them disgusting, feel free to comment below

Hacks and thefts follow every financial technology or system, as far as there is a prospect of acquiring the funds and assets of others.


Most hacks happen over the secondary market mostly centralized exchanges, the chances of a wallet address getting hacked is very low, you can secure it further by using a hardware wallet.

How come really?

We should just increase a version number (or how it is called correctly), so that you don't really need to update existing addresses at all. In this way, only newer addresses will be able to use this feature. In other words, legacy addresses should just ignore it. Basically, this is how scalable and compatible systems are built where you can add new features without affecting the existing feature set in a negative or dangerous way (like you mean it)

From what I have seen here on the recommendations you made, its something I would call an Escrow system which is something already in place and what is applicable in most peer to peer site that they create a form of timing for transactions between two people and you are equally allowed to open s trade dispute should in case you are not comfortable with the trade.

On the other option of making transaction reversible, how that would be possible is what I can't get my head around except the entire bitcoin or crypto is reconfigured to make this option possible other than that, I fear we might have to do with what we currently have and continue to protect ourselves in the face of people who are bent on ripping us of.

Probably yes (as I don't know how the system you refer to actually works)

But what I suggest should be done on the protocol level. This feature will also prevent you from sending your coins to a wrong address by mistake. If you make such a mistake, whether the receiving address actually exists or not won't matter as your coins will come back to you after the grace period is over. Honestly, I don't understand why we don't have such a system already implemented


But how are other systems upgraded? If Bitcoin doesn't allow such upgrades being made in a safe and reliable way, it pretty much means that it is poorly designed, and we need to redesign it (while it is still officially in beta)

What is the difference between your suggest and using OP_CHECKLOCKTIMEVERIFY (OP_HOD (https://coinb.in/#newTimeLocked) ?

Or using Hashed Timelock Contracts (HTLCs) (https://rusty.ozlabs.org/?p=462) ?


So it would need to pay 2 times the fee?

I will look into that later (as I'm not very familiar with Bitcoin's opcodes)


I don't really know

But it doesn't matter as this feature should be optional anyway and it is certainly worth the money, i.e. fee paid first by the payer (as usual) and then probably by the payee (or by the payer alone). Just imagine how many people lost their coins when they sent them to a non-existent address and then imagine how many are still going to lose their coins in the future. In simple terms, we have to literally pay for the lack of a feature which should have been in Bitcoin right from the start. Some things seem to be too obvious to be actually done

both things are possible now
but lets deal with the second one

imagine you set up a 1-of-2 multisig (only one signer is needed)
you pay into that address and if the recipient then does not move the funds. out of the multisig within a timescale you can then spend them back to yourself

no protocol changes are needed to do this

1. There are already freezing balance tricks on bitcoin blockchain, technically every transaction you make contains a include in block chain field, which makes sure that you can lock the transaction.

can be done on any modern advance wallet

2.  reversible or party confirming transaction would cripple the SDK running on bitcoin, this removes the very concept of blockchain, the mempool will be clogged with unaccepted transactions, if every needed to be accepted the coin base generation can be manipulated, and the whole Benefit of FEE BUMP +  CPFP will be useless, but the way which was the point of conflict between BCH & BTC fork.

use multisig mode on electrum wallet for 2. it does what you looking for

This is a very clumsy setup

Why would I need to share my private key with someone else as this is what a multisig is about as far as I understand it? I don't know if I'm using the correct terminology here but I hope you get the point. I just want to send somebody a few coins from my wallet (read, address) who I may not even know, and make sure that the coins don't get lost or stolen in the process. So how does a 1-of-2 multisig help me in any meaningful way here?

Have you heard the saying: "If a programmer makes an easy interface, nature will make a stupid user"? This is exactly the case. Most abductions occur through Social Engineering.

you dont need to share a private key..
thats what multisig is about.

in simple terms you have a private key.. the recipient has a private key.
you both only provide the PUBLIC key of each. and a multisig is an address that allows any of those to spend the funds within it.
meaning you dont get to know the recipients privat key and he doesnt get to know yours. it just allows more than one spender to spend independantly without giving away private keys

you get to also stipulate how many people are needed to spend. hense a 1 of 2 means out of 2 chosen people only one is needed to spend the funds. thus allowing equal oppertunity to spend the funds. thus if the recipient does not spend it, you can get it back

the result is exactly what you want. funds are put into an address which you or the recipient can then claim.. EG the recipient can claim or you can claim(refund)

There is already a solution to this problemL Use banks/paypal/USD

If you can't handle security for your cryptocurrency you shouldn't own any.

And what does it change?

Centralized exchanges hold most of their funds in cold wallets anyway, so keeping such wallets locked with a forward timer (say, set for 1 hour) will prevent these hacks from happening. On the flip side, though, there is another catch here. For example, it becomes known that the keys have been compromised, but the hacker can't steal the coins as it has a timer counting. So how can a legitimate owner claim his coins and not let the hacker claim them before him? That's an interesting implication which I didn't think of when starting this thread


Okay, I will look into it. Can I set a timeout with this approach, i.e. when the recipient doesn't claim the coins after a specified amount of time, can I claim them back?


Blockchain is that overseer. It decides what is allowed and what not

yes. you can for instance use the same time locks that LN uses(without neding to use LN) so that you stipulate that you, yourself cannot touch the funds for X time (allowing the other person to spend within the time without fear that you are fake paying them by you claiming as soon as it confirms) thus giving them time to spend it

there are other options too


changing the network to make all addresses behave in a certain manner that allows confirmed transactions to become unconfirmed. or to allow people to double spend is bad. but i dont think thats what the OP is asking for.
instead voluntarily putting funds into a multisig which 2 people volunteer to use as their escrow between themselves. where the 2 parties are the deciders. . then that is an option that is available now without network changes needed and not causing centralisation.

Personally, I always follow the situation and when I think the time is right for entering then I get. Well what will happen to this countdown if the price in this period becomes as I wish? It is like taking over management. Anyway even if there is any solution, it will be hacked or stolen. There is no escape from something online, unless you are awake.

Okay then, probably it is exactly what I wanted to see in Bitcoin, though done in a different way (maybe, even in a more flexible way). So how can we prevent coins from being sent to a non-existent address? Well, not actually prevent them from being sent but rather being able to claim them back?

Perhaps, adding a variable (a timer) that would allow to claim the coins back if they don't get spent?


Funny, taking into account that I specifically pointed out in the OP that people should not attack me without first trying to understand what I actually wanted to suggest (and they still failed me):


Obviously, I didn't mean that all transactions should be made reversible. And maybe a 1-of-2 multisig is the right way to go with my proposal, after all

I think there would be no way to do that. Once the countdown ended, they both would try to send the coins to another address at the same time, so the only way the legitimate owner could keep his coins would be by spending a higher fee than the hacker and being lucky.

This can be done by Smart Contracts I believe. The contract will keep the sent coins locked for a grace period unless the recipient sends a confirmation TX. No confirmation after a time, the coins will return to the sendee.

That's what I think myself

However, there can be a way out, something like a fallback plan. For example, you can also add an encrypted variable with a password known only to you, which you set at the moment you lock the address. It would allow you to stop the timer prematurely and thus claim the coins back immediately. I know you are going to say that it can be stolen too, but it is a one-off variable which is used only to stop the timer, so you don't need to save it anywhere but in your head only (read, it is not the same as your private key)

That's the closest we have to the OP's first idea ("frozen addresses"), yes. I'm pretty sure I've seen this use case suggested before, but it doesn't seem particularly useful as an anti-hacking mechanism. If your private keys are compromised, then once the timelock is ending you're still just racing the attacker to spend the outputs and hoping your transaction gets confirmed first.


You should use payment channels on Lightning then. Both counterparties need to sign a transactions before channel state can be updated. Otherwise, the last valid state can be broadcast to the blockchain.

how multisig works
you both then make a separate private/public keys
1deisikr4nd0m4ddr355  \
                                     >=bc1qD31s1kfri3nd
1fr13ndr4nd0m4ddr355 /

you both can calculate that your random PUBLIC keys BOTH created the bc1qD31s1kfri3nd address and you can both confirm its a real address as you both calculated it separately
again neither of you know/provided the private keys to each other
but both have the public info to check the address is real.

..
as for a separate situation of just wanting to prevent people funding addresses they mistakenly mistyped/misspelled... there is no real way.
because if you start implementing a system where people can get coins out of an address that a person does not have a private key of.. then thats just going to cause alot of hacking.

the only way to stop this is to prevent typo's... NOT allow a way to get funds from addresses which people dont have priv keys for.. but just a way to double check with other parties that an address is actually an active address

This is basically how atomic swaps work presently. It's one of the forms of the already mentioned "HTLCs" (hashed timelock contracts).

Your setup could work this way:

- Alice sends a transaction to Bob containing a timelock and the condition to provide a secret S to spend the funds (this includes a hash of S)
- Bob must provide the secret to move it. Once Alice is sure that Bob is really Bob, she provides Bob the secret (e.g. via an encrypted email).

In atomic swaps, the secret is provided only when the other party has also transferred the funds (the setup is even a bit more complicated, see https://en.bitcoin.it/wiki/Atomic_swap), but you don't need that in your setup, as all you want is that the other party needs to provide information received from two different channels (1 - the transaction, 2 - the secret)

Your second option and suggestion is OK by me, for transactions to auto reverse if not confirmed by the receiver I think if that option is added it will be OK. But your first point is where am finding hard to understand do you mean a wallet that received certain amount of bitcoin should be  locked for some time before the owner is able to send it out, in that way we will not have the fast transactions rate that we always look forward in bitcoin.

Yeah, I know (more or less) what atomic swaps are

But with this setup will I (as that Bob in your post) be able to retrieve my money if Alice doesn't spend it (I mean after I send her the secret)? The point is to protect your dough from sending it to a wrong address or even a non-existing address. A lot of people lost their coins for making a mistake in typing the address. Yeah, I also know that you can't use certain characters which can cause such spelling mistakes like I and l (the first is a capital i, while the second is a lowercase L), but the idea of losing money just because you make a stupid mistake doesn't sit quite well with me

Yes, because the transaction contains also a CheckLockTimeVerify (CLTV) timelock. I should have clarified that better.

When the timelock expires, Alice can spend the money again.

In reality, it's a bit complicated - Alice's transaction has two "alternative" outputs, one that authorizes Alice [the sender] to move the funds after the timelock expired, and the other one that authorizes Bob to move the funds when he provides the secret. If Bob doesn't provide the secret in time, Alice is able to move the funds back. But if she doesn't, then Bob can still move the funds (but that's no danger because he must know the secret).

So yes, this setup can be a solution for mistyped addresses. However, in this case, I would prefer to use the BIP70 payment protocol, which avoids mistyping without the hassle of a HTLC.

As others have said, thefts mostly occur in major exchange hacks (in which case it wouldn't matter if you had a transaction where you send the receiver a question and they answer correctly, i.e "confirm it" since both the sender and receiver would be the hacker). Further, if an exchange is storing their funds they probably don't want to lower their liquidity (and perhaps their reputation with users) by locking users funds with CLTV. What if people want to withdraw? If you need to dip into your cold storage (which is locked for the next n weeks) what will you tell users?

Hacks on individual people's addresses, or sending to the wrong address are very unlikely these days because you're unlikely to be manually typing out addresses. Sure there are instances where malware can change the result of a copy/pasted address, but this can be fixed by just double checking the addresses you're sending to.

Okay then. But I have two questions

First, how is that solution better (worse) overall than what franky(stein) offers? I mean a 1-of-2 multisig? And second, is it possible to set it as a default mode in wallets like Electrum (or even Bitcoin's vanilla wallet)? Or is it more like you can't mistype an address simply because you have to set it up first to make a transaction with it? If this is not the case, then what are the shortcomings of making it a default mode of operation (in simple terms)? From my perspective, it makes perfect sense in order to avoid losing money

Only one way how to know about exchange market was hacked is by checking condition or exchange owner, they have know more about their exchange and we will see the owner of exchange will rich or not after his exchange was hacked.

I am more for the second option creating an option for a reversible transaction. Transactions on cryptocurrencies that will not be successful until when confirmed. This will go a long way to curb hacking of cryptocurrencies.

If I understood it the right way, in franky's design there's no timelock involved. So while Bob does not move the funds, Alice can move it back.

If franky's design involves a timelock, then the designs are roughly equivalent.

I think there are two reasons:
- first, it occupies more space on the blockchain as the multisig transaction is larger, and additionally you would have to move the money with a second transaction, so your transaction fees would be at least doubled;
- second, to send the secret via another channel requires you to set up this channel. I don't know currently a wallet that includes this feature (it would need access to your email address or an instant messaging protocol).

For these reasons, for the mistyping problem I think BIP70 is much more appropiated. In BIP70, the receiver first sends a message to the emittant of the transaction, which does not only provide the address to send to, but also the name of the business. So when you send a BIP70 transaction to Bitpay (Bitpay is the entity that mostly uses BIP70), you can't mistype or send the TX to the wrong person because the transaction then would be invalid.

See BIP70 here: https://github.com/bitcoin/bips/blob/master/bip-0070.mediawiki

And this also seems to be an effective solution to the problem of stolen keys

I didn't even know that I already came up with that solution in the OP. Basically, when locking an address you can add a white list of addresses where coins can be moved during the lock time, so even if the private key from this wallet gets stolen or otherwise compromised, you can still safely move your coins to one of these "backup" addresses. I guess this will be useful for a lot of cold wallets out there (and their owners)

Hacks are not what comes by easily. Most hacks comes mostly on a centralized exchange where you have no control of your private key. But in decentralised exchange you can monitor and control your funds . Using a reversible transaction i belive will be contrary to the main concept of blockchain

Thanks for taking an effort to explain this to me

But I don't think that BIP70 solves the problem described (i.e. sending coins to nowhere) as it is assumed that you have to take some actions beforehand. It is more like a crutch or a solution for a specific case which doesn't solve the issue in general, conceptually. I think it was in fact an effort to make up for this shortcoming of Bitcoin but not a very effective one. Why not add an option in a Bitcoin wallet to make an automatic check whether an address already exists on the blockchain? It looks like a simple but nevertheless effective solution

The buyer (i.e. the person who sends Bitcoins) doesn't have to do anything - (s)he must only paste the code provided by the merchant to the wallet. Bitcoin Core and Electrum support it out of the box, although usability could be improved. And I read recently that Bitcoin Core has deprecated BIP70 (maybe as consequence/part of the conflict between Bitcoin Core and BitPay?) in favour of BIP20, which offers a somewhat similar but significantly weaker protection against mistyping (address "hijacking" is possible).

For merchants there should be automated solutions to generate the message for the buyer, but I don't know which wallets support that out of the box.

This doesn't help in two cases:
- when the payee wants the payer to transfer coins to a new address (which is the default behaviour of many wallets, including Bitcoin Core and Electrum)
- when the payer mistypes the address, but the address exists.
As far as I know, address mistyping is very improbable because of Bitcoin's address format, and even more so with the bech32 (Segwit) format. But it's a very common fear people without technical background cite when they are asked to name the hurdles to use Bitcoin. So BIP70-like solutions are definitively necessary for Bitcoin to become mainstream.

I think that these innovations could help us somehow from hacker attacks. I like the idea of reversibility. But in this case it is necessary to think over everything very well, because it seems to me that many will be against it.

What you don't seem to understand is that "once reversible" transactions will always be reversible. How do you determine who has the authority to reverse transactions? What gives you the confidence that once a precedent is there, you won't see "reversals" for "moral" reasons like wealth distribution and other garbage?

This will not profound solution to cryptocurrency theft. As security level goes higher the hackers also upgrade their hacking techniques. The solution is just to be careful and security conscious.

That's not my point

The whole idea behind BIP70 (as I got it) consists in you wanting to buy something from someone who is ready and willing to send you an "invoice" (let's call this code so for simplicity's sake). Obviously, it limits the application of this scheme to a very specific and narrow use cases. That's likely the reason why support for BIP70 has been dropped as it is not something worth having at the protocol level


In the latter case it actually helps a lot as it allows you to see the balance of the wallet and understand that something is probably wrong and you likely sending your coins to a wrong destination

Interesting to apply, I think decentralization must have the same function as centralization. The first point is easy to apply for now either through code locking or hardware locking. While the second point must use a command code that can keep private keys into new unique code. The possibility of these transactions can use smart contract orders, so there are no 2x fees. But clearly, the private key on the wallet address becomes a new code that is difficult to solve.

You may want to read the OP in its entirety first


Being careful and aware of security concerns doesn't seem to help exchanges much

As they are continually being hacked with coins stolen. So we need something which would stop hackers at the protocol level itself, something which they can't possibly beat (then no improved hacking techniques will be able to help them). I think an option of locking addresses at this level with a whitelist of addresses attached would help a lot in this department. Can anyone ask Bitcoin developers to think about implementing this option?

again. no protocol changes are needed.
the issue is that exchanges use "hotwallets". meaning they store private keys on the very same server as the exchange front-end. thus if a hacker can get to the server he can get to the keys.

easy solution is that exchanges stop using hotwallets
next instead of usernames and passwords. users can register a public key on the exchange. and then to login AND to withdraw they simply sign a message the exchange requests to prove identity.
EG: 'sign a message using 13xamP734ddr355 with the message:
deisiksayzletzmein110219

user signs the message using their key and pastes it to the server
this public signature sits on a database on the server front end. and separately a remote server just sniffs the database and sees the withdraw request and see's that the signature matches the users registered public key and then its the remote(secret) system that then processes actual withdrawals. thus no passwords, no private keys are ever saved on the exchange server

that way a hacker cant just grab a private key, because there are none. and cannot log in, because they dont have access to sign a message to prove ID.

i find it absolutely astonishing that in a bitcoin world people are not using the benefits of signatures as proof of ID

Exchanges don't store coins in hot wallets

Even if they do use hot wallets too as you seem to understand yourself (since you refer to hot wallets meaning you understand there are cold wallets as well). I don't know the exact ratio but I don't think that the amount of dough they store in their hot wallets exceeds a few percentages of their total holdings (unless there is an exchange run). The option proposed helps increase security of cold wallets, and it is a big deal