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

Cryptocurrencies Are Taxable and Not Free From Fraud

In this report, the authors discuss cryptocurrencies — especially bitcoin — and argue that because the IRS lists them as property, they are taxable, and because they are not as anonymous as once thought, they are not free from fraud. Cryptocurrencies are digital assets used as a medium of exchange, but they are not really coins. They can be sent electronically from one entity to another almost anywhere in the world with an internet connection. There are many cryptocurrencies in the market, including bitcoin, ethereum, ethereum classic, litecoin, nem, dash, iota, bitshares, monero, neo, and ripple. Many of the cryptocurrency networks are not controlled by a single entity or company; instead, a decentralized network of computers keeps track of the currency using a token ID. A ledger maintains a continuously growing list of date stamped transactions in real time called “blocks.” This technology is known as blockchain, which records, verifies, and stores transactions without a trusted central authority. The network instead relies on decentralized autonomous organizations (DAOs) with uncertain legal standing

블록체인 기반 디지털 자산에 대한 분석 연구: 중앙은행 디지털 화폐, 스테이블코인, 대체 불가능 토큰을 중심으로

학위논문(박사) -- 서울대학교대학원 : 공과대학 산업공학과, 2023. 2. 이재욱.본 논문은 탈중앙화 금융 (DeFi) 시장에서 유망한 세 가지 자산인 중앙은행 디지털 화폐, 스테이블 코인 및 대체 불가능한 토큰에 대한 심층적인 실증분석을 제공한다. 먼저 현재 중앙은행 디지털 화폐 설계에 있어서 가장 큰 걸림돌이 되고 있는 두 가지 문제를 해결하기 위한 블록체인 기반 중앙은행 디지털 화폐 결제 시스템을 제안한다. 이 때, 크로스-체인 아토믹 스왑 기술과 격자 기반 순차적 통합 서명 (sequential aggregate signature) 기술이 함께 활용된다. 그리고 스테이블 코인 시장에 대한 심층적 이해를 위해 최근에 발생하였던 테라-루나 사태를 파급효과 지수와 효과적 전이 엔트로피를 활용하여 분석하였다. 이를 통해 스테이블코인과 암호화폐 시장 간의 연결성과 정보 전송을 정량화하였다. 그리고 대체 불가능 토큰의 경우, 대체 불가능 토큰의 특성상 기존 암호화폐에 비해 거래량이 적다는 점을 착안하여 대체 불가능 시장 내 수익률과 거래량 간의 인과관계를 분석한다. 중앙은행 디지털 화폐의 경우, 현재 중앙은행 디지털 화폐 설계의 두 가지 근본적인 과제를 해결하는 블록체인 기반 결제 시스템을 제안한다. 먼저 감사 가능성을 제공하기 위해 결제 시스템에 관리자 원장을 도입하고, 관리자 노드가 모든 거래에 참여할 수 있도록 하였다. 본 모델은 크로스 체인 아토믹 스왑과 격자 기반 순차적 통합서명을 활용하여 안전성을 보장하고 국가간 결제를 가능케한다. 또한 제안 모델은 거래 기록을 추적하고 거래 기록과 거래 참가자의 신원을 일치시킬 수 있으며, 격자 기반 암호 활용을 통해 미래의 양자 컴퓨터 공격에도 강건할 수 있다. 동일 프로토콜 내의 토큰을 준비금으로 갖는 스테이블 코인의 경우, 해당 프로토콜에 대한 대중의 신뢰가 무너진다면 데스 스파이럴에 빠질 위험이 매우 높다. 정상적인 시장 상황에서는 스테이블코인의 가격이 매우 안정적이기 때문에, 이에 대한 분석을 진행하는 데에 어려움이 있다. 따라서, 스테이블코인의 시장 영향력을 정량화하기 위하여, 스테이블코인의 가격 변동성이 매우 심했던 최근의 테라-루나 폭락 사태를 분석하였으며 이 때, 파급효과 지수와 효과적 전이 엔트로피와 같은 계량 경제학적 방법론을 사용하였다. 분석에는 1시간 및 5분 단위 암호화폐 가격, 구글 트렌드 지수, 그리고 StockTwits에 포스팅된 트윗들을 사용하였다. 실험 결과, 디페그가 시작되면서 스테이블 코인의 파급효과가 급격하게 증가했고, 루나 코인이 전체 암호화폐 시장에서 큰 영향력을 가졌음을 확인하였다. 또한 루나에서 비트코인이나 이더리움과 같은 다른 주요 암호화폐로의 효과적 전이 엔트로피도 함께 증가하였다. 그러나 투자자 감성의 경우 루나로의 전이 엔트로피가 크게 감소함에 따라, 폭락 사태 동안 정보 송신자로서의 역할을 잃어버렸다. 이러한 현상이 일어난 이유는, 루나의 미래에 대한 투자자들의 의견이 매우 분분하여 시장 내 투자자 감성이 방향성을 잃었기 때문이라고 해석할 수 있다. 대체 불가능 토큰 시장은, 대체 불가능 토큰이 갖는 고유성이라는 특성으로 인해 기존 암호화폐 시장과는 차이점이 있다. 이에 따라 거래의 유동성이 매우 낮아지게 된다. 다시 말해, 개별 대체 불가능 토큰에 대한 적합한 매도자와 매수자를 찾는 작업이 비교적 오래 걸릴 수 있다. 이러한 특성을 알아보기 위하여 대체 불가능 토큰의 거래량과 가격 간의 인과관계를 알아보고자 하였다. 이 때, 분위수별 그레인저 인과관계 검정을 사용하였다. 데이터의 경우, 대체 불가능 토큰의 일일 거래량과 가격을 사용하였으며, 분석 결과 전반적인 대체 불가능 토큰 시장에 대해서는 극단적인 시장 상황 속에서 인과 관계가 더욱 강하게 나타남을 보였다. 하지만 대체 불가능 토큰 프로젝트 별로 분석한 결과는 이와 다르게 나타났다. 예를 들어, 액시 인피니티는 모든 분위수에서 거래량과 수익률이 강한 인과관계를 가진 바면, 디센트럴랜드는 중앙값 주변에서만 인과관계를 보였다. 또한 샌드박스의 거래량은 오히려 약세장 속에서 샌드박스 가격을 예측하는 데에만 도움을 줄 수 있음을 확인하였다. 마지막으로, 대체 불가능 토큰과 해당 토큰이 존재하는 프로토콜 내 기본 암호화폐와의 인과관계를 분석하였다. 실증 실험 결과, 대체 불가능 토큰의 가격과 프로토콜 내 기본 암호화폐의 가격에는 밀접한 관계가 있으며, 대체 불가능 토큰 거래 및 투자 시에도 이러한 점을 고려해야함을 보였다. 본 논문은 블록체인 기반 중앙은행 디지털 화폐, 스테이블코인 및 대체 불가능 토큰과 같은 다양한 유형의 디지털 자산에 대한 실증분석을 진행하였다. 가장 먼저, 전통 금융시장과 탈중앙화 금융시장의 현 기술적 장애물을 해결하기 위한 블록체인 기반 중앙은행 디지털 화폐를 제안하였다. 또한 스테이블 코인의 데스 스파이를에 대한 계량경제학적 분석을 통하여 스테이블코인이 암호화폐 및 탈중앙화 금융시장에 지대한 영향을 미치고 있음을 보였다. 또한, 대체 불가능 토큰 시장의 수익률-거래량 인과관계를 확인하였으며, 이를 통해 다양한 시장 상황에 놓여 있는 대체 불가능 토큰 투자자들에게 도움을 줄 수 있을 것으로 기대한다.This dissertation provides an in-depth analysis of three promising assets in the DeFi market: CBDCs, stablecoins, and NFTs. For CBDCs, a blockchain-based CBDC settlement model is proposed using cross-chain atomic swaps and lattice-based sequential aggregate signature scheme to address two challenging issues. For stablecoins, the connectedness and information transmission between the stablecoin and cryptocurrency market is quantified to conclude that CBDCs can mitigate financial risks. For NFTs, the return-volume causal relationships in the NFT markets are analyzed due to the low transaction volume. For CBDCs, we propose a blockchain-based CBDC settlement model which addresses two fundamental challenges in CBDC design. It introduces an administrator ledger to the settlement system to provide auditability and allows the administrator node to participate in every transaction. The model also uses cross-chain atomic swap technology and a lattice-based sequential aggregate signature scheme to ensure safety and enable cross-border payments. These features make the model suitable for the growing needs for stable and reliable digital currencies. Our model provides a secure and reliable way to track transaction records and match the identity of transaction participants, while also protecting against malicious behavior and quantum computer attacks. Stablecoins backed with their own protocol's native tokens are highly susceptible to death spirals if the corresponding blockchain protocol is met with public distrust. During normal market conditions, the impact of stablecoins on the cryptocurrency market is difficult to measure as their prices remain fairly stable. To quantify the impact of the stablecoin, we analyze the recent Terra-Luna crash with econometric methodologies such as the spillover index and effective transfer entropy. Hourly and 5-minute cryptocurrency prices, Google Trends index and tweets posted on StockTwits were collected and used to measure the spillover effect. Results showed that the spillover effect of the stablecoin increased rapidly as the depeg started, and LUNA gained influence in the overall cryptocurrency market. The effective transfer entropy from LUNA to other cryptocurrencies such as BTC and ETH also increased dramatically. However, investor sentiment lost its role as an information transmitter during the crash, as the effective transfer entropy from the investor sentiment to LUNA decreased significantly. We conclude that the collusion between bearish and bullish opinions about the future of LUNA led to the market sentiment losing its influence. NFT markets are distinct from traditional cryptocurrency markets due to their uniqueness. This makes it difficult to find the right buyer and seller pair for each individual NFT. To understand the relationship between trading volume of NFTs and their prices, we used the Granger causality test in quantiles. Our data included daily transaction volume and price of NFTs. The results showed that the causality from overall NFT volume to return became stronger in extreme market conditions. However, different NFT projects had different behaviors. For example, Axie Infinity had strong causality in every quantile, while Decentraland only had a causal relationship around the median. Additionally, the transaction volume of The Sandbox was only helpful in forecasting The Sandbox prices during bearish markets conditions. Lastly, we found a strong causal relationship between NFT returns and the return of its in-protocol native cryptocurrencies. Overall, our analysis showed that NFT volume and prices are closely related and should be taken into account when trading NFTs. This dissertation has explored the various types of digital assets, such as blockchain-based CBDCs, stablecoins, and NFTs. It has proposed a blockchain-based CBDC model to address the current obstacles in traditional and decentralized financial markets. The econometric analysis of stablecoin death spiral has revealed the significant impact of stablecoin on the cryptocurrency and DeFi markets. Additionally, the return-volume causal relationships in the NFT markets have been confirmed, providing guidance to NFT investors in different market conditions.Chapter 1 Introduction 1 1.1 Motivation of the Dissertation 1 1.2 Aims of the Dissertation 8 1.3 Organization of the Disseration 11 Chapter 2 Analysis on Blockchain-based CBDC Settlement System 12 2.1 Chapter Overview 12 2.2 Defining our CBDC research goal 16 2.2.1 Security and Privacy issues in CBDCs 16 2.2.2 Our Research Challenges in CBDC 31 2.3 Preliminaries 35 2.3.1 CBDC: State of Adoption 35 2.3.2 Cryptographic Background 36 2.4 Proposed Model 39 2.4.1 Model Description 39 2.4.2 Model Architecture 43 2.4.3 Our signature scheme: AggSign 45 2.5 Security Analysis 48 2.5.1 Security of the Settlement System 48 2.5.2 Security of AggSign 51 2.6 Proof-of-Concept Experiments and Analysis 60 2.6.1 Simulation Setting 60 2.6.2 Experimental Results 62 2.7 Chapter Summary 65 Chapter 3 Quantifying the Connectedness between the Algorithmic based Stablecoin and Cryptocurrency: The Impact of Death Spiral 67 3.1 Chapter Overview 67 3.2 Data and Methodology 71 3.2.1 Data 71 3.2.2 Methodology 73 3.3 Empirical Findings 75 3.3.1 Return and volatility spillover effects 75 3.3.2 Effective Transfer Entropy 84 3.4 Chapter Summary 88 Chapter 4 Return-Volume Relationship in Non-Fungible Tokens:Evidence from the Granger Causality in Quantiles 92 4.1 Chapter Overview 92 4.2 Data and Methodology 95 4.2.1 Data 95 4.2.2 Methodology: Granger causality test in quantiles 98 4.3 Empirical results 101 4.3.1 Causal effects of NFT volume on return 101 4.3.2 Causal effects of NFT return on volume 105 4.3.3 Causal effects between NFTs and their native cryptocurrencies 108 4.4 Chapter Summary 111 Chapter 5 Conclusion 113 5.1 Contributions of the Dissertation 113 5.2 Future Works 117 Bibliography 118 국문초록 141박

Demystifying Quantum Blockchain for Healthcare

The application of blockchain technology can be beneficial in the field of healthcare as well as in the fight against the COVID-19 epidemic. In this work, the importance of blockchain is analyzed and it is observed that blockchain technology and the processes associated with it will be utilised in the healthcare systems of the future for data acquisition from sensors, automatic patient monitoring, and secure data storage. This technology substantially simplifies the process of carrying out operations because it can store a substantial quantity of data in a dispersed and secure manner, as well as enable access whenever and wherever it is required to do so. With the assistance of quantum blockchain, the benefits of quantum computing, such as the capability to acquire thermal imaging based on quantum computing and the speed with which patients may be located and monitored, can all be exploited to their full potential. Quantum blockchain is another tool that can be utilised to maintain the confidentiality, authenticity, and accessibility of data records. The processing of medical records could potentially benefit from greater speed and privacy if it combines quantum computing and blockchain technology. The authors of this paper investigate the possible benefits and applications of blockchain and quantum technologies in the field of medicine, pharmacy and healthcare systems. In this context, this work explored and compared quantum technologies and blockchain-based technologies in conjunction with other cutting-edge information and communications technologies such as ratification intelligence, machine learning, drones, and so on

Blockchain Securities Issues: Decentralized Identity System With Key Management Perspective

Blockchain was created many years ago to solve the problems of data transfer Integrity, several years later the issues persist. Blockchain securities are one of the most important considerations to be investigated, and data integrity is about ensuring the accuracy and validity of messages such that when they are read, they are the same as when they were first written. It is of the opinion that passing information across from one person to another cannot be the same as it was first said at the onset. Our work investigated Blockchain security issues, studying Integrity emanating from transactions across the blocks and how to deal with the securities issues. It also investigated decentralization and issues in blockchain to investigate how to mitigate the security issues associated with blockchain. It further discusses the use of key management in solving security issues in blockchain, viewing different key management systems of private and public keys, and solutions in addressing the blockchain problems. Lastly, we contributed the use of Decentralized Identity systems (DIDs) into the blockchain where we use a unique identifier, “ID.me” to verifier the individual credentials before any transaction, this was done by sending a digital ID through the issuer to the verifier to authenticate the integrity and identity of the holder and this proof worthy of protecting the information and maintaining the privacy of the user of the blockchain technology

SoK: Cryptocurrency Wallets -- A Security Review and Classification based on Authentication Factors

In this work, we review existing cryptocurrency wallet solutions with regard to authentication methods and factors from the user's point of view. In particular, we distinguish between authentication factors that are verified against the blockchain and the ones verified locally (or against a centralized party). With this in mind, we define notions for $k-factor$ authentication against the blockchain and $k-factor$ authentication against the authentication factors. Based on these notions, we propose a classification of authentication schemes. We extend our classification to accommodate the threshold signatures and signing transactions by centralized parties (such as exchanges or co-signing services). Finally, we apply our classification to existing wallet solutions, which we compare based on various security and key-management features.Comment: arXiv admin note: text overlap with arXiv:1812.0359

Foundations, Properties, and Security Applications of Puzzles: A Survey

Cryptographic algorithms have been used not only to create robust ciphertexts but also to generate cryptograms that, contrary to the classic goal of cryptography, are meant to be broken. These cryptograms, generally called puzzles, require the use of a certain amount of resources to be solved, hence introducing a cost that is often regarded as a time delay---though it could involve other metrics as well, such as bandwidth. These powerful features have made puzzles the core of many security protocols, acquiring increasing importance in the IT security landscape. The concept of a puzzle has subsequently been extended to other types of schemes that do not use cryptographic functions, such as CAPTCHAs, which are used to discriminate humans from machines. Overall, puzzles have experienced a renewed interest with the advent of Bitcoin, which uses a CPU-intensive puzzle as proof of work. In this paper, we provide a comprehensive study of the most important puzzle construction schemes available in the literature, categorizing them according to several attributes, such as resource type, verification type, and applications. We have redefined the term puzzle by collecting and integrating the scattered notions used in different works, to cover all the existing applications. Moreover, we provide an overview of the possible applications, identifying key requirements and different design approaches. Finally, we highlight the features and limitations of each approach, providing a useful guide for the future development of new puzzle schemes.Comment: This article has been accepted for publication in ACM Computing Survey

A survey paper on blockchain and its implementation to reduce security risks in various domains

Every technology with its powerful uses has issues connected to it and security is at the top of it. As for the changing environment, the world has been shifting to Virtual Reality, the new coming world seems to be the internet and blockchain technology which is more powerful than others and has its applications in every field, be it quantum computing, internet of things, security or others. This survey paper covers the blockchain and its security in different fields of sciences and technology. We begin with the introduction of blockchain and then discuss its structure. After that security issues have been highlighted which include attacks and their behavior in quantum computing, internet of things, cloud computing. Furthermore, we have discussed the most common types of attacks and the SRM model of blockchain followed by the conclusion