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SoK: Design, Vulnerabilities, and Security Measures of Cryptocurrency Wallets

August 4, 2023

The rapid growth of decentralized digital currencies, enabled by blockchain technology, has ushered in a new era of peer-to-peer transactions, revolutionizing the global economy. Cryptocurrency wallets, serving as crucial endpoints for these transactions, have become increasingly prevalent. However, the escalating value and usage of these wallets also expose them to significant security risks and challenges. This research aims to comprehensively explore the security aspects of cryptocurrency wallets. It provides a taxonomy of wallet types, analyzes their design and implementation, identifies common vulnerabilities and attacks, and discusses defense mechanisms and mitigation strategies. The taxonomy covers custodial, non-custodial, hot, and cold wallets, highlighting their unique characteristics and associated security considerations. The security analysis scrutinizes the theoretical and practical aspects of wallet design, while assessing the efficacy of existing security measures and protocols. Notable wallet attacks, such as Binance, Mt. Gox are examined to understand their causes and consequences. Furthermore, the paper surveys defense mechanisms, transaction monitoring, evaluating their effectiveness in mitigating threats.

Yimika Erinle

DLT Science Foundation

Yathin Kethepalli

DLT Science Foundation

Yebo Feng

DLT Science Foundation

Jiahua Xu

University College London & DLT Science Foundation

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