Cold storage and hardware wallets are fine, I am not here to knock them. I am looking to improve hot wallet security. It occurred to me the other day that if I had some way of enforcing a "spend delay" on my bitcoins, they could never be stolen from my hot wallet during that delay.
I would need the ability to store bitcoins with the following rules:
- Specify a delay time: X
- If the last spend attempt is greater than X time ago, send the transaction.
- If not, or if no previous attempt, create a new spend attempt.
These simple but powerful rules (if enforced) would mean I could spend my coins as I please anytime, simply suffering a small delay before they actually start getting sent out. If a thief accessed my private key and tried to spend my BTC they too would suffer the same delay. Yet, as long as I was watching (or had some program to watch for me) I'd be able to redirect the transaction back to a destination of my choice! In order to avoid a game of endlessly redirecting transactions between myself and a thief, the wallet could also include instructions for a fail-safe address.
But how on earth could these rules be enforced to the most absolute degree possible? It's not good enough to simply design a wallet with these constraints, because a thief could design another wallet to simply bypass these rules. How could I make sure that everyone absolutely had to follow them?
Imagine a special wallet program that contributes to and communicates with another kind of blockchain. It does not replace the bitcoin blockchain, but it moves in parallel to it. It would be a peer to peer decentralized network that stores transaction attempts, private keys, and the specific delays made by their owners. It could ultimately forward to the bitcoin network to create transactions, but only after the specified waiting conditions are satisfied.
Creating an address in a Vault Wallet creates a 2-of-2 multisignature address that requires both private keys to spend. Within minutes it is confirmed and your rules are eternally bound to this address.
You hold one private key in your wallet, encrypted by a password (similar to the bitcoin-qt). The other private key is held by the vault chain itself, encrypted until its conditions are satisfied. These are the rules you created at the beginning, and once logged in the vault chain they are buried by consensus blocks and forever granted primacy so no one can supersede or overwrite your instructions.
When you go to spend your coins, your private key is only the first half of the spend equation. The coins go into limbo in the vault chain as a spend attempt is registered. They must wait there until your X delay is over. If the destination of the coins changes with another spend attempt then the waiting time reset and overwrite the first attempt. Once the timer is up and enough confirmation blocks have been created, the Vault chain decrypts the other necessary private key and immediately creates a transaction to spend in the bitcoin blockchain. A receiving address would see zero activity until this process is completed, so this is not a way to chargeback or revoke payment, only delay the spending of the coins on your end for security purposes. Once actually sent in the bitcoin blockchain, the transaction is irreversible.
Since the keys are split up and one of them isn't even on my computer, there is no point in trying to hack my password.
Since the vault-chain is trust-less and decentralized and requires consensus in order to spend the transaction, there is no point in trying to run a rogue client with its own rules that attempts to ignore the delays.
Try to spend my coins and I'd know about it right away, and I can stop you. I'd fail-safe them right into a paper wallet. Think about that for a second. Imagine being alerted that your coins are being stolen before they're gone for good, and imagine being able to do something about it!
And how is it all supported? With tiny extra transaction fees for those that want the security. There are blocks to be found, transaction attempts to be logged, bitcoins to be earned, and miners to be paid. ASIC miners can contribute to both chains simultaneously, and their power would continue to find blocks in each chain and secure both of these networks.
What I'm imagining requires quite a bit of creative thinking to implement properly, but it results in rules that are very hard to circumvent and a hot wallet with very hard to steal bitcoins. I want to give people the power to put a delayed-fuse on their coins. All of these changes would be user-initiated, optional, and would require zero changes to the bitcoin protocol itself. A Vault wallet is simply software, no extra hardware or paper required. Please poke holes in this idea, I'd love to heard your feedback. (I am also aware of Oracles, but they are not quite trust-less enough in my opinion)
I am willing to add a 5BTC bounty to this idea if it can be successfully implemented and a Core-Dev confirms it performs as described.
